LendEDU, a website that compares loans, credit cards and insurance for consumers, engaged in a pay-to-play scheme that saw the online marketplace accept money from financial firms in exchange for higher ratings and post fake customer reviews, according to the Federal Trade Commission.
LendEDU and three company officers deceived the public by promoting the website as an unbiased and objective resource when, in reality, the best product ratings went to the highest bidder, according to a complaint filed Feb. 4 by the regulator.
The complaint "underscores how pay-to-play greed and deception have corrupted the ratings and rankings on which consumers increasingly rely to make informed purchasing choices online," said Rebecca Kelly Slaughter, a commissioner at the FTC.
The comparison website, launched in 2014 and based in Hoboken, New Jersey, also posted supposedly impartial reviews from consumers that were actually written or made up by LendEDU employees, their family and friends, or other people with personal or professional relationships with the company, according to the FTC.
The firm — as well as chief executive Nathaniel Matherson, chief technology officer Matthew Lenhard and Alexander Coleman, vice president of product — agreed to settle the allegations for $350,000.
They neither admitted nor denied the allegations, according to a filing outlining the deal.
The public has 30 days to comment on the settlement before the regulator decides to finalize it.
Neither LendEDU nor its company officers responded to a request for comment.
LendEDU also recently drew attention when it was revealed in 2018 that Drew Cloud, allegedly a spokesman for partner website The Student Loan Report and quoted in stories in several publications and websites, was fictitious.
The online marketplace, the legal name of which is Shop Tutors, Inc., compares student loans, personal loans, credit cards, home loans and insurance for consumers and rates companies based on details such as interest rates, fees, benefits and incentives, ease of use and borrower protections, according to the FTC complaint.
"Contrary to their claims, respondents have provided financial services companies with higher numerical rankings or star ratings and higher positions on rate tables based on compensation," the regulator claimed. "Respondents also have added or removed companies from their content based on compensation."
LendEDU also, in several instances, required partner companies to increase payments to maintain their current rankings, the FTC said.
The complaint doesn't name any specific firms that paid to boost their ratings.
In one anonymous example, the FTC said LendEDU CEO Matherson asked one student loan refinance company to pay $9.50 per click to retake the No. 1 ranking after it had fallen to No. 3. (It ultimately paid $8.50.) LendEDU officials later asked the same firm to up payments to $16 per click to maintain its position, and the firm agreed to pay $15.