A group of student-loan borrowers are getting $30 million in debt relief after a tech boot camp offered them 'illegal' payment plans, a federal watchdog says

  • A group of student-loan borrowers who attended boot camp Prehired are getting $30 million in debt relief.

  • The CFPB sued Prehired over the summer, accusing it of offering "illegal" income-share agreements.

  • Impacted borrowers will receive refunds, and any outstanding ISAs will be canceled.

More student-debt relief is on the way for a group of borrowers who attended a tech boot camp.

On Monday, the Consumer Financial Protection Bureau — in partnership with 11 states — announced a federal court order requiring boot camp Prehired to provide over $30 million in debt relief to student-loan borrowers who entered income-share agreements with the company.

The CFPB and the states sued Prehired in July over claims that it "misrepresented" the nature of the income-share agreements it made with students who enrolled in the 12-week online training program. ISAs typically require a borrower to pledge a certain amount of their income to the lender in exchange for funds to pay for their education, but the CFPB said the nature of those agreements were "illegal" and did not properly disclose its cost to borrowers.

"Prehired lured student borrowers into debt with false promises of job placements and claims that students wouldn't have to pay until they got a job," CFPB Director Rohit Chopra said in a statement. "Today's action with our state partners ensures that borrowers harmed by Prehired can receive redress and have their illegal loans canceled."

According to the CFPB, Prehired falsely marketed the ISAs by saying a borrower would not have to repay the loan until they received a job placement with a yearly salary over $60,000, when the terms required graduates to pay the loan back regardless of employment.

Monday's court order requires Prehired to refund $4.2 million to borrowers who made payments on ISAs between May 2019 and March 2023, along with canceling all outstanding ISAs — valued at around $27 million. The judgment also permanently bans Prehired from offering ISAs in the future.

Borrowers who believe they qualify for a payment because they signed an ISA with Prehired should email info@PreHiredClaims.com to confirm the CFPB has their information on file.

Prehired did not immediately respond to Insider's request for comment on Monday's announcement.

The CFPB's initial complaint also said that Prehired filed more than 280 lawsuits in 2022 demanding former students who defaulted on their loans pay the company $25,000 each. Prehired ended up filing for bankruptcy in 2022, and while those lawsuits have since been dropped, Prehired said in its bankruptcy filing that it "believed that in these lawsuits, it acted in the defaulted members' best interests, as well as Prehired's, because it reduced the amount owed on the ISAs from $30,000.00 to $25,000.00, and the members could participate in the proceedings virtually."

This was not the only legal challenge Prehired has faced over the past few years. In May 2022, the Delaware's Justice Department launched an investigation into the company, and Washington's attorney general filed a lawsuit the same year accusing it of deceptive practices.

Read the original article on Business Insider