Corinthian Colleges sued for predatory lending

WASHINGTON (AP) — Corinthian Colleges is being sued by the federal Consumer Financial Protection Bureau for what it calls a "predatory lending scheme."

The CFPB is seeking more than $500 million for borrowers who used the for-profit education company's private student loans. Corinthian misled students about their job prospects, in some cases paying employers to offer temporary jobs to graduates, the agency said Tuesday.

Corinthian charged as much as $75,000 for a bachelor's degree and pushed students into private loans with interest rates of roughly 15 percent, more than double the rate for a federal loan, the CFPB said. More than 60 percent of Corinthian students with those loans defaulted within three years.

Shares of Corinthian Colleges Inc., based in Santa Ana, California, plunged more than 30 percent following the lawsuit announcement, to less than 10 cents per share.

The entire for-profit education sector has come under intense government scrutiny. The Department of Education put into place new regulations that cut off federal aid if too students default on loans or fail to earn enough money after graduation to repay them.

Earlier this year, the Obama administration proposed even tighter regulations.

The CFPB action is the latest blow to Corinthian. The company already plans to close a dozen of its U.S. campuses under an agreement with the Education Department, which also places Corinthian under an independent monitor, former federal prosecutor Patrick Fitzgerald.

The Santa Ana, California-based company also plans to sell up to 85 of its branch campuses. The company owns Everest College, Heald College and WyoTech schools.

As of March, 74,000 students were enrolled at the company's campuses.