Blog Enforcement Watch August 13, 2019

CFPB Announces Settlements with Higher-Learning Institution and Lender Over Private Student Loans

On August 12, 2019, the Consumer Financial Protection Bureau (CFPB) announced a proposed settlement with a for-profit higher-education institution. The CFPB filed a complaint against the institution in the U.S. District Court for the Southern District of Indiana on February 26, 2014, alleging that the institution had violated the Consumer Protection Act by engaging in unfair, deceptive, and abusive acts and practices in connection with a private loan program. The CFPB alleged that the institution offered students short-term loans called “Temporary Credits,” and when students defaulted they were coerced into paying off these credits with high-interest, high-fee private loans. According to the CFPB, the institution engaged in a variety of aggressive tactics to force students into taking out private loans, including threatening expulsion and withholding course materials and transcripts. The proposed settlement requires the institution to pay $60 million in equitable monetary relief and prohibits the entity from offering or providing private educational loans to consumers.

The CFPB simultaneously announced that it had agreed to a final stipulated judgment against the company that holds the private student loans at issue. This judgment requires that the entity discharge all outstanding loans, cease all collection on those loans, and correct any negative credit reporting associated with the loans.