The CFPB and several state attorneys general have filed a lawsuit against the education company Prehired, alleging deceptive marketing and unfair debt collection practices related to income-share loans.
07/18/2023 12:05 P.M.
2 minute read
Prehired, an education company offering a 12-week online training program, is facing legal action from the Consumer Financial Protection Bureau and several state attorneys general for deceptive marketing and unfair debt collection practices, according a recent complaint by the bureau. The company claimed to prepare students for entry-level software sales development representative positions with “six-figure salaries” and a “job guarantee.” However, Prehired induced applicants to sign “income-share” loans to finance the program’s costs while misrepresenting that consumers would only need to make payments once they secured high-income jobs through Prehired.
In reality, Prehired concealed terms in the loan agreements that obligated consumers to make payments even if they didn’t obtain a job. Additionally, the company unilaterally increased consumers’ minimum monthly payments without evidence of employment or income growth.
Lawsuit
The legal action involves attorneys general from Washington, Oregon, Delaware, Minnesota, Illinois, Wisconsin, Massachusetts, North Carolina, South Carolina and Virginia, along with California’s Department of Financial Protection and Innovation. According to the complaint, Prehired originated over 1,000 income-share loans for students nationwide, and its debt collection entities, Prehired Recruiting and Prehired Accelerator, pursued collection activities on defaulted loans.
The lawsuit alleges that Prehired misrepresented the nature of its income-share loans, falsely claiming that the loans did not create debt and were contingent on securing a job with a yearly salary above $60,000. However, buried within the loan terms were requirements for graduates to make payments regardless of job placement. Furthermore, Prehired engaged in deceptive debt collection practices, tricking consumers into converting the income-share loans into revised settlement agreements that imposed burdensome dispute resolution and collection terms. Prehired also filed debt collection lawsuits in remote jurisdictions, making it difficult for consumers to defend themselves.
The CFPB further alleges that Prehired failed to disclose key loan terms, such as the amount financed, finance charges and annual percentage rate, violating the Truth in Lending Act and its regulations.
What’s Next?
Through this joint action, the CFPB and state attorneys general aim to hold Prehired accountable for its deceptive practices, void the income-share loans, provide restitution to affected consumers and impose penalties, with the collected amount being deposited into the CFPB’s Civil Penalty Fund.
Prehired’s alleged deceptive practices highlight the importance of consumer protection in the student lending market, emphasizing the need for transparency and fairness when offering educational financing options.
“Today’s action is part of the renewed focus the CFPB has placed on partnering with state regulators and bringing forth joint actions, including issuing an interpretive rule in 2022 designed to reinforce and expand state enforcement efforts,” according to the bureau.
Read the bureau’s complaint here.
Remember, subscribe to ACA Daily and Member Alerts under your My ACA profile when logged in to acainternational.org to receive updates on the ACA Huddle.