The First State is one of 12 involved in a national $30 million order against a student lender for malpractice.
Attorney General Kathy Jennings’ office worked with the federal Consumer Protection Financial Bureau and 11 other states to crack down on the bankrupt student lender Prehired.
A Delaware bankruptcy court approved a stipulated judgment that requires Prehired to pay more than $30 million in relief to student borrowers nationwide for making false promises of job placement, trapping students with income share loans that violated the law and resorting to abusive debt collection practices when borrowers could not pay.
The order approved by a federal bankruptcy court requires Prehired to cease all operations, as well as permitting the potential payment of $4.2 million in redress to consumers that were affected by the malpractice.
“The number of borrowers in Delaware is still being determined and I can’t speculate as to how much they might receive,” said Mat Marshall, communications director at the Delaware Department of Justice. “The State of Delaware — i.e. the DOJ or any other government agency — will not receive any funds as part of the settlement. This money is for consumers, not the government.”
The order also voids all of its outstanding income share loans, valued by Prehired at nearly $27 million.
“Through an effort that grew to include 11 other states and the Consumer Financial Protection Bureau, we are pleased to announce this resolution that will provide real relief to borrowers around the country,” Jennings said.
Prehired operated a 12-week online training program claiming to prepare students for entry-level positions as software sales development representatives with “six-figure salaries” and a “job guarantee.”
The company offered students “income share” loans to help finance the costs of the program.
Jennings’ Consumer Protection Unit took action in early 2022, and an investigation began after Prehired filed nearly 300 debt-collection lawsuits in the Delaware Justice of the Peace Court seeking to enforce its income share agreements.
Prehired started filing the lawsuits one month after forming two Delaware limited liability companies, including the plaintiff in the debt collection actions.
Prehired then voluntarily dismissed those cases after the Consumer Protection Unit expressed its concerns in a March 8 letter in which most of the defendants resided outside of Delaware and had no practical way to defend themselves in the lawsuits.
Days later, Prehired began refiling those same cases on the Ejudicate online arbitration platform—even though students never agreed to arbitrate on Ejudicate.
Once again, the Consumer Protection Unit acted quickly seeking to stop the illegal arbitrations.
“My office will continue to do the work to ensure that Delaware’s courts and judicial system are not used to perpetrate frauds,” Jennings said, “either here in Delaware or across the nation.”
Raised in Doylestown, Pennsylvania, Jarek earned a B.A. in journalism and a B.A. in political science from Temple University in 2021. After running CNN’s Michael Smerconish’s YouTube channel, Jarek became a reporter for the Bucks County Herald before joining Delaware LIVE News.
Jarek can be reached by email at [email protected] or by phone at (215) 450-9982. Follow him on Twitter @jarekrutz
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