NEW YORK - New York Attorney General Andrew Cuomo on Thursday filed the first lawsuit in a nationwide investigation into the college loan industry.
Cuomo is suing Education Finance Partners over alleged deceptive practices, claiming the company has repeatedly paid schools in exchange for having loans steered its way.
He says EFP is put on "preferred lender" lists because of the payments, and that approximately 90 percent of students choose their lenders from such lists.
"EFP aggressively offered schools cash kickbacks in exchange for business," Cuomo said. "This kickback scheme was widespread and took place from coast to coast, at colleges large and small, public and private."
Cuomo calls the suit "just the beginning of an investigation that will show that lenders put market share above fair play."
Cuomo says the alleged arrangement gave schools a certain percentage of the net value of all referred loans, and claims Drexel University received more than $100,000 in kickbacks in one year.
The relationship that Cuomo claims is deceptive deals with the percent EFP gives to colleges that put it on their "preferred lender" lists. EFP gives a percentage of the net value of loans to the school.
Of the more than 60 schools who have such a relationship with EFP are Baylor University, Boston University, Clemson University, Drexel University, Duquesne University, Fordham University, Long Island University, Pepperdine University, St. John's University, Texas Christian University, Washington University in St. Louis, and the University of Mississippi.
"EFP's marketing practices were clearly intended to imply that the universities had endorsed EFP loan products for individual student borrowers," Cuomo said. "Deceptive marketing is just that and it limit's the information available for students to get the best deal in their college loans."
In February, Cuomo requested information from more than 60 colleges and universities regarding their "preferred lender" lists.