The Consumer Financial Protection Bureau yesterday announced it has filed a lawsuit against student lender Climb Credit and its largest shareholder 1/0, accusing them of misleading students into taking out loans for low-quality vocational programs. The CFPB claims Climb Credit misrepresented the value of the educational programs offered by their partner schools, including exaggerated claims about graduate outcomes, job placement rates, and salary increases.
Details: According to the CFPB’s lawsuit, Climb Credit marketed itself as a trusted intermediary between students and vocational schools, claiming that it vetted its partner schools for quality. However, the CFPB alleges that Climb Credit frequently failed to conduct proper return-on-investment analyses for these schools or ignored red flags about the programs’ job placement outcomes.
Key allegations include:
- False claims about program quality: Climb Credit assured students that it only partnered with schools that passed its “return-on-investment” analysis. In reality, many programs either failed this analysis or were never vetted at all.
- Misleading graduate outcomes: The lender advertised inflated statistics, claiming that graduates saw significant salary increases and high job placement rates, despite lacking reliable data to support these claims.
- Hidden loan costs: The CFPB also accuses Climb Credit of failing to disclose critical loan terms, such as the annual percentage rates (APRs) and origination fees, in their marketing materials.
What they’re saying: “Climb Credit used false promises and outright lies to lure borrowers into loans for vocational programs,” said CFPB Director Rohit Chopra. “Tens of thousands of students may have been impacted by Climb’s actions, and the CFPB is suing Climb and its investor overlord to halt these activities and get relief for students.”
