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Clearwater-Based Student Loan Company Settles With Florida, New York

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By RUSSELL RAY and JEROME STOCKFISH, The Tampa Tribune

Published: December 11, 2007

The attorney generals of Florida and New York said Tuesday they have settled an investigation into Student Financial Services Inc., a student loan provider based in Clearwater that allegedly paid colleges and sports marketing firms fees to get student loan business.

"They preyed on students' sense of school pride," said Sandi Copes, spokeswomen for state Attorney General Bill McCollum. "We weren't concerned about the quality of the loans. The issue here is marketing. They gained an unfair and undeserved advantage that was inappropriate."

The company, which did business as University Financial Services, paid fees to the colleges, their athletic departments and sports marketing firms, said New York Attorney General Andrew Cuomo. In exchange, students were steered to the lender, which used school mascots, logos and team names to peddle for business.

In a prepared statement, McCollum said: "When student loan companies use school insignia, colors and mascots in advertising, they imply that the company is recommended by the university as the "official" loan provider of the university. This is misleading to both students and their parents."

Unfortunately, he said, schools, athletic departments and sports marketing firms often made these agreements without evaluating the quality of the loans.

An agreement struck with the company, which had relationships with 63 colleges and five sports-marketing companies, ends the marketing practices, he said.

The company didn't return calls Tuesday seeking comment.

Company contracts involved five Florida colleges: University of South Florida; Florida Atlantic University; University of Central Florida; Florida State University and Nova Southeastern University.

Each of those contracts, Copes said, were made through sports marketing companies. Those companies were not identified by Cuomo or McCollum.

"The agreement involved the schools, but they weren't directly with the schools," she said.

Copes said she didn't know whether USF and the other Florida universities received any revenue from the company in exchange for their business. That information, she said, hasn't yet been released by investigators in New York.

A USF spokesman said staff attorneys didn't know how or if USF was involved with the company.

"We are in favor of anything that will increase student confidence in our student loan practices," said spokesman Ken Gullette.

State officials didn't disclose the amount of money paid to the colleges and sports marketing firms, saying the information was confidential and was being withheld by investigators in New York.

"It's almost unbelievable that the school mascots and logos would be used in this way where the school's mascot becomes a wolf in sheep's clothing," Cuomo said at a news conference in Manhattan.

Under some contracts, the company was given access to mailing lists of students and alumni and was allowed to advertise at campus events and on school web sites, Cuomo and McCollum said.

Under the settlement, the company admitted to no wrongdoing but agreed to end the lending-related agreements with the schools and five sports marketing companies. It will also launch an advertising campaign warning students to protect themselves when looking for a loan and end cash inducements for students that refer friends to the company.

The Clearwater company also agreed to abide by a code of conduct for direct marketing of loans to students, Cuomo said.

Other schools that the company had agreements with include Georgetown University, Howard University, the University of California at Berkeley and Wake Forest University.

Cuomo's office has been looking into the $85 billion student loan industry for most of this year.

Information from The Associated Press was used in this report.

Reporter Russell Ray can be reached at (813) 259-7870 or rray@tampatrib.com. Reporter Jerome Stockfish can be reached at (813) 259-8402 or jstockfish@tampatrib.com.

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