Corinthian Colleges Accused Of Predatory Lending In Lawsuit

Corinthian Colleges Accused Of Predatory Lending In Lawsuit

While it may just be a coincidence, John Oliver seems to be gaining traction with his new HBO show “Last Week Tonight.” The week prior to the World Cup Finals, the British host brought attention to the evil that is FIFA. In the days following the extended segment, my Facebook Newsfeed and that of millions of others featured links to the rant and his official YouTube saw over 10 million view the clip. Two weeks ago, he took on for-profit universities and student debt and saw roughly the same viewership.

On Tuesday, the Consumer Financial Protection Bureau filed a lawsuit against Corinthian Colleges accusing the company of illegal debt-collection practices and predatory lending. The suit filed in federal civil court alleges that the company victimized tens of thousands of students with misleading career opportunity representations and undelivered job placement assistance.

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Corinthian Colleges’ 107 campuses and online programs

Corinthian Colleges is one of the nation’s largest for-profit education companies and operates 107 campuses and online education programs nationwide under the names Heald, Everest, and WyoTech. Earlier this year, over 74,000 students, many from economically disadvantaged backgrounds, were enrolled in Corinthian-owned programs.

The suit accuses the company of high-pressure sales tactics and misleading statistics regarding student job placement following graduation. For example, the company used students who held a job for just a single day as basis for its placement numbers. The company was also accused of paying companies to hire graduates for a short period of time to boost its placement numbers.

The cost of a Corinthian bachelor’s degree in 2013 averaged between $60,000 and $75,000, an amount considerably higher than federal student loans cover. In order to mitigate this disparity, the CFPB is alleging that Corinthian promoted “Genesis” loans to students without disclosing the fact that the company owned a financial interest in the loan program.

Students who fell behind on loans, according to the lawsuit, were treated to a wide range of responses from Corinthian Colleges including being publicly removed from classrooms, having their computer access terminated and being forced to start loan repayments while still in school.

Suit is looking for $570 million of loan forgiveness

“We believe Corinthian lured in consumers with lies about their job prospects upon graduation, sold high-cost loans to pay for that false hope, and then harassed students for overdue debts while they were still in school,” said CFPB Director Richard Cordray.

The lawsuit is calling on Corinthian to forgive nearly $570 million in private loans to almost 130,000 students between July 2011 and March 2014.

This is not the first time that Corinthian has run afoul of the law. Just last month, it received a federal grand jury subpoena from the U.S. attorney’s office in Los Angeles. It’s also faced heightened scrutiny from the Securities and Exchange Commission as a result of alleged use of misleading marketing materials and job placement rates.

Corinthian closed the day at $0.1037, a loss of $0.0361 per share or 25.82%.

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