On July 13, 2023, the CFPB joined with several state attorneys general and a state regulator to take action against Prehired for deceptive marketing and debt collection practices. The attorneys general from Washington, Oregon, Delaware, Minnesota, Illinois, Wisconsin, Massachusetts, North Carolina, South Carolina, and Virginia joined the action, along with California’s Department of Financial Protection and Innovation.
Prehired was a limited liability company incorporated in Delaware. The company had two debt-collection companies, Prehired Recruiting in South Carolina and Prehired Accelerator in Florida, that primarily pursued collection activities on defaulted income share loans.
According to the CFPB, Prehired operated a 12-week online training program claiming to prepare consumers for entry-level positions as software sales development representatives with “six-figure salaries” and a “job guarantee.” To finance the program's costs, Prehired required interested applicants to sign an income share loan, and it claimed consumers would not pay until they obtained a high-income job through the program. In reality, Prehired deceptively concealed terms that required consumers to pay even if they never got a job and, in many cases, unilaterally increased consumers’ required minimum monthly payments without any evidence that they had secured employment or experienced an increase in income.
The states and the CFPB allege that:
Prehired misrepresented the nature of its income share loans. Prehired’s marketing falsely claimed that its loans did not create a debt because they were tied to job placements with salaries above $60,000, but the truth is the company deceptively buried terms in the loan that required graduates to pay even if they never got a job.
Prehired Recruiting and Prehired Accelerator tricked consumers in its debt collection practices. Prehired’s collection companies tricked consumers into converting the income share loan into a revised “settlement agreement” that required them to make payments on the loan and contained more burdensome dispute resolution and collection terms.
Prehired Recruiting sued its students in faraway jurisdictions. Additionally, Prehired Recruiting frequently filed debt collection lawsuits far away from consumers' homes so that they could not be present at the time of signing financing documents.
The CFPB also alleges that Prehired failed to disclose key terms including the amount financed, finance charges, and annual percentage rate for its income share loans.
According to the states and the CFPB, Prehired engaged in deceptive marketing practices by misrepresenting its income share loans’ payment obligations. The CFPB also alleges that Prehired’s failure to make required disclosures violated the Truth in Lending Act and its implementing regulation, Regulation Z. Thus, the states and CFPB are seeking to void the income share loans, obtain redress for affected consumers, and obtain a penalty which would be deposited into the CFPB’s victims relief fund.
Read the CFPB’s press release here.
The complaint can be found here.