August 15, 2019
DFS SUPERINTENDENT LINDA A. LACEWELL ANNOUNCES SETTLEMENT WITH NATIONAL STUDENT LOAN SERVICER OF FOR-PROFIT SCHOOLS
Tuition Options LLC Operated as a Sales Finance Company Without a License, Leveraging Financing Agreements Involving New York Students as Collateral
Companies to Pay $236,309 to New York State
New York − Financial Services Superintendent Linda A. Lacewell today announced that the Department of Financial Services (DFS) entered into a $236,309 settlement with student loan servicer Tuition Options LLC and its parent company, EDvantage LLC, under which the companies will pay a $203,000 civil penalty and $33,309 in disgorgement to the State of New York. The settlement stems from DFS’s investigation of whether Tuition Options engaged in the business of a sales finance company without a license.
“DFS is taking action to protect New York’s students and ensure that all student loan servicers comply with New York licensing laws,” said Superintendent Lacewell. “The Department is actively preparing to implement and enforce New York’s recently enacted student loan servicer legislation and will continue to take steps to protect student loan borrowers from unlawful or predatory practices.”
New York’s student loan servicer licensing law, requiring companies that service student loans held by New Yorkers to meet new standards that address unscrupulous practices that have taken place in the industry, takes effect October 9, 2019.
In addition to the fine and disgorgement, Tuition Options will submit applications to DFS for a sales finance company license and a student loan servicer license. The companies will also remove incorrect information concerning interest capitalization from their loan documents.
DFS’s investigation found that Tuition Options engaged in the business of a sales finance company without a license by purchasing or otherwise acquiring as collateral a total of 55 retail installment obligations involving New York students. Tuition Options entered into purchase advance agreements and collateral agreements with for-profit schools by which Tuition Options made loans to the schools. To secure those loans by Tuition Options to the schools, Tuition Options held as collateral 53 retail installment obligations involving students (i.e., financing agreements between schools and students). Tuition Options also purchased two retail installment obligations from schools.
DFS’s investigation also found that the companies failed to comply with the E-Sign Act’s disclosure requirements when obtaining student borrowers’ consent to provide disclosures electronically.
A copy of the full consent order is available here.