The Consumer Financial Protection Bureau (CFPB) ordered online college Bridgepoint Education to discharge all proprietary loans made to its students. The San Diego-based firm used deceptive practices that led students to take out loans that cost more than advertised, according to a federal consent order.
The CFPB ordered Bridgeport Education to make cash refunds on all loan payments already made by borrowers and slapped the for-profit college with an $8 million civil penalty, payable to the CFPB. Total loan forgiveness and refunds were thought to be at least $23.5 million. The CFPB action took effect on September 12, the date of the consent order signed by Bridgepoint Education.
"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. "Together with our state partners, we will continue to be vigilant in rooting out illegal practices facing student borrowers in the for-profit space."
Bridgepoint remains under investigation by four state Attorneys General, the Securities and Exchange Commission, and the Department of Justice.
Bridgepoint Education, Inc. is a for-profit higher ed provider that does business as Ashford University and the University of the Rockies. It's been a comer in the online education market, having enrolled hundreds of thousands of students. It's not clear whether the consent order will amount to a nuclear option from which Bridgepoint,
. According to the CFPB consent order, Bridgepoint offered private student loans to its students beginning in 2009 to help cover the cost of tuition. The Bureau found that the school deceived its students about the total cost of the loans by promising an unreasonably low monthly repayment amount. As a result, students at Bridgepoint were deceived into taking out loans without knowing the true cost, leading to payments that were higher than originally promised.
Many public and private schools, from the Ivy League to for-profit colleges, originate their own loans--known as institutional loans--which can be toxic for borrowers. Corinthian Colleges Genesis' Loans were among judged predatory by the CFPB in the run-up to Corinthian's shutdown in 2015, and a similar restitution plan was made available to Corinthian borrowers.
Bridgepoint's proprietary loan program has been shut down, according to CFPB spokesperson Moira Vahey.
The National Consumer Law Center shed light on the problem with its 2011 report, Piling It On: The Growth of Proprietary School Loans and the Consequences for Students. Bridgepoints loans, the NCLC said, were cut from a predatory cloth.
"Bridgepoint's practice of tricking its students into taking out expensive loans from the school highlights the tendency of for-profit schools to prioritize profit-making above any educational mission," said National Consumer Law Center staff attorney Abby Shafroth. "These findings illustrate the urgent need for states and the federal governments to do more to protect students from predatory school lending practices."
Shafroth ticked off terms in the consent order, including the required use of the CFPB's electronic tool that discloses student-specific information about the cost of the program. There will be compliance reporting and monitoring for five years from the date of the order, or five years from the most recent date that the CFPB initiates an action alleging any violation of the order.
"Just days after ITT Tech's predatory practices finally forced the for-profit college to close its doors - leaving thousands of students in the lurch - another bad actor in the industry has come under fire from federal watchdogs," said Senator Richard Blumenthal (D-Conn.). "Bridgepoint lied to its students, plain and simple. I applaud the Consumer Financial Protection Bureau for taking meaningful action to give students who were deceived and defrauded the relief they deserve."