On July 13, 2023, the CFPB and various state attorneys general, along with California’s Department of Financial Protection and Innovation, filed an adversary proceeding against a sales training company for deceptive marketing and debt collection practices relating to the company’s allegedly illegal student loan program.

The eight-count complaint, filed in the United States Bankruptcy Court for the District of Delaware, alleges that the company improperly marketed predatory loans to its consumers and falsely guaranteed job placement.  The complaint also alleges that the Company unilaterally changed the terms of the loans to require arbitration after the loans attracted regulatory scrutiny.  Prior to filing for bankruptcy, the company operated a private, for-profit vocational training program for software sales representatives in Delaware.  The complaint alleges the company’s practices were deceptive and abusive in violation of the Consumer Financial Protection Act of 2010 (CFPA), Truth in Lending Act (TILA), Regulation Z and the Fair Debt Collection Practices Act (FDCPA).

In particular, the complaint alleges that the company deceptively advertised that its “income share” agreements were not loans and that the borrowers would not need to pay anything until they had a job making at least $60,000 a year, despite the fact that loan terms required payment regardless of whether graduates got a job.  The complaint also alleges that that the company engaged in unfair debt collection practices by filing debt collection lawsuits in distant forums where the borrowers neither resided nor signed any agreements.

The complaint seeks, among other things, declaratory and injunctive relief, restitution to all injured borrowers, disgorgement of money derived from the alleged improper practices, civil penalties, rescission and reformation of contracts, and the investigative and litigation costs associated with the suit.

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