The Consumer Financial Protection Bureau announced it has taken action against for-profit college chain Bridgepoint Education, Inc., for deceiving students into taking out private student loans that cost more than advertised. The bureau is ordering Bridgepoint to discharge all outstanding private loans the institution made to its students and to refund loan payments already made by borrowers. The consent order can be found here.
“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,” said CFPB Director Richard Cordray. “We will continue to be vigilant in rooting out illegal practices facing student borrowers in the for-profit space.”
From 2009 until recently, Bridgepoint offered private student loans to its students to help cover the cost of tuition. The bureau alleges that the school deceived its students about the total cost of the loans by telling students the wrong monthly repayment amount. As a result, students took out loans without knowing the true cost, and were obligated to make payments greater than what they were promised. Specifically, the CFPB found that Bridgepoint told students that borrowers normally paid off loans made by the school with monthly payments of as little as $25, an amount that was not realistic.
The CFPB consent order requires loan forgiveness and refunds that will total more than $23.5 million in automatic consumer relief. Bridgepoint must refund all payments made by students toward private student loans taken out from the school, including principal and interest, a total of about $5 million. Bridgepoint must also discharge all outstanding debt for its institutional student loans, a total of approximately $18.5 million. Student borrowers eligible for relief are not required to take any action. Adverse data must also be removed from students’ credit reports. Bridgepoint must also pay an $8 million penalty to the CFPB’s Civil Penalty Fund.
In addition, Bridgepoint is being required to utilize a standardized “financial aid disclosure tool” designed by the CFPB. Students will use the new tool to access personalized financial aid information as well as information about graduation and loan default rates, potential salaries for their programs, and post-graduation budgeting. Bridgepoint must require that students use the tool to access this important information before enrolling. The school will be responsible for generating a personalized interactive disclosure for each student.