The U.S. government is taking action against another for-profit college chain.
The Consumer Financial Protection Bureau said Monday it has ordered Bridgepoint Education to refund $23.5 million for deceiving students into taking out private student loans that cost more than advertised.
The San Diego-based company, which does business as Ashford University and the University of the Rockies, will also pay an $8 million civil penalty. It has neither admitted nor denied the allegations.
According to the CFPB order, from 2009 until recently, Bridgepoint offered private student loans to its students to help cover the cost of tuition. It told students that borrowers "normally" paid off loans made by the school with monthly payments of as little as $25, an amount that the bureau said was not realistic.
The CFPB is ordering Bridgepoint to discharge all outstanding private loans the institution made to its students and to refund loan payments already made by borrowers. Loan forgiveness and refunds will total over $23.5 million in consumer relief. Bridgepoint must also pay an $8 million civil penalty to the bureau.
Student borrowers eligible for relief are not required to take any action. And Bridgepoint must remove negative loan information from borrowers' credit reports and stop reporting information to debt collectors and credit reporting companies about private student loan debt.
The consent order also requires the company to make the cost of college clear with mandatory financial aid shopping tool.
The action comes one week after ITT Technical Institute announced it would close its more than 130 campuses after the government banned it from enrolling new students receiving federal aid.
Unlike ITT, Bridgepoint is still eligible to enroll students who receive federally guaranteed student loans. According to a regulatory filing, this is the company's primary source of revenue.
"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 press release. "Together with our state partners, we will continue to be vigilant in rooting out illegal practices facing student borrowers in the for-profit space."
The CFPB's investigation was assisted by the California attorney general and the Department of Education.
Bridgepoint released a statement saying that its institutions "acted in good faith and provided all appropriate tools and disclosures for the loan programs," and that it agreed to the resolution "in order to move forward and allow its institutions to focus on students."
The company noted that the CFPB only identified one area of concern. "The quality of the education Bridgepoint institutions are providing to students or the value of the degrees they are working towards was not disputed by the CFPB. There is also no concern over the interest rates provided to students in these loans."
Bridgepoint's stock fell on the news amid heavy trading volume. More than 1.6 million shares had changed hands by late afternoon, compared with average daily trading volume of just over 66,000 shares.