CFPB Lawsuit against Corinthian Colleges Finally Resolved
A lawsuit between a federal regulator and a defunct for-profit university has finally come to a close.
At the request of the Consumer Financial Protection Bureau (CFPB), a federal court entered a final default judgement against Corinthian Colleges, resolving a lawsuit filed by the agency last year.
In September 2014, the CFPB sued Corinthian Colleges, Inc. for luring tens of thousands of students into taking out private loans, known as Genesis loans, to cover expensive tuition costs by advertising bogus job prospects and career services. Corinthian then used illegal debt collection tactics to strong-arm students into paying back those loans while still in school.
The court ordered that Corinthian was liable for more than $530 million and prohibited the company from engaging in future misconduct.
Earlier this year, however, Corinthian Colleges filed for bankruptcy and was liquidated. Despite the court's significant ruling against the company, Corinthian cannot pay the judgment because it has dissolved and its assets have already been distributed according the liquidation plan in its bankruptcy case.
In November 2014, the ECMC Group worked with the U.S. Department of Education to reach an agreement to acquire a substantial number of Everest and WyoTech campuses, which were owned by Corinthian. In February 2015, the CFPB announced that, through an action with ECMC, the Bureau secured hundreds of millions of dollars in forgiveness for borrowers who took out Corinthian Colleges' high-cost private student loans.
In a statement, the CFPB says it will continue to pursue relief for consumers harmed by Corinthian's unlawful conduct.
"We all have much more work to do before current and past students who were hurt by Corinthian's illegal practices can be made whole," said CFPB Director Richard Cordray. "We remain deeply concerned about risks facing student borrowers in the for-profit space and will continue to be vigilant in rooting out harmful practices."
A copy of the ruling can be found here.