More than $30 million in relief was ordered Monday for student borrowers from a former Delaware company after the federal consumer financial protection agency and 11 states charged the firm with illegal loans and abusive debt collection practices.
According to the Consumer Financial Protection Bureau (CFPB), joined the states for bringing the action against Prehired, a firm that the CFPB said was a Delaware-based company (before declaring Chapter 7 bankruptcy) operating a 12-week online training program claiming to prepare students for entry-level positions as software sales development representatives with “six-figure salaries” and a “job guarantee.” The bureau said Prehired offered students income share loans to help finance their costs of the program.
The bureau said that, among other things, Prehired deceived borrowers by claiming its loans were not loans, kept borrowers in the dark about key loan information, tricked consumers with deceptive debt collection practices and “sued students in a faraway location.”
According to CFPB, Prehired and its affiliate company Prehired Recruiting “filed debt collection lawsuits in a jurisdiction far away from where the consumers lived and were not able to be physically present when they executed the financing contract.” The agency said consumers were unaware that Prehired Recruiting could file an action in Delaware because Prehired’s income share loans did not provide for venue in Delaware or the consumers had little or no opportunity to review or negotiate that provision.
Under the order, which the agency pointed out was approved by a federal court, Prehired must refund $4.2 million to student borrowers, cancel all outstanding income share loans (valued at nearly $27 million), shut down permanently, and pay a civil money penalty of $1. The bureau said the payment, to the CFPB victims relief fund, will make it possible for the agency to use that fund to provide additional compensation to borrowers harmed by the company’s illegal conduct.
The 11 states joining the bureau in the action are Washington, Delaware, California, Oregon, Minnesota, Illinois, South Carolina, North Carolina, Massachusetts, Virginia, and Wisconsin.