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Financial Services Law Insights and Observations

CFPB and Department of Education Reach Agreement with Buyer of For-Profit Colleges

CFPB Student Lending

Consumer Finance

On February 3, the CFPB and the U.S. Department of Education announced that they had reached an agreement with ECMC Group, to provide debt relief and additional consumer protections to borrowers who took out private loans from Corinthian Colleges, Inc. ECMC is the new owner of a number of Corinthian schools. In September 2014, the CFPB sued Corinthian for allegedly luring students into high-cost private loans, using illegal debt collection tactics to make students pay back private loans while still in school, and advertising inaccurate job prospects and career services. The agreement releases ECMC from liability for Corinthian’s actions in exchange for ECMC (i) providing more than $480 million in debt relief for borrowers who took out high-cost private student loans with Corinthian; (ii) not offering private student loans for a period of seven years; (iii) ceasing lawsuit threats and improper debt collection practices; (iv) instructing credit reporting agencies to remove negative credit reporting information from borrowers’ credit reports; and (v) implementing additional consumer protections, including flexible withdrawal policies and clear information on job prospects. The CFPB’s lawsuit against Corinthian remains ongoing.