November 4, 2015

CFPB Granted Default Judgment against Corinthian Colleges for Engaging in a Predatory Lending Scheme

2 min

On October 27, 2015, a federal district court entered a final default judgment against Corinthian Colleges, Inc. for engaging in deceptive lending practices and illegal debt collection practices. The Consumer Financial Protection Bureau (CFPB or the Bureau) filed suit against Corinthian in September 2014, alleging that the company "induced students to enroll in its programs through false and misleading representations about its graduates' career opportunities," including falsely inflating job placement statistics. The CFPB further alleged that when students defaulted on their loans, "Corinthian took illegal aggressive action" to collect the debt, even while some students were still in school.

In February 2015, the CFPB and the U.S. Department of Education announced more than $480 million in forgiveness for student loans offered through Corinthian College, Inc.'s Genesis loan program, in conjunction with the ECMC Group's acquisition of several Corinthian campuses. However, the Bureau's agreement with ECMC did not release Corinthian from any liability, and the lawsuit against Corinthian continued throughout 2015.

Corinthian filed for bankruptcy in May, however, and was unable to defend against the suit. Corinthian has since been liquidated and will therefore not be able pay the $530 million judgment entered against it.

The CFPB remains "deeply concerned about risks facing student borrowers" and "will continue to be vigilant in rooting out harmful practices." Industry participants are encouraged to review and, if necessary, update and strengthen their compliance programs to help avoid CFPB enforcement action.