Student lender ‘preyed on young people’; $30M in relief coming to borrowers in 11 states

A company that offered an online training program claiming to prepare students for entry-level positions with “six-figure salaries” and a “job guarantee” will provide more than $20 million in relief to student borrowers for making false promises and trapping students with “income share” loans that violated Virginia law.

Prehired, a Delaware-based company resorted to abusive debt collection practices when borrowers could not repay them.

An order approved by federal court requires Prehired to cease all operations, pay $4.2 million in redress to consumers and voids all outstanding loans, valued at nearly $27 million.

The Consumer Financial Protection Bureau and 10 other states joined Attorney General Jason Miyares in this lawsuit.

“The transition from college to the working world is challenging for our students. Prehired preyed on young people during this time of uncertainty and adjustment, setting them up for failure rather than success,” said Miyares.

Prehired was a Delaware-based company that operated a 12-week online training program supposedly preparing its students for jobs as software sales development representatives.

The states and the CFPB alleged in the lawsuit 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 more than $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: Affiliated companies 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. Many consumers were unaware that Prehired Recruiting could file an action in Delaware because Prehired’s income share loans did not provide for venue in Delaware or the consumers had little or no opportunity to review or negotiate that provision.

Under the Consumer Financial Protection Act, the CFPB, state attorneys general and state regulators have the authority to take enforcement action against institutions that violate federal consumer financial laws, including the CFPA’s prohibition of deceptive acts or practices and the Fair Debt Collection Practices Act.

Under the order approved by the court, Prehired will:

• Refund $4.2 million to student borrowers: Prehired will pay $4.2 million to student borrowers who made payments on income share loans between May 2019 and March 2023.
• Cancel all outstanding income share loans: All outstanding loans, which Prehired valued at nearly $27 million, are permanently voided and cannot be sold or collected on by Prehired or anyone else.
• Shut down permanently: Prehired is permanently banned from offering income share loans in the future or any activities related to vocational education. 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.
• Pay a civil money penalty: In addition to the direct consumer redress above, Prehired will make a $1 payment to the CFPB victims relief fund. 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.

Prehired students affected by this action may submit a claim at https://cms.www.prehiredclaims.com/.