On September 12, 2016, the Consumer Financial Protection Bureau (“CFPB”) announced the issuance of a consent order with a for-profit college chain that allegedly deceived its students into taking out loans that were more expensive than advertised.
For the last several years, the for-profit education company allegedly had enrolled hundreds of thousands of students at its two campuses and offered private loans to students to offset tuition. According to the Bureau, the college chain violated the Consumer Financial Protection Act of 2010 (“CFPA”), by allegedly deceiving students into taking out these loans in providing them with the wrong monthly repayment amount, which was much less than what students would ultimately be obligated to repay. The colleges were allegedly falsely advertising to students that they could pay off their loans by making monthly payments of $25. In total, the CFPB alleged that students had borrowed over $23,544,184 through the company’s loan program, and the company had collected $4,973,102 in principal and interest.
The CFPB consent order required, inter alia, that the company: (1) pay back the $4,973,102 the company had received by way of refunds to borrowers and cancel approximately $18,571,082 in outstanding debt; (2) create a new personalized disclosure tool for financial aid and require students use that tool; (3) halt illegal practices, including making false, deceptive, or misleading statements concerning its private student loan program; (4) remove any negative information from student borrowers’ credit history; and (5) pay $8 million to the CFPB’s Civil Penalty Fund.