A federal judge in Illinois has ruled that national for-profit chain Corinthian Colleges Inc. must pay $531 million in damages to former students for misleading them about their career prospects and engaging in other deceptive practices.
The order issued Tuesday ends a yearlong case in which the Consumer Financial Protection Bureau sued now-defunct Corinthian for "luring tens of thousands" of consumers into taking out private loans and then "strong-armed" students into paying back the debt. Corinthian declined to contest the charges.
Judge Gary Feinerman of the U.S. District Court for the Northern District of Illinois, in his ruling, said Corinthian violated a federal “prohibition on deceptive acts and practices by its misrepresentations and omissions regarding prospective students’ career opportunities.”
The damages are unlikely to be paid because Corinthian was dissolved in bankruptcy in May and its assets have been distributed according to an August liquidation plan, a U.S. government official said.But the CFPB vowed Wednesday in a press release that it would find ways to reimburse effected borrowers.
CFPB Director Richard Cordray said the ruling marks the end of litigation against a company that “severely harmed tens of thousands of students, turning dreams of higher education into a nightmare.” "We all have much more work to do before current and past students who were hurt by Corinthian's illegal practices can be made whole. We remain deeply concerned about risks facing student borrowers in the for-profit space and will continue to be vigilant in rooting out harmful practices,” he said.
The CFPB reached a consent order in February with the buyer of Corinthian's campuses, ECMC Group, in which the company agreed to forgive more than $480 million in student debt from the legacy Corinthian loans.
The CFPB during its investigation into Corinthian’s practices found that since July 2011, Corinthian lured tens of thousands of students at Heald College, Everest University and WyoTech to take out private student loans to cover expensive tuition costs by advertising bogus job prospects and career services.
Corinthian allegedly advertised their education as a gateway to good jobs and better careers for students coming from economically disadvantaged backgrounds. To entice these students, Corinthian's schools used sham job placement rates to lead students to think that when they graduated they were likely to land good jobs and sufficient salaries to repay their private student loans.
The CFPB found that Corinthian inflated these rates by creating fictitious employers and reporting students as being placed at those fake employers. The company also allegedly counted a “career" as a job that merely lasted one day, with the promise of a second day.
Mark D. Collins, a lawyer who represented Corinthian in its bankruptcy case, couldn’t immediately be reached for comment.