New York Atty. Gen. Andrew Cuomo said Thursday that he had expanded his probe into the student loan industry and had subpoenaed 29 companies, including Bank of America Corp., Wachovia Corp., Wells Fargo & Co. and SunTrust Banks Inc.
Cuomo is turning his focus to direct marketers after earlier investigating conflicts of interest between lenders and colleges and universities. Four other companies received requests for information, including an affiliate of JPMorgan Chase & Co., Cuomo spokeswoman Rashmi Vasisht said.
The subpoenas and requests seek information on whether marketers used deceptive offers, fraudulent solicitations or illegal incentives to lure students into applying for college loans or loan consolidations.
Cuomo said such practices might violate the federal Higher Education Act and state consumer protection laws.
"The practices we have found in the direct marketing of loans to students are surprisingly blatant," Cuomo said in a statement. "The last thing [students] need are sharks baiting them with glossy promotions and deceptive offers."
Cuomo said a review of marketers' mailings, advertisements and websites showed that marketers might use a variety of deceptive tactics to entice vulnerable borrowers.
He said these included, among others, phony offers designed to look like official letters from the government; mailing fake checks or gift cards or holding sweepstakes to encourage students to sign up; and failing to disclose that loans might be sold, wiping out some benefits.
The attorney general said the latest subpoenas and requests followed a probe of direct-to-student marketers that had previously received subpoenas.
He said these included EduCap Inc./Loan-to-Learn of McLean, Va.; Affinity Direct/Educational Direct of Englewood Cliffs, N.J.; and three affiliates of Boston-based First Marblehead Corp.: Astrive Student Loans, Laurel Collegiate Student Loans and Monticello Student Loans.
Wachovia spokeswoman Christy Phillips-Brown and Wells Fargo spokeswoman Mary Berg said their respective banks had not received subpoenas. Bank of America spokeswoman Shirley Norton declined to comment. SunTrust, JPMorgan, EduCap, Affinity Direct and First Marblehead did not immediately return calls seeking comment.
The House Education and Labor Committee is also looking into unfair and deceptive marketing practices by student lenders, said Rachel Racusen, a spokeswoman for Rep. George Miller, a California Democrat who chairs the committee.
Cuomo has been investigating practices in the $85-billion student loan industry since January. At least 12 lenders and 26 schools this year have agreed with his office to abide by a new code of conduct governing student lending.