Latest News - Company Forced to Pay Student Loan Borrowers Millions

Company Forced to Pay Student Loan Borrowers Millions

Company Forced to Pay Student Loan Borrowers Millions

Prehired, a self-described workforce accelerator, must shut operations indefinitely and offer more than $30 million in debt forgiveness to hundreds of former clients, according to a court order signed Monday by a Delaware bankruptcy judge.

Company Forced to Pay Student Loan Borrowers Millions

To prepare students for positions as software sales development agents, Delaware-based Prehired provided a 12-week training program, according to the CFPB. The company claimed that trainees might make wages in the six figures.

The company’s website states: “After 12 weeks, Prehired members average $69,000 in their first year with 6-figure potential after that. Start with zero upfront cost and a job guarantee.”

“Prehired members are HIRED in 12 weeks on average, while those who attend other programs are barely finishing their coursework.”

According to the CFPB, Prehired misled borrowers into believing that its loans were not loans, concealed important loan information from borrowers, used dishonest debt collection tactics to trick customers, and filed debt collection lawsuits in a location that was remote from the consumers’ residences and where they were unable to be present in person when the financing contract was executed.

According to a statement released by the organization on Monday, the Consumer Financial Protection Bureau (CFPB) collaborated with the states of Washington, Delaware, California, Oregon, Minnesota, Illinois, South Carolina, North Carolina, Massachusetts, Virginia, and Wisconsin.

Together with 11 state attorneys general, the federal government filed a combined lawsuit against Prehired and its related businesses in July due to the latter’s business practices. Together, they announced the court ruling on Monday.

Director of the CFPB Rohit Chopra said in a statement, “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. ”

He added, “Today’s action with our state partners ensures that borrowers harmed by Prehired can receive redress and have their illegal loans cancelled.”

A CFPB representative informed Newsweek that Prehired generated more than a thousand income share loans, contracts in which students take out loans to cover their educational expenses and repay the debt with a portion of their future wages.

The representative emphasized that Prehired Recruiting, a partner company mentioned in the order on Monday, aimed to obtain $25,000 from each client for a total of more than $7.2 million.

The spokesperson added, “The final stipulated judgment and order, signed by the court today, voids all income share loans originated or sold to consumers and prohibits their sale and collection,”

Prehired is required by a court-approved order to pay $4.2 million to student borrowers who made loan payments between 2019 and 2023. The company has been ordered to cease operations, and all student debt, estimated to be worth $27 million, will be erased.

“Prehired is permanently banned from offering income share loans in the future, or any activities related to vocational education,” the Consumer Financial Protection Bureau said in a statement.

“The company has already filed for Chapter 7 bankruptcy and ceased operations, and under the terms of this order, it will stay shut down for good.”

It will also have to pay $1 million to the CFPB victims relief fund to fulfil its financial obligations to students.

The Consumer Financial Protection Bureau said in a statement, “The payment will make it possible for the CFPB to use that fund to provide additional compensation to borrowers harmed by the company’s illegal conduct,”

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About the author

Nancy Beverly

Nancy Beverly is a prominent political journalist and editor at World-Wire, known for her sharp analysis and deep understanding of global politics. With a Master's degree in Political Science, she excels in breaking down complex political issues, making them relatable to the public. At World-Wire, Nancy crafts compelling political narratives covering everything from local governance to international relations. Recognized for her expertise, she received the 'Excellence in Political Journalism' award in 2021. Nancy's work not only informs but also enriches her readers' understanding of political dynamics.

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