CFPB Sues Climb Credit and 1/0, Alleging ‘False Promises’ to Borrowers
The Consumer Financial Protection Bureau (CFPB) sued student lender Climb Credit and investment firm 1/0 Thursday (Oct. 17), alleging they provided potential borrowers with false information about the quality of their partner schools’ training programs and their graduates’ hiring rates and salaries.
The regulator’s complaint alleges that the companies offered loans for programs that had failed their return-on-investment analysis or that they had not analyzed, and in some cases failed to properly disclose annual percentage rates and loan origination fees, the CFPB said in a Thursday press release.
“Climb Credit used false promises and outright lies to lure borrowers into loans for vocational programs,” CFPB Director Rohit Chopra said in the release. “Tens of thousands of students may have been impacted by Climb’s actions, and the CFPB is suing Climb and its investor overlord to halt these activities and get relief for students.”
Reached by PYMNTS, Climb Credit CEO Casey Powers said in an emailed statement that the company stands behind the data it has shared publicly about the outcomes of the programs it works with, that the CFPB does not have evidence that Climb’s statements or data were misleading or harmful, and that the lawsuit “unfairly calls into question the positive outcomes that the overwhelming majority of students in these programs achieve.”
“We’re very disappointed in the fact that after 3+ years of complete cooperation with the CFPB, sending them thousands of documents and providing live testimonies — and showing a willingness to make requested changes and to negotiate a settlement in good faith — the CFPB abruptly ended our conversations and has chosen to move this matter to litigation rather than work with us,” Powers said in the statement.
The CFPB said in its press release that in addition to charging Climb Credit and its wholly owned subsidiaries Climb Investco and Climb GS Loan Fund, its investigation also “uncovered facts to charge” 1/0 Holdco, which is Climb’s controlling investor, and 1/0 Capital.
Reached by PYMNTS, Jason Berland, general counsel at 1/0 Capital, said in an emailed statement that the company is “disappointed” that CFPB named it in the suit.
“The claims are entirely without merit and we expect them to be dismissed,” Berland said. “1/0 Holdco is a passive minority shareholder in Climb. 1/0 Capital provided services to the company in its early stages of development, much like any venture capital investor.”
In an earlier, separate announcement, the CFPB said in September that student loans account for a growing number of complaints service members and veterans make about financial products.
The post CFPB Sues Climb Credit and 1/0, Alleging ‘False Promises’ to Borrowers appeared first on PYMNTS.com.