Consumer Finance Insights
October 29, 2015

CFPB Obtains Default Judgment Against For-Profit Colleges


​On October 28, the Consumer Financial Protection Bureau (CFPB) announced that the U.S. District Court for the Northern District of Illinois entered a default judgment and order against affiliated for-profit colleges, resolving a complaint filed by the CFPB on September 16, 2014.  The complaint alleged that the colleges provided “consumer financial products or services” by brokering and maintaining an interest in private student loans.  The complaint further alleged that to induce students to take out these loans, the colleges inflated job statistics, misrepresented to prospective students that they would be able to repay their student loans upon graduation, and failed to provide promised job-placement assistance.  This conduct, according to the complaint, was “unfair, deceptive, and abusive” under the Consumer Financial Protection Act, and violated the Fair Debt Collection Practices Act by harassing and abusive debt collection practices.  The default judgment noted that the colleges had filed a Chapter 11 bankruptcy petition on May 4, 2015, and that on August 28, 2015, the U.S. Bankruptcy Court for the District of Delaware had approved a liquidation plan.  The default judgment ordered the colleges to pay $531,224,267 in redress to affected private student loan borrowers.  As previously reported by Enforcement Watch, the CFPB on February 2, 2015 reached a settlement with colleges formerly affiliated with the entities subject to this default judgment.  As part of that settlement, the colleges agreed to coordinate $480,000,000 in debt relief for current and former students.