On April 17, 2024, the Consumer Financial Protection Bureau entered an order against a for-profit vocational school and its CEO for mischaracterizing the school’s income-share agreements (ISAs) and misrepresenting its graduates’ employment rates. The CFPB said the school drove students to finance their training programs with promises of high graduate employability. To finance students’ education, the school offered ISAs, under which students received their education in exchange for a percentage of their future earnings. The school falsely told students that its ISAs were not loans, carried no finance charges and were “risk free.” And the school advertised on its website that 71% to 86% of its students were placed in jobs within six months of graduation, when its nonpublic reporting to investors consistently showed placement rates closer to 50%, the CFPB noted. The order marks the CFPB’s second enforcement action targeting ISAs.
Read on for details about how the school’s actions violated federal laws, including the Consumer Financial Protection Act, the Truth in Lending Act and Regulation Z, and the FTC’s Holder Rule.