New York Student Loan Providers Agree to Adopt Code of Conduct
Tired of predatory student loan practices such as deceptive advertising and marketing that tries to mask the true cost of a student loan? In New York, eight student loan companies have responded to a state investigation into their practices by promising to observe a code of conduct in their lending practices.
The lenders who have adopted this code are Nelnet Inc., Campus Door Inc., GMAC Bank, NextStudent Inc., Xanthus Financial Services Inc., EduCap Inc., Graduate Loan Associates LLC, and MRU Holdings, Inc. (better known as “My Rich Uncle“). All of these companies were under investigation by the state, with the exception of MRU Holdings, which voluntarily joined the efforts.
The code of conduct calls for more transparency in lending, which means that loan companies need to make the price of the loans and the loan process easy to understand and “up front” for consumers to see. Some of the practices they have vowed to discontinue are:
- The advertising of loan rates that only a small percentage of the public are eligible to receive
- The use of logos on their mailing that make the companies look official, and perhaps like the federal government
- The offering of gifts to students as incentives to take out loans with their company
- The offering of cash incentives to students for getting their friends to take out loans with their company
This sounds like a pretty good start to me. Perhaps national legislation is needed to make sure student loan companies practice transparency and act in a way that is in the best interest of students.