AWS - Tracking the Digital Payments Takeover - September 2023

CFPB Orders Prehired to Pay $30 Million, Cease Operations

The Consumer Financial Protection Bureau (CFPB), in collaboration with 11 states, has announced an enforcement action against Prehired, a Delaware-based company that has filed for bankruptcy and ceased operations.

The CFPB alleges that Prehired engaged in deceptive practices, including making false promises of job placement, offering illegal income share loans and resorting to abusive debt collection practices, the agency said in a Monday (Nov. 20) press release.

As a result, Prehired has been ordered to provide over $30 million in relief to student borrowers, cease all operations and cancel all outstanding income share loans, according to the release.

Prehired operated a 12-week online training program that claimed to prepare students for entry-level positions as software sales development representatives, promising “six-figure salaries” and a “job guarantee,” the release said.

To finance their program costs, Prehired offered income share loans to students, per the release However, the CFPB alleges that Prehired deceived borrowers by falsely claiming that these loans were not loans, as they were contingent on job placement with a yearly salary of over $60,000. The company buried terms in the loan that required graduates to make payments even if they did not secure a job.

The enforcement action also highlighted other deceptive practices employed by Prehired, according to the press release. These practices included keeping borrowers uninformed about crucial loan details such as the amount financed, finance charges and annual percentage rate.

Additionally, Prehired’s affiliated companies, Prehired Recruiting and Prehired Accelerator, engaged in deceptive debt collection practices, pressuring borrowers to convert their income share loans into revised “settlement agreements” with unfavorable terms, the release said.

The court-approved order mandates that Prehired take several actions to address its illegal practices, per the release. Firstly, the company must refund $4.2 million to student borrowers who made payments on income share loans between May 2019 and March 2023. Moreover, all outstanding income share loans, valued at nearly $27 million, are permanently voided and cannot be collected on by Prehired or any other entity.

As part of the enforcement action, Prehired is permanently banned from offering income share loans or engaging in any activities related to vocational education, according to the release. The company has already filed for Chapter 7 bankruptcy and ceased operations.

In addition to consumer redress, Prehired will pay a civil money penalty of $1 to the CFPB victims relief fund, the release said. This payment will enable the CFPB to provide further compensation to borrowers who were harmed by Prehired’s illegal conduct.

This announcement comes on the same day that the CFPB said it ordered Toyota Motor Credit to pay a $60 million fine for engaging in illegal lending practices and credit reporting misconduct.