As comparison sites become more popular, the fine print becomes increasingly important for both consumers and companies.
As one recent US Federal Trade Commission (FTC) settlement reminds us, companies that want to boast that their reviews are “honest,” “accurate,” or “unbiased” should carefully scrutinize their relationships with advertisers and brands and clearly disclose any payments or other business ties that could lead reasonable consumers to question the site’s objectivity.
LendEDU offers product comparisons between student loans, personal loans, and credit cards, and other consumer financial products. In addition to comparing key loan terms such as APR and term length, the site offers reviews and rankings of service providers, such as “top 9 companies for student loan refinancing.”
According to the FTC’s complaint, LendEDU misled consumers to believe that its reviews and rankings were objective and unbiased, when in fact the site offered better reviews and rankings to companies from which it received financial compensation. The FTC alleges that before 2016, LendEDU completely failed to disclose that it was receiving payments from financial institutions to boost rankings, and that even after 2016, LendEDU failed to adequately disclose that its rankings and reviews were tied to compensation. Specifically, the FTC took issue with the fact that LendEDU’s only disclosure consisted of a statement in the website’s footer that the “site may be compensated through third party advertisers,” which the FTC considered inadequate to place consumers on notice of the relationships between LendEDU and companies that appear on the site. In addition, the FTC alleged that LendEDU misrepresented that reviews were written by consumers, when in fact many were written by LendEDU employees, their family, or friends. These are all considered violations of the FTC’s Endorsement Guides.
The proposed settlement order would require LendEDU to pay a fine of $350,000 and prohibit similar misrepresentations in the future. This case is a reminder that brands and advertisers must carefully consider their business relationships before claiming that product and service reviews or rankings are objective. Failing to disclose material connections with other companies, advertisers, or consumers, even when unintentional, can lead to costly regulatory action or litigation.
In considering endorsements and reviews, the FTC is currently seeking public comments on the Endorsement Guides. This case and others like it will no doubt be factors that it considers as it finalizes and considers any revisions to its rules.