"Income share" program left students mired in debt
Students who borrowed money through an "income share" program from Prehired will be getting $30 million in refunds, the Consumer Financial Protection Bureau (CFPB) and 11 states announced today.
A federal court has ordered the refunds and has also ordered Prehired to shut down and voi d all of its existing outstanding loans.
“Prehired lured student borrowers into debt with false promises of job placements and claims that students wouldn’t have to pay until they got a job,” said CFPB Director Rohit Chopra. “Today’s action with our state partners ensures that borrowers harmed by Prehired can receive redress and have their illegal loans canceled.”
Prehired was a Delaware-based company that operated a 12-week online training program claiming to prepare students for entry-level positions as software sales development representatives with “six-figure salaries” and a “job guarantee.”
Prehired offered students income share loans to help finance their costs of the program. Today’s order also names two affiliated companies, Prehired Recruiting and Prehired Accelerator, that pursued collection on defaulted income share loans.
Illegal, deceptive loans
In July 2023, the states and the CFPB sued Prehired to void the illegal loans and facilitate consumer redress. The states and the CFPB alleged that Prehired:
- Deceived borrowers by claiming its loans were not loans: Prehired’s marketing falsely claimed that its loans did not create a debt because the loan was contingent on job placement with a yearly salary over $60,000. But the company also deceptively buried terms in the loan that required graduates to pay even if they never got a job.
- Kept borrowers in the dark about key loan information: Prehired hid important loan terms from borrowers, including the amount financed, finance charges, and the loans’ annual percentage rate.
- Tricked consumers with deceptive debt collection practices: Prehired Recruiting and Prehired Accelerator pushed borrowers into converting their income share loan into a revised “settlement agreement” that required them to make payments even if they had not found a job, and which contained more burdensome dispute resolution and collection terms. Prehired Recruiting and Prehired Accelerator also falsely represented the amount of debt owed by consumers and stated Prehired could collect more than the consumer legally owed.
- Sued students in a faraway location: Prehired Recruiting filed debt collection lawsuits in a jurisdiction far away from where the consumers lived and were not able to be physically present when they executed the financing contract.
The CFPB partnered with Washington, Delaware, California, Oregon, Minnesota, Illinois, South Carolina, North Carolina, Massachusetts, Virginia, and Wisconsin to bring the enforcement action against Prehired and two affiliated companies.
Read today’s stipulated judgment.
Prehired students affected by this action can submit a claim at https://cms.www.prehiredclaims.com/