The FTC recently published a blog post about a warning letter it sent to TAPD, Inc., which does business as Frank Financial Aid, warning the company that advertising and marketing, including on its website, may be misleading consumers about pandemic-related relief in the form of grants available to postsecondary students and a cash advance product offered by the company, in violation of Section 5 of the FTC Act. The letter also warns the company that the advertising of the cash advance product on its website may violate TILA disclosure requirements. According to the FTC, the takeaway for other marketers is that the pandemic does not change established consumer protection principles and, with that in mind, “FTC staff is keeping a careful watch on companies’ claims.”
In explaining the concerns that prompted the letter, the FTC notes that the Department of Education has made clear that for its Higher Education Emergency Relief Fund created by the CARES Act, each school has its own unique application process and “decides the criteria for qualified students to receive a grant, the grant amount, and how and when the grant will be disbursed (paid out) to students.” In the letter, the FTC warns the company that the potentially misleading claims on its website include:
- Consumers are told they may “apply in 2 minutes for your student emergency grant” through the company’s site and that “Frank emails you everything you need to send to your school.” This may be misleading because Frank creates letters for consumers to submit to schools that are not tailored to the application process and documentation requirements of each school.
- Consumers are told that to be eligible for emergency relief, students and/or their parents must have experienced one or more of four identified criteria since March 1, 2020 (for example, a firing or furlough). This may be misleading because each school determines its own grant eligibility criteria.
- Consumers who obtain a cash advance through the company are told they can pay it back when they receive their financial aid but, in fine print, are also told that they are required to pay the cash advance back 61 days after the date of disbursement. (Presumably the FTC’s view is that the “fine print” does not prevent the preceding statement from being misleading.)
With regard to the company’s website advertising of the cash advance product, the FTC states in the letter that although the advertising indicates that consumers can get cash advances of up to $5,000 on their student loans with “No interest, no fees – ever,” the company charges a monthly fee of $19.90. The FTC warns that in addition to potentially violating the FTC Act because it is false or misleading, the advertising could violate TILA by not including the disclosures required by TILA when certain trigger terms (such as the amount of any finance charge) appear in an advertisement.
The warning letter advises Frank to promptly review and monitor all of its advertising and marketing (including websites, social media, email, telemarketing, and text messages) “to ensure any deceptive or unlawful claims or offers are removed or corrected, as appropriate, and any other required disclosures are provided.” The letter also directs the company to notify the FTC by a specified date of the specific actions it has taken to address the FTC’s concerns and to indicate how “any claims that remain in [the company’s] advertising and marketing” comply with Section 5 of the FTC Act and TILA.