CFPB Claims Climb “Deceived Borrowers” and “Exploited Consumers’ Trust”
October 17, 2024 | WASHINGTON, D.C. — The Consumer Financial Protection Bureau (CFPB) has sued the specialty private student lender Climb Credit (Climb) for illegally luring students into expensive loans for predatory for-profit coding bootcamps. According to the complaint, Climb and its partners deceived students by promising to vet programs for value but in fact offered loans for programs that had failed the defendants’ own return-on-investment analysis or which they had not analyzed at all. The complaint also alleges that Climb failed to comply with necessary loan disclosures and unlawfully co-branded its products with its partner schools.
In response, SBPC Legal Director Winston Berkman-Breen released the following statement:
“We applaud the Consumer Financial Protection Bureau for taking much needed action to hold companies accountable when they prey on students by making false promises and using deceptive marketing. This case strikes at the heart of so many borrowers’ experiences: taking a company’s statements at face value and relying on them when making important education and financial decisions.
“Congress gave the Bureau a tool to stop scams just like this: its authority to halt ‘abusive’ conduct and protect consumers who reasonably rely on lenders. We are glad to see the Bureau exercising this authority in this case. Consumers should be able to navigate the marketplace and choose programs and financing options based on the information presented to them and without fear that they are being lied to.”In October 2020, the SBPC wrote to Kathy Kraninger, then-Director of the CFPB, urging her to investigate Climb for violations of both consumer and fair lending laws. The letter described circumstances nearly identical to those included in today’s complaint, notably that Climb misrepresented to borrowers that its partner schools were screened and carefully selected, and that they underrepresented the cost of credit to attend these schools. The letter also raised concerns that Climb’s use of educational criteria in its loan underwriting may violate the Equal Credit Opportunity Act.
Background
Climb Credit first raised concerns for advocates and industry watchdogs when in 2020 it responded to an inquiry from the Senate Banking Committee by stating that it did not conduct fair lending compliance analyses, despite the fact that it considered applicants’ major or academic programs, which may be a proxy for race, gender, or other protected classes.
In 2021, the SBPC issued a report highlighting the relationship between predatory student lenders and colleges and universities. The report, Pushing Predatory Products: How Public Universities are Partnering with Unaccountable Contractors to Drive Students Towards Risky Private Debt and Credit, included several examples of Climb’s school partnerships, such as bootcamps facilitate by 2U Inc., the EdTech firm that serves as an Online Program Manager (OPM). At the time, Climb’s chief executive denied any wrongdoing.
Earlier this year, Pine Tree Legal Assistance filed a groundbreaking lawsuit against 2U Inc. and Climb. This lawsuit seeks to enforce Maine state consumer protections that were enacted in recent years specifically to address abuses by predatory student lenders, and also uses state law to address gaps in federal oversight of so-called “non-degree” programs.
Further Reading
SBPC blog on the hidden risks of online higher education program providers is available here: https://protectborrowers.org/a-hidden-risk-of-online-higher-education/
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About Student Borrower Protection Center
Student Borrower Protection Center (SBPC) is a nonprofit organization focused on eliminating the burden of student debt for millions of Americans. We engage in advocacy, policymaking, and litigation strategy to rein in industry abuses, protect borrowers’ rights, and advance racial and economic justice.
Learn more at protectborrowers.org or follow SBPC on Twitter @theSBPC.