If SoFi’s lawsuit winds up becoming a viral story, say, because they win it, borrowers resume payments and the White House tweets about it that could impact the company financially, said Jonathan Bundy, an associate professor of management at Arizona State University’s W.
Bhatia touched on this tension, noting that SoFi has “always been about what’s right for you, what’s good for your money, and now you’re going and asking a court to say, ‘Hey, tell these consumers to start making payments,’” Bhatia said, adding, “just wondering how you balance that,” referencing press articles discussing the issue. While the pause has hurt SoFi’s bottom line, the suit could tarnish the image the company has tried to build as a firm that’s more consumer-focused than other financial institutions, experts say. As a result, “the Moratorium has eliminated the primary benefits of student loan refinancing,” the company wrote in its complaint. During the payment pause, the rate on federal student loans has been set at 0%. Though SoFi now offers a suite of products, including bank accounts and personal loans, the company made its name offering borrowers the opportunity to refinance their student loans at lower interest rates.
The pause on federal student-loan payments, interest and collections, which began in March 2020, has cost SoFi between $300 and $400 million in revenue and between $150 million and $200 million in profits, according to the company’s legal filings. “I’m also protecting our shareholders and our shareholder value, which is critically important.” “We definitely recognize the risk, but we also recognize the importance of being a leader in this country and a leader in this industry,” Noto said. Noto told the analyst that filing the lawsuit “was not an easy decision for us,” and “something we really thought through quite meaningfully,” adding that company officials consulted stakeholders and SoFi’s board before moving forward with the suit. “Strategically, do you worry about litigation potentially damaging the brand at all from a consumer perspective?” Mihir Bhatia, a Bank of America analyst, asked Noto, according to a transcript provided by AlphaSense/Sentieo.
Tuesday, Noto provided some insight into how the company weighed those concerns when considering whether to file the lawsuit. During an exchange with an analyst at a conference hosted by Bank of America
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