Student loan company used deceptive practices, says CFPB: Tips for choosing a reputable lender

The CFPB issued a consent order for a college finance company after ruling that its ISA program was a form of consumer credit and had to comply with federal financial laws. (iStock)

The Consumer Financial Protection Bureau (CFPB) is taking on a student lender who offers an alternative college financing option known as an Income Sharing Agreement (ISA), the office recently announced. An ISA is a college funding option that sets minimum payments based on your future salary.

Provider ISA Better Future Forward, Inc. (BFF) has falsely stated that its products are not loans and has used this loophole to circumvent federal law. The CFPB now requires Better Future Forward to comply with federal protections and stop misleading borrowers. But since Better Future Forward has shown good faith and substantial cooperation, the office has chosen not to impose financial penalties.

“The ISA industry has tried to escape scrutiny by claiming that its products are not loans.”

– Statement from CFPB Acting Director Dave Uejio

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Uejio continued, “Regardless of the name on the label, these products are credit and must comply with federal consumer protections. The ISA industry cannot claim that basic consumer protection laws do not exist. not apply to their products. “

Read on to learn how to choose a legitimate private student loan lender in light of CFPB’s action against ISA funding. You can browse student loan offers from reputable lenders in Credible’s online loan market, so that you can get the best private student loan for your needs.

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How to find a reputable private student loan lender

Deciding how to pay for higher education can be a complicated process. Fortunately, there are many traditional loan options to choose from, including federal student aid and private loans. Federal student loans are a good first choice for paying for a college education, and private student loans are a valuable way to fill the funding gap if federal loans aren’t enough.

While federal student loans are offered by the government, private student loans are typically issued by a bank, online lender, credit union, or other type of financial institution. Here are some ways to choose a trustworthy private lender:

  • Check if your school’s financial aid office has a list of private lenders
  • Confirm that any potential lender is working with the college of your choice
  • Request a Loan Truth Disclosure Statement (TIL Disclosure), which is required by federal law

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The TIL disclosure is an overview of the loan repayment terms, including the annual percentage rate (APR), finance charges in dollars, and total payments including interest charges. You can use a student loan calculator to estimate your monthly payment.

If you are considering borrowing a private student loan, you should browse through the rates of several lenders to get the best possible rate for your situation. Visit Credible to see your private student loan options without affecting your credit score.

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3 red flags to avoid when borrowing money for college

The The Truth in the Loan Act (TILA) was introduced in 1968 as a means of providing federal oversight regarding consumer credit to help borrowers make informed financial transactions. Student loans were no exception.

Under federal law, student lenders were required to provide financial information. They are also prohibited from charging illegal prepayment penalties. Better Future Forward violated federal protections by:

  1. Falsely represent that ISAs are not loan products.
  2. Deny borrowers their financial disclosures.
  3. Charge a fee to prepay their loans.

When choosing a private student loan, one of the above violations is a red flag that the lender may be engaging in deceptive practices.

You can compare offers from legitimate private student lenders on Credible. Some of their partner lenders include Sallie mae, Citizens Bank and Student Loans College Ave.

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Have a finance-related question, but don’t know who to ask? Email the Credible Money Expert at [email protected] and your question could be answered by Credible in our Money Expert column.

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