Corinthian Colleges Sued by U.S. Over Predatory LendingAndrew Harris
Corinthian Colleges Inc., the for-profit education company winding down its operations, resorted to predatory lending techniques and “strong arm” collection tactics to collect from students it misled about job prospects, a U.S. agency said in a lawsuit.
“Corinthian lured tens of thousands of students to take out private loans to cover expensive tuition costs by advertising bogus job prospects and career services,” the Consumer Financial Protection Bureau said today in a statement. “Corinthian then used illegal debt collection practices to strong-arm students into paying back those loans while still in school.”
Claiming those actions violated federal debt collection laws, the CFPB asked a Chicago federal court today to bar the alleged practices and order restitution to borrowers harmed. Corinthian fell more than 30 percent to a 52-week low of less than 10 cents per share in Nasdaq trading. The company has lost almost 95 percent of its value in the past year.
Over the past three years, Corinthian made 130,000 loans, totaling almost $569 million, to students who couldn’t afford its tuition, according to the complaint. Corinthian, which had about 72,000 students as recently as July, agreed to a U.S. government plan to close or sell its 107 campuses in the U.S. and Canada.
The company has been fending off allegations by several states that it falsifies job placement and marketing data.
The CFPB raised similar claims in its complaint, accusing the company of inflating placement statistics as it “deflated the number of graduates who were ‘available for employment.’”
The Santa Ana, California-based company said in a statement that it “strongly disputes” the CFPB claims. The agency wrongfully disparaged Corinthian’s career services assistance and mischaracterized its Genesis student loan program, a subject of the regulator’s complaint, according to the statement.
“The complaint ignores clear, easily obtainable evidence that thousands of Corinthian graduates are hired into permanent positions by large and small employers across the U.S. every year,” the company said, claiming the agency cited isolated incidents that Corinthian had disclosed and taken steps to cure.
It also described the Genesis loan program as supplemental financial assistance used by less than 40 percent of its students at a cost of about $35 per month.
“We ask students to make payments while in school to help them develop the discipline and practice of repaying their federal and other loan obligations,” Corinthian said.
The case is Consumer Financial Protection Bureau v. Corinthian Colleges Inc., 14-cv-7194, U.S. District Court, Northern District of Illinois (Chicago).