Attorney General Josh Kaul, along with the Consumer Financial Protection Bureau (CFPB) and 10 states, has announced a significant victory in the fight against predatory student lending practices. Prehired, a Delaware-based company, has been ordered to provide more than $30 million in relief to student borrowers who were allegedly deceived and trapped in income share loans that violated the law.
The allegations against Prehired include false promises of job placement, deceptive loan practices, and abusive debt collection tactics. The states and the CFPB filed an adversary proceeding against Prehired and its affiliated companies in federal bankruptcy court, leading to the court-approved order. As part of the order, Prehired will cease all operations, pay $4.2 million in redress to affected consumers, and void all outstanding income share loans valued at nearly $27 million.
Attorney General Kaul emphasized the importance of holding companies accountable for their actions, stating, "Companies that offer loans must not engage in predatory practices that deceive borrowers. This resolution helps protect consumers who were impacted by Prehired's actions."
Prehired operated a 12-week online training program that claimed to prepare students for entry-level positions as software sales development representatives with high salaries and a job guarantee. The company offered income share loans to finance the program, but it allegedly deceived borrowers by claiming that the loans did not create a debt. However, hidden loan terms required graduates to make payments even if they did not secure a job.
Additionally, Prehired hid important loan information from borrowers and engaged in deceptive debt collection practices through its affiliated companies, Prehired Recruiting and Prehired Accelerator. These companies pushed borrowers into revised settlement agreements that contained more burdensome terms and misrepresented the amount of debt owed.
The enforcement action taken against Prehired was made possible under the Consumer Financial Protection Act (CFPA) and the Fair Debt Collection Practices Act. The order approved by the court includes several key provisions:
- Prehired will refund $4.2 million to student borrowers who made payments on income share loans between May 2019 and March 2023.
- All outstanding income share loans, valued at nearly $27 million, are permanently voided and cannot be collected on.
- Prehired is permanently banned from offering income share loans or engaging in any activities related to vocational education.
- Prehired will pay a civil money penalty to the CFPB victims relief fund, potentially providing additional compensation to borrowers affected by the company's illegal conduct.
Joining Attorney General Kaul and the CFPB in this enforcement action are the attorneys general of California, Delaware, Illinois, Massachusetts, Minnesota, North Carolina, Oregon, South Carolina, Virginia, and Washington.
Affected Prehired students can submit a claim for relief through the designated claims website provided.
This significant enforcement action sends a strong message that deceptive student lending practices will not be tolerated. It serves as a reminder that companies must act responsibly and in the best interest of consumers.
To learn more, click on this link: https://www.doj.state.wi.us/news-releases/ag-kaul-joins-cfpb-and-10-states-securing-order-requiring-prehired-provide-students