Consumer Financial Protection Bureau and 11 states announced that they ordered Prehired to provide over $30 million in relief for illegal student lending practices. This order is a result of Prehired's alleged illegal practices including false job placement promises, abusive debt collection practices, and "income share" loans.
The following details outline the circumstances leading up to this enforcement action. According to a press release by the Consumer Financial Protection Bureau (CFPB), the bureau and 11 states have announced that Prehired will provide over $30 million in relief to student borrowers for false job placement promises, violating the law with "income share" loans, and resorting to abusive debt collection practices. The CFPB partnered with states like Washington, Delaware, California, Oregon, Minnesota, Illinois, South Carolina, North Carolina, Massachusetts, Virginia, and Wisconsin to bring the enforcement action against Prehired and two affiliated companies. The order requires Prehired to cease operations, pay $4.2 million in redress to affected consumers, and void all outstanding income share loans valued at nearly $27 million. The order also names two affiliated companies—Prehired Recruiting and Prehired Accelerator—that pursued collection on defaulted income share loans.
Deceptive tactics employed by Prehired came in various forms as detailed below. According to the press release, Prehired Recruiting and Prehired Accelerator deceived borrowers by falsely claiming its loans were not loans as they were contingent on job placement with a yearly salary over $60k. They also buried terms in the loan that required graduates to pay even if they never got a job. Prehired hid important loan terms from borrowers including the amount financed, finance charges and the loans' annual percentage rate. They also pushed borrowers into converting their income share loan into a revised settlement agreement, which required payments even if they had not found a job.
In addition to misleading students about the nature of loans, Prehired also used unscrupulous methods in its debt collection practices. According to the press release, they falsely represented the amount of debt owed and claimed Prehired could collect more than the consumer legally owed. Prehired Recruiting filed debt collection lawsuits in a jurisdiction far away from the consumers' homes, as the income share loans did not provide for venue in Delaware or allow consumers little opportunity to review or negotiate that provision.
The CFPB Director expressed his views on this issue during his recent statement. "Prehired lured student borrowers into debt with false promises of job placements and claims that students wouldn’t have to pay until they got a job," said CFPB Director Rohit Chopra. "Today’s action with our state partners ensures that borrowers harmed by Prehired can receive redress and have their illegal loans canceled."
