The Consumer Financial Protection Bureau today sued Santa Ana-based Corinthian Colleges, Inc. and alleged it engaged in “illegal predatory lending.”
Corinthian said it “strongly disputes” the allegations.
In a statement today the bureau said the for-profit school operator enticed “tens of thousands of students” to borrow more than $500 million to attend the schools.
It said Corinthian advertised job prospects and career services that were overstated or did not exist as students took out private loans at twice a typical federal loan rate.
“We believe Corinthian lured consumers into predatory loans by lying about their future job prospects, and then used illegal debt collection tactics to strong-arm students at school,” said CFPB Director Richard Corday in the statement.
The lawsuit covers July 11, 2011 to the present, the agency said.
In a statement Corinthian said the complaint “wrongly disparages the career services” the company offers graduates, that less than 40% of students take out the kinds of loans in question, and that the average loan is $4,700 per borrower with an average annual percentage rate of 9%.
It said the average payment while a student is in-school is $35 a month and that since 2008 about 54,000 students had received hardship-based forbearances on their loans.
Corinthian is in the middle of wind-down plan of its business. It is selling or closing campuses and programs. It recently had about 74,000 students at 107 campuses in the United States and Canada.
The stock traded at a market cap of $8.3 million after the announcement.
