CFPB Accuses Ejudicate of Conducting ‘Sham’ Student Loan Arbitrations

The CFPB has barred dispute resolution platform Ejudicate from arbitrating disputes about consumer financial products.

The ban came after the Consumer Financial Protection Bureau (CFPB) found that the company had misled student loan borrowers about its neutrality and undertook “sham” arbitration proceedings, the regulator said in a Thursday (Oct. 10) news release.

“Ejudicate ran bogus arbitration proceedings, deceived borrowers, and hid its financial conflicts of interest,” CFPB Director Rohit Chopra said in the release. “Arbitration outfits cannot rig the process against consumers to enrich their corporate clients.”

According to the release, Ejudicate — which has since rebranded as Brief — initiated arbitration proceedings on behalf of a company called Prehired, without telling borrowers that it had a business relationship with that firm.

The CFPB last year ordered Prehired to provide more than $30 million in relief to consumers after finding that the company had engaged in deceptive practices, including making false promises of job placement, offering illegal income share loans and resorting to abusive debt collection tactics. Prehired filed for bankruptcy and ceased operations last year.

“When Prehired’s deceptive debt collection practices first came under scrutiny, Prehired unilaterally changed the terms of its contracts to force consumers into arbitration through Ejudicate,” the CFPB said.

“In April 2022, Ejudicate illegally started arbitration proceedings against consumers who had allegedly defaulted on loans from Prehired and misrepresented itself to those borrowers.”

PYMNTS has contacted Ejudicate/Brief for comment but has not yet gotten a reply.

Last month, the CFPB unveiled findings from its Office of Servicemember Affairs Annual Report showing that student loans make up a growing number of complaints service members and veterans make about financial products.

“For example, service members stationed overseas may have difficulty reaching their student loan servicer during regular call center hours,” PYMNTS wrote. “Service members complained to the CFPB that they spend hours trying to reach their student loan servicer and often find that the call fails to resolve the issue.”

Service members also had trouble with income-driven repayment (IDR) plans. Because service members often move around a lot, their spouses change jobs and see drastic shifts in income, leading loan servicers to incorrectly calculate their monthly repayment amounts under the IDR plan.

In addition, service members told the CFPB that colleges and universities withhold transcripts when trying to collect a debt or disputed fees. Because they frequently move to new duty stations, members of the military need timely access to transcripts.