Another federal agency is launching an investigation into how a for-profit institution provided private student loans.
California-based Bridgepoint Education and its subsidiary, Ashford University, received a "civil investigative demand" from the Consumer Financial Protection Bureau last week to determine whether the for-profit chain engaged in "unlawful acts or practices related to the advertising, marketing or origination of private student loans," according to a corporate filing released Friday.
The filing said that, as of June 30, the company had $9.1 million of net outstanding loans made to students.
In an emailed statement to Inside Higher Ed, a spokeswoman for the company said, "Bridgepoint Education and Ashford University intend to cooperate with the investigation and expect to provide documents, testimony and other information to the CFPB."
It's the third time the CFPB has pursued a for-profit company for its lending practices. Last year, the agency filed separate lawsuits against ITT Educational Services and Corinthian Colleges. Both lawsuits are ongoing.
"This really does show the CFPB has a commitment to investigating for-profit colleges, especially with the private loan aspect," said Maura Dundon, senior policy counsel with the Center for Responsible Lending. "These loans are basically unregulated. They're not made, in this case, by a bank. You don't have a banking regulator overseeing them and they fly under the radar. Because you don't have the protections of income-based repayment or federal discharge, they can be extremely harmful for students."
The loans are especially harmful for students who received a degree from a for-profit college that lacked value in the career field they were interested in pursuing, she said.
The for-profit industry's private loan programs are connected to the U.S. Department of Education's 90/10 threshold rule, which caps operating revenue at 90 percent from federal sources. Consumer advocates say the companies looked for other sources of nonfederal revenue, such as loans to students.
The CFPB can evaluate loans that were made a few years ago. And if they find the company is in violation they could order a settlement or forgive those loans, Dundon said.
Last month, Ashford shut down its physical campus in Iowa because of shrinking enrollment and revenue. The company purchased that location in 2005, when the campus was known as the Franciscan University of the Prairies.