September 7, 2014
CFPB Readying Action Against College Over Debt Sales and Collection Methods
For-profit higher education firm Corinthian Colleges revealed in a recent SEC filing that the CFPB has initiated settlement talks relating to an enforcement action over the company’s debt collection tactics and treatment of certain loans.
The 8-K report, filed Monday with the SEC, disclosed that the CFPB had met with Corinthian last Thursday to discuss a proposed settlement over violations of the Dodd-Frank Act and FDCPA. The Bureau said the settlement offer, the financial terms of which were not disclosed, would expire this Friday.
The day before the meeting, Corinthian said it sold a portfolio of its student loans for $19 million to an unrelated party following a bid process.
But the CFPB wants all of that to stop. Corinthian noted that part of the settlement would include the company agreeing to cease “the sale or transfer of private student loans” and ceasing to engage in certain in-school collection efforts the CFPB considers unlawful. The CFPB also asked for documents relating to the sale of the student loan portfolio.
The specific nature of the FDCPA violations were not disclosed.
It’s the latest problem for Corinthian which has been under investigation by a number of federal agencies. The Department of Education in June withheld the company’s access to federal aid funds, creating a liquidity crisis for Corinthian. The company then agreed to begin liquidating assets, including the sale or closure of its 107 campuses, to meet its lenders’ terms.
The state of California has also been tough on Corinthian, with the attorney general launching at least two enforcement actions against the firm in recent year. And just this week, California’s Department of Veterans Affairs moved to prevent Corinthian from receiving federal GI Bill benefits, a major source of tuition revenue for the college operator.
The CFPB became involved late last year when it began investigating the loans for-profit colleges were offering to students. Shortly thereafter, the CFPB sued a separate college operator – ITT Educational Services – over its loans. But Corinthian defended their financial services practices at the time noting that it “believes that its acts and practices relating to student loans are lawful and essential.”
There was no mention of the loan investigation in Monday’s SEC filing. So it appears that the CFPB has moved on to debt collection practices and the sale of student loan portfolios.
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