Mass. student lender charged hidden fees, lawsuit contends | Wu blames developers for collapse in Boston housing construction | Markey running scared as challenger rumors mount |

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Shady lending tactic or just an oversight? State-backed nonprofit student lender tucked hidden fees into loan, lawsuit contends

That would be the Massachusetts Educational Financing Authority, which touts its “mission” of spreading “college affordability” via low-cost student loans.

A few years ago, MEFA stopped charging origination fees, part of those much-loathed “closing costs” that private sector lenders typically pad their profits with, at the expense of borrowers.

“MEFA Student Loans-competitive rates, flexible repayment options, and no origination fees,” reads the student lender’s marketing pitch.

However, in a case that could have much wider ramifications given the thousands of MEFA borrowers out there, the state-backed student lender last month settled a lawsuit brought by local lawyer Arthur Guray.

MEFA today touts that it does not charge origination fees on its student loans. That wasn’t always the case, as a lawsuit filed in state court contends

In a lawsuit filed in state court, Guray argued that MEFA, before it eliminated the dubious charges in 2019, had slapped thousands of dollars in origination fees on his loans over several years without the proper disclosures.

And by adding the fees to the principal of his loans, and then charging interest on them, MEFA made them more difficult to pay off, Guray’s lawsuit contends.

After nearly three years of legal skirmishing in court, the case was all set to go to trial when MEFA reached a settlement with Guray, who had borrowed tens of thousands in order to pay his way through Boston College Law School.

It certainly looks like the state student loan behemoth, unable to refute one of Guray’s key charges, opted to cut a deal rather than risk an adverse ruling in state court.

A Worcester County Superior Court judge declined to dismiss one of Guray’s key charges, that MEFA never disclosed, in the mandatory federal Truth in Lending forms, that its loans included origination fees, which lenders ostensibly charge to cover processing and administrative fees.

MEFA balked for three years when asked to provide copies of the disclosure forms it had given to Guray on his student loans, according to the lawsuit. When the student lender finally coughed up the paperwork, it showed a line for origination fees and a blank space next to it.

“The documents contained in the summary judgment record establish a question of fact as to whether and when MEFA disclosed loan origination fees,” Justice Karin M. Bell wrote.

While MEFA didn’t disclose the origination fees up front, it did list thousands of dollars in origination fees in the disbursement records for Guray’s loans that were entered into the court record.

And while MEFA today boasts in its marketing material that it does not charge origination fees, it was a very different case back in the 2010s.

Over the course of a decade, MEFA raked in nearly $50 million in revenue from origination fees. That’s according to the bond prospectuses, reviewed by Contrarian Boston, that the state authority issued to potential investors.

In some years, revenue from origination fees accounted for well over half of MEFA’s non-interest income.

The lawsuit comes on the heels of a GBH investigative piece last year that found the state-backed student lender has filed thousands of lawsuits over the past decade against borrowers who missed payments or defaulted on their loans.

Still, despite losing millions in annual revenue by dropping origination fees, top executives and managers at MEFA appear to be doing just fine.

The nonprofit’s executive director pulls down nearly $400,000, state payroll records reviewed by Contrarian Boston show.

MEFA’s executive suite also boasts a $238,000 chief information officer, a nearly $240,000 chief marketing officer, a $172,000 editor in chief, not to mention an $108,000 assistant editor.

As they say, it’s all part of doing good by doing well.

Doubling down on disaster: Amid heated reelection campaign, Boston’s mayor points finger at developers as she attempts to explain away crash in housing production

Does Boston Mayor Michelle Wu believe in the law of supply and demand when it comes to bringing down housing costs?

That the only real way to bring down prices and rents is to build more apartments, condos and homes?

Based on Wu’s latest comments on the campaign trail, that would not seem to be a good bet.