Pay-for-Play Website Pays FTC Over Fake Reviews, Deceptive Rankings

Advertising Law

Deceptive rankings and fake reviews triggered a Federal Trade Commission (FTC) action for a comparison shopping website—and a warning to other companies.

Delaware-based LendEDU operates a website that compares consumer financial products such as student loans, credit cards and personal loans.

But according to the administrative complaint filed by the agency, the company and three individuals tricked consumers into thinking that the site provided objective product information—with claims that it was “accurate” and “unbiased”—when it actually gave higher rankings and ratings to companies that paid for placement.

For example, the site features rankings, star ratings and reviews. The FTC alleged that LendEDU moved companies up the list if they were willing to pay for the raise. One email from LendEDU’s CEO to a student loan refinancing company that dropped from first to third in the ranking promised to move it back if the company paid LendEDU $9.50 per click.

A subsequent email to the same company proposed increasing the price to $16.50 per click, according to the complaint. “We want to keep [your company] positioned as the #1 lender on our site, but we need to justify the move from a business perspective,” the CEO wrote. The company agreed to pay $15 per click and remained in the top spot.

The defendants also misrepresented that consumer reviews on the website (and third-party websites) were based on actual experiences of impartial consumers, the FTC alleged. In reality, most of the reviews were written by LendEDU employees, their families or friends, or other individuals with some form of ties to the company, the agency said.

On trustpilot.com, 90% of the 126 reviews of LendEDU’s website and customer service were written or fabricated by LendEDU employees or those with personal or professional relationships with the company, the FTC alleged, and all the false reviews gave the company ratings of five stars.

One five-star review from Kenny stated: “LendEDU showed me the light at the end of the tunnel. I was drowning in student loan debt, then they showed up with a lifeboat and a warm blanket. The website was easy to navigate and with the help of their customer service team, I saved a lot of money refinancing. I can’t thank them enough and would recommend to anyone!”

“Kenny” was actually a LendEDU employee, the FTC said.

To settle the charges of violating the FTC Act, the FTC issued a proposed consent order that would prohibit the defendants from making misrepresentations similar to those alleged in the complaint and require them to pay $350,000.

To read the complaint and the consent order in In the Matter of Shop Tutors, Inc., click here.

Why it matters: In a statement, FTC Bureau of Consumer Protection Director Andrew Smith cautioned companies about selling rankings to the highest bidder. “These misrepresentations undermine consumer trust, and we will hold lead generators like LendEDU accountable for their false promises of objectivity,” he said. Commissioner Rebecca K. Slaughter filed a concurring statement with the goal of highlighting the importance of the case to address “a cutting edge market practice”: purportedly neutral rankings and recommendations that actually reflect product placement. “Companies that engage in pay-to-play rankings and ratings should take heed: This conduct robs consumers of vital information, pollutes our online marketplaces and violates the law, which will result in serious consequences,” Slaughter wrote.

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