WASHINGTON (2/4/15)--The Consumer Financial Protection Bureau (CFPB) announced two actions Tuesday that it says will protect consumers from high-cost private student loans and a sham credit card.
The bureau, along with the U.S. Department of Education, took action against ECMC Group, which owns a number of schools that are part of Corinthian College, for allegedly "luring tens of thousands of students to take out private loans" in order to cover tuition costs.
This was done by advertising bogus job prospects and career services, according to the bureau. The lawsuit also alleges that Corinthian used illegal debt collection tactics to strong-arm students into paying back those loans while still in school.
According to the CFPB, under the Genesis loan program, as it was known, nearly all student borrowers were required to make monthly loan payments while attending school. More than 60% of Corinthian school students defaulted on these high-cost loans within three years.
ECMC must provide more than $480 million in relief to Corinthian victims, halt lawsuits and improper debt collection practices, remove negative information from student borrowers' credit reports and implement new consumer protections. It also is banned from offering a private student loan program for seven years.
The CFPB's other recent action was against the Texas-based Union Workers Credit Services for allegedly duping thousands of consumers into signing up for sham credit cards. The bureau filed a lawsuit against Union Workers Credit Services in December, alleging that the vast majority of the company's revenue was generated from selling a buying-club membership card that it falsely advertised as a general-purpose credit card.
In reality, the card could only be used to buy products from the company. Most consumers never used the membership card but were unable to recoup their membership fees.
Under a proposed consent order, Union Workers Credit Services would pay a civil penalty of $70,000 and is prohibited from offering any credit products or services.
According to the CFPB, consumers who were harmed by these violations may be eligible for relief from the CFPB's Civil Penalty Fund in the future.