To quote the Consumer Financial Protection Bureau's press release:
[T]he Consumer Financial Protection Bureau and the U.S. Department of Education announced more than $480 million in forgiveness for borrowers who took out Corinthian College’s high-cost private student loans. ECMC Group, the new owner of a number of Corinthian schools, will not operate a private student loan program for seven years and agreed to a series of new consumer protections.
Read the entire press release. The settlement documents are here. Note in these documents that the settlement amends, but does not eliminate, the schools' mandatory arbitration clauses.
The settlement's injunctive-like relief addresses many topics. It includes instructions to credit-reporting agencies to cleanse the students' credit reports and an independent monitor (acceptable to the Department of Education) for up to three years who will, among other things, review the schools' advertising and recruiting materials for fairness and compliance with state and federal law. A list of many of the settlement's key components appears after the jump.
- Provide more than $480 million in debt relief to Corinthian victims: Although Corinthian Colleges will no longer operate the schools, tens of thousands of students remain saddled with debt incurred under Corinthian’s alleged predatory and illegal lending scheme. ECMC worked with the CFPB and U.S. Department of Education to secure $480 million in debt relief for borrowers who took out Corinthian’s high-cost private student loans. These students will see an immediate 40 percent reduction in the amount that they owe on outstanding private student loans. Eligible borrowers will be notified of the loan forgiveness and automatically receive the relief.
- Not offer private student loan programs: The CFPB sued Corinthian Colleges for alleged predatory practices related to its high-cost Genesis loan program. ECMC will not offer its own private student loans to current and future students for a period of seven years.
- Halt lawsuits threats and improper debt collection practices: The CFPB’s lawsuit alleges that Corinthian engaged in strong-arm tactics to collect private student loan debt. ECMC has taken steps to ensure that borrowers who have outstanding Corinthian loans will not be sued or threatened with legal action. In addition, borrowers will not be harassed or have their debts disclosed to third parties.
- Remove negative information from student borrowers’ credit reports: Many borrowers lured in by Corinthian’s efforts to induce them into high-cost loans have seen their credit report damaged. Credit reporting agencies will receive instructions to delete any existing negative credit reporting information from borrowers’ credit reports.
- Implement strong, new consumer protections: The CFPB’s lawsuit alleges that Corinthian made a range of misrepresentations to prospective students. As part of today’s announcement, ECMC is obligated to adhere to an agreement with the U.S. Department of Education that provides for flexible withdrawal policies, clear information on job prospects, and other protections.
