Continuing its recent focus on student lending, the Consumer Financial Protection Bureau (CFPB) ordered a for-profit college company to provide loan forgiveness and refunds of more than $23 million, adding an $8 million civil money penalty on top.
Since 2009, California-based Bridgepoint Education Inc. enrolled hundreds of thousands of students in online courses at Ashford University and the University of the Rockies, offering private loans to cover tuition costs. But the company also deceived students into taking out private student loans that cost more than advertised, the Bureau alleged in an administrative complaint. For example, the company told borrowers repayment was as low as $25 each month when this estimate "was not realistic" and monthly payments were much higher, the CFPB said. As a result, students did not know the true cost of their loans and were obliged to pay more than promised, according to the Bureau.
"Bridgepoint deceived its students into taking out loans that cost more than advertised, and so we are ordering full relief of all loans made by the school," CFPB Director Richard Cordray said in a statement about the action. "Together with our state partners, we will continue to be vigilant in rooting out illegal practices facing student borrowers in the for-profit space."
To settle charges that the company's actions violated the Dodd-Frank Wall Street Reform and Consumer Protection Act's prohibition on unfair, deceptive, or abusive acts or practices, Bridgepoint entered into a consent order with the CFPB.
All payments made by students toward private student loans taken out from the two schools will be refunded pursuant to the comment order, including principal and interest. In addition to this estimated $5 million, Bridgepoint must also discharge all outstanding debt for its institutional student loans for another $18.5 million. The CFPB tacked on an $8 million civil money penalty for a total of $31.5 million.
Bridgepoint is also subject to policy changes. Going forward, the company is prohibited from making false, deceptive, or misleading statements about actual or typical monthly payments that students are obligated to make and must remove any negative information about outstanding private student loan debt owed to the school from borrowers' credit reports.
Finally, the Bureau leveraged a newly developed financial aid shopping tool as part of the consent order. Bridgepoint will now require all entering students as well as existing students starting different programs to use the tool when they decide to borrow money to pay for school. The tool provides personalized financial aid offer information along with details about graduation and loan default rates, potential salaries for the program the student is interested in, and post-graduation budgeting.
Students will be required to use the tool prior to enrollment, the CFPB said, and Bridgepoint will be responsible for generating a personalized interactive disclosure for each student.
To read the consent order in In the Matter of Bridgepoint Education, Inc., click here.
Why it matters
The CFPB has made student lending one of its priorities in recent months, from an administrative action against a debt relief company for allegedly deceiving student loan borrowers and misrepresenting an affiliation with the Department of Education to a proposal for grading financial companies for their offerings to students with the "Safe Student Account Scorecard," an attempt to increase transparency on student accounts.