For-Profit Educational Company Agrees to $60 Million Judgment to Settle UDAAP Claims with CFPB

The CFPB and a for-profit educational company have agreed to the entry of a stipulated final order imposing a judgment of $60 million to settle claims that the company engaged in unfair and abusive practices in connection with its private loan programs.

In its complaint, the CFPB had alleged the company helped to create private loan programs for students at the school it ran until the company filed for bankruptcy and ceased operations in 2016.  The CFPB further alleged that the company improperly induced students to take out loans that in many cases the student borrowers did not want, did not understand, or did not realize they were getting, resulting in high default rates and injuries to the students.  The CFPB claimed these allegations to be unfair and abusive practices in violation of the Consumer Financial Protection Act of 2010.

The terms of the proposed stipulated order include, among other things, a judgment against the company for $60 million and an injunction prohibiting the company from offering or providing student loans in the future.

In addition, a stipulated final order was entered in a separate action filed by the CFPB on June 14, 2019, against the entity holding the loans at issue.  Under the terms of that judgment, that entity must cease all collection activities on such loans, discharge and cancel all outstanding balances on the loans, and correct all negative credit reporting related to the loans.

The CFPB’s press release, which contains links to the stipulated orders, is available here.