Buzz
Getting financial guidance from a loan servicer is like taking health tips from a tobacco company. The advice might be on point, but there’s almost certainly a more trustworthy alternative that doesn’t benefit from your missteps.
The Consumer Financial Protection Bureau (CFPB) recently filed a lawsuit against Navient, a student loan servicer, accusing them of various unethical practices, such as mishandling loan payments and providing inaccurate information to credit reporting agencies. As if that weren’t enough, they allegedly deceived borrowers with dubious advice regarding their relief options.
So, how did Navient, a company whose Financial Tips blog claims to be dedicated to “helping student loan borrowers achieve financial success,” respond to the legal action? Here’s their statement:
There is no assumption that the servicer will prioritize the consumer's best interests.
Whether guilty or not, this response feels like a direct insult to borrowers.
How Companies Reel You In With Grand Promises
Navient's defense is that they aren’t in the business of helping, but this contradicts the message on their website, which invites visitors to check back frequently for “the latest tips and strategies to help you achieve your goals.”
The Navient debacle underscores a common issue with a prevailing business trend: big idea marketing.
You’ve likely encountered big idea marketing before. It’s when companies try to lure consumers in with a grand concept that far outshines the product they’re actually offering. You’re not just purchasing a phone, you’re a revolutionary. You’re not simply buying shoes, you’re changing lives. While big idea marketing isn’t always harmful, as helping those in need is indeed a big—and positive—idea, it’s not always what it seems.
However, big idea marketing becomes problematic when the idea clashes with the company’s profit model, like when predatory financial services tout financial literacy. You’re not drowning in debt and accumulating astronomical interest, you’re on the road to financial prosperity!
When Financial Advice Turns Into a Marketing Strategy, It Becomes a Problem
Navient isn’t alone in this. A while back, writer J.Money from the popular blog Budgets Are Sexy shared his frustration about a pitch he received from a credit card company trying to persuade Millennials to use credit cards more often:
When asked about the biggest advantage of using cash, most Millennials said it helps them stick to their budget, with one in five expressing concerns that credit card use could lead to debt. However, some believe that strategically using credit cards for regular purchases can be an effective way to manage their overall budget.
J.Money’s reaction to this pitch expressed my own feelings perfectly:
COME ON!!!! If people are concerned about getting into debt and want to stay within their budget, just leave them be! They’re actually being smarter than a lot of other adults! Who cares about the rewards if it just leads you into a hole, costing you more in the long run?
Sure, using a credit card can boost your credit score if you manage it well, but healthy financial habits matter more than just good credit. Also? Credit card companies actually profit when you don’t use your cards responsibly. They make money when you fall short financially.
And there’s the issue: the advice isn’t entirely false. These companies aren’t outright lying to consumers, but they’re manipulating them by luring them in with just enough truth to hook them.
The line becomes blurred. While J.Money’s example is pretty clear-cut, the fact that these companies reach out to bloggers, financial advisors, and journalists to spread their message highlights how easily solid advice can be mistaken for marketing.
How to Safeguard Yourself
So, how do you protect yourself from big idea marketing disguised as financial advice?
For starters, think like a journalist. A journalist must consider their source and be wary of potential conflicts of interest. Similarly, when you come across financial advice, whether it’s in a blog post or a podcast, ask yourself: Who’s providing it? How does the source profit? Is it a podcaster earning through ads? Good financial advice won’t contradict how she earns (in fact, it likely supports her success). But if it’s a credit card company benefiting when you go into debt, then good financial advice completely contradicts their business model. While this doesn’t automatically determine whether the advice is good or bad, considering conflicts of interest is definitely important.
Another step is to research the company’s reputation. The CFPB’s extensive consumer complaint database includes complaints about various banks, credit unions, and other financial services. If you’re following a blog, podcast, or video series sponsored by a major bank or investment firm, that doesn’t immediately mean the advice is wrong, but it’s a good idea to look into that company’s reputation.
It should be obvious, but always double-check any advice you come across. For instance, if you’re reading money advice about how FICO calculates your credit score, it’s worth visiting FICO’s website directly to confirm the information.
If you're receiving guidance from a financial planner, it’s crucial to verify that they are a Certified Financial Planner® —true CFPs are required to take a fiduciary oath, ensuring they put your best interests first. Otherwise, you might be dealing with someone more focused on selling you an investment product, regardless of whether it aligns with your portfolio needs.
Personal finance is far simpler than it’s often made out to be. It’s wonderful that blogs, books, videos, and podcasts are making financial knowledge more accessible. However, the downside is that with this vast access to advice, it’s important to be cautious about where you get it. While advice from a loan servicer may not be outright wrong, don’t expect them to act with your best interests in mind, even if their blog implies they do.
