Federal Trade Commission Warns Financial Aid Startup to Stop ‘Potentially Misleading’ Students About CARES Act Emergency Grants

By Owen Daugherty, NASFAA Staff Reporter

The Federal Trade Commission (FTC) in a letter warned Frank, a startup aimed at helping students apply for financial aid, that it is potentially misleading students about the company’s ability to help them access emergency grants made available under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

The letter notes that Frank claims on its website and in marketing materials that it offers students “everything you need” to apply for emergency grants.

As the letter sent last week identifies, Frank’s service consists primarily of providing students with a form letter to fill out to apply for an emergency grant. However, the form may lack the information a student would need to apply for one of the grants from their school, FTC asserts, due to the fact that CARES Act emergency grants are administered by students’ institutions, and each has its own unique application process and eligibility criteria.

Specifically, the letter noted that Frank advertises to students that they and/or their parents must have experienced one or more of four identified criteria, such as a job loss or furlough, to qualify for the grants, when in fact each school determines its own grant eligibility criteria and the Department of Education gave schools wide latitude in determining eligibility.

FTC pointed to several “potentially misleading claims” made by the company, including its message to students offering cash advances that can be paid back “when your financial aid comes in” and with “no interest, no fees – ever.”

However, fine print on the agreement states that students are required to pay back Frank’s cash advance “61 days after the date of disbursement,” according to FTC. Additionally, a cash advance from Frank comes with a fee of $19.90 a month, FTC noted.

A spokesperson for Frank told NASFAA that the cash advance was available only to those who participated in a membership product, hence the $19.90 monthly fee. The spokesperson added that no members used the optional aid advance feature.

“To the extent these claims are not truthful, are misleading, or are not substantiated, they would violate the FTC Act,” the letter stated.

Frank has until close of business Tuesday, November 17, to address the concerns raised in the letter and notify FTC of the specific actions it took. 

“Frank should take prompt action, including by reviewing and monitoring all advertising and marketing used by Frank in any form (including websites, social media, emails, telemarketing, and text messages), to ensure any deceptive or unlawful claims or offers are removed or corrected, as appropriate, and any other required disclosures are provided,” the letter stated, adding that the warning “is not meant to contain an exhaustive list of possible violations related to your products or operations.”

Frank in a statement said it had removed the features FTC took issue with.

Frank came onto the financial aid radar last year and advertised itself as a more efficient, simpler option to help students complete the FAFSA and initiate financial aid package appeals. The company’s sharp website and promotional materials stood in stark contrast to the dated, cumbersome FAFSA and generated Frank frequent press coverage.

When the pandemic hit, the company promoted its services to students to help them obtain emergency grants, though some in the higher education community pointed out the problems associated with using a one-size-fits-all application for institution-based grants.

"Frank’s free appeal tool for emergency aid and the optional aid advance feature of its membership product were both of value, fairly advertised, and put to good use during their relevant periods," Frank said in a statement. "Although we disagree with the FTC that there were any issues with either offering, in order to resolve this matter and as both products were no longer timely, we removed them from our website last week."


Publication Date: 11/18/2020

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