WASHINGTON D.C. โ The Consumer Financial Protection Bureau (CFPB) and 11 states today announced that Prehired will provide more than $30 million in relief to student borrowers for making false job placement promises, trapping students with โincome sharingโ loans that violated the law and resorted to abusive debt collection practices when borrowers could not pay. The CFPB partnered with Washington, Delaware, California, Oregon, Minnesota, Illinois, South Carolina, North Carolina, Massachusetts, Virginia, and Wisconsin to bring enforcement actions against Prehired and two affiliated companies. The order passed by a federal court requires Prehired to cease all operations, pay $4.2 million in compensation to consumers who were affected by its illegal practices, and discharge all of its outstanding revenue-sharing loans valued by Prehired. at almost 27 million dollars.
โPrehired lured student borrowers into debt with false promises of job placement and claims that students would not have to pay until they got a job,โ 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 paid off."
Prehired was a Delaware-based company that operated a 12-week online training program that aimed to prepare students for entry-level positions as software sales development representatives with "six-figure salaries" and a "guarantee of employment". Prehired offered students income-sharing loans to help them finance program costs. Today's order also names two affiliated companies, Prehired Recruiting and Prehired Accelerator, that sought collection of delinquent revenue-sharing loans.
In July 2023, states and the CFPB pre-contracted defendant void illegal loans and facilitate consumer redress. The states and the CFPB alleged that Prehired:
- It misled borrowers by claiming that its loans were not loans.: Prehired's marketing falsely claimed that its loans did not create debt because the loan was contingent on job placement with an annual salary greater than $60,000. But the company also deceptively hid conditions in the loan that required graduates to repay even if they never got a job.
- Kept borrowers aware of key loan information.: Prehired hid important loan terms from borrowers, including the amount financed, finance charges, and the annual percentage rate of the loans.
- Consumers deceived by deceptive debt collection practices: Prehired Recruiting and Prehired Accelerator pushed borrowers to convert their income-sharing loan into a revised โsettlement agreementโ that required them to make payments even if they hadn't found a job, and that contained dispute resolution and collection terms more onerous. Prehired Recruiting and Prehired Accelerator also misrepresented the amount of consumers' debt and claimed that Prehired could collect more than the consumer legally owed.
- Students sued in a distant place: Prehired Recruiting filed debt collection lawsuits in a jurisdiction far removed from where the consumers lived and were unable to be physically present when they executed the financing contract. Many consumers were not aware that Prehired Recruiting could sue in Delaware because Prehired's income-sharing loans provided no venue in Delaware or consumers had little or no opportunity to review or negotiate that provision.
Execution action
Under the Consumer Financial Protection Act (CFPA), the CFPB, state attorneys general, and state regulators have the authority to take enforcement action against institutions that violate federal consumer financial laws, including prohibiting deceptive acts or practices of the CFPA and Fair Debt Collection. Practice Law.
According to the order approved by the court, Prehired:
- Refund of $4.2 million to student borrowers: Prehired will pay $4.2 million to student borrowers who made income share loan payments between May 2019 and March 2023.
- Cancel all outstanding revenue sharing loans: All outstanding loans, which Prehired valued at nearly $27 million, are permanently voided and cannot be sold or collected by Prehired or anyone else.
- Permanently turn off: Prehired is permanently prohibited from offering future income-sharing loans, or any activities related to vocational education. The company has already filed for Chapter 7 bankruptcy and ceased operations, and under the terms of this order it will remain closed forever.
- Pay a civil monetary fine: In addition to the direct consumer compensation mentioned above, Prehired will make a payment of $1 to the CFPB Victim Relief Fund. The payment will allow the CFPB to use that fund to provide additional compensation to borrowers harmed by the company's illegal conduct.
Read today's stipulated sentence.
Pre-hired students affected by this action may file a claim at https://cms.www.prehiredclaims.com/ .
The CFPB website has additional resources for consumers on student loans. Consumers can file complaints about financial products or services by visiting the CFPB website or by calling (855) 411-CFPB (2372).
Employees of companies who believe their company has violated federal consumer financial laws are encouraged to submit information about what they know. whistleblower@cfpb.gov.
The Consumer Financial Protection Bureau (CFPB) is a 21st century agency that helps consumer finance markets work by making rules more effective, enforcing those rules consistently and fairly, and empowering consumers to to take more control over their economic lives. For more information visit www.consumerfinance.gov.
