The Consumer Financial Protection Bureau, in conjunction with 11 different state attorneys general and regulators yesterday filed suit against Prehired, a vocational training program, for violating the Fair Debt Collection Practices Act among other laws.
A copy of the complaint, filed in the Bankruptcy Court for the District of Delaware, can be accessed by clicking here.
Prehired operated a 12-week course the claimed it would prepare students for entry-level positions as software dales development representatives. It drove applicants to sign “income-share” loans to finance the cost of the program and represented that individuals would pay nothing until they obtained a “high-paying” job. The company allegedly buried the terms of repayment — consumers would be required to pay whether they got a job or not — and increased the minimum monthly payments unilaterally. When individuals wouldn’t pay, the company was accused of filing collection lawsuits in jurisdictions far from where the consumers lived.
When the company’s debt collection practices came under scrutiny from state regulators, it changed the terms of its contracts with consumers to force arbitration. Before and after filing collection lawsuits, the company was accused of inducing customers to sign settlement agreements that were put forth as being beneficial to consumers, when, in reality, the agreements released any claims that consumers had against the company and converted the loans into obligations to make recurring monthly payments for several years.
“Prehired falsely pitched its purported training program as a risk-free investment, but instead often saddled its students with debt,” said CFPB Director Rohit Chopra, in a statement. “The CFPB is joining with the states to void these loans obtained through illegal student lending practices.”
AGs from Washington, Oregon, Delaware, Minnesota, Illinois, Wisconsin, Massachusetts, North Carolina, South Carolina, and Virginia joined the action, along with California’s Department of Financial Protection and Innovation.