WASHINGTON—The Consumer Financial Protection Bureau has banned private dispute resolution platform Ejudicate from arbitrating disputes about consumer financial products after the company “misled” student borrowers about its neutrality and initiated sham arbitration proceedings, the Bureau said.
Ejudicate initiated those proceedings for the company Prehired, which was permanently shut down in 2023 by the CFPB and several state attorneys general for its illegal lending practices. Ejudicate acted as a service provider to Prehired by providing these sham arbitration services. The CFPB found that Ejudicate treated borrowers unfairly and was not truthful about its role while hiding that its financial interests were aligned with Prehired, the Bureau said.
“Ejudicate ran bogus arbitration proceedings, deceived borrowers, and hid its financial conflicts of interest,” said CFPB Director Rohit Chopra. “Arbitration outfits cannot rig the process against consumers to enrich their corporate clients.”
Ejudicate is a private arbitration company based in Los Angeles that provides an online dispute resolution platform. One of the companies that bought Ejudicate’s services was Prehired, which operated an online vocational training program and offered “income share” loans to students before it was shut down by the CFPB and state attorneys general, the CFPB explained.
Terms Changed
“When Prehired’s deceptive debt collection practices first came under scrutiny, Prehired unilaterally changed the terms of its contracts to force consumers into arbitration through Ejudicate,” the agency said. “In April 2022, Ejudicate illegally started arbitration proceedings against consumers who had allegedly defaulted on loans from Prehired and misrepresented itself to those borrowers.
According to the CFPB, it found that Ejudicate harmed borrowers by:
- Falsely claiming to be a neutral arbiter: The company described itself as “neutral and unbiased” in communications with consumers, despite its financial interest in consumers settling with Prehired. Prehired promised to pay Ejudicate contingency fees for each claim that it settled.
- Unfairly attempting to bind consumers to sham proceedings: Ejudicate required consumers to “agree” to its terms of service, which purported to bind consumers to Ejudicate’s dispute resolution process, even if consumers simply wanted to review the claims against them. Ejudicate’s bogus process left student borrowers with little opportunity to gather evidence or clarify facts needed to defend themselves against the claims lodged against them.
- Starting arbitration proceedings without borrower consent: Although Ejudicate was aware that consumers had not agreed to arbitrate on the Ejudicate platform, it initiated arbitration proceedings for claims that each sought tens of thousands of dollars from student borrowers.
Enforcement Action
The CFPB’s order permanently bans Ejudicate from arbitrating disputes about consumer financial products or services. It also imposes a nominal civil penalty of $1 because of the company’s demonstrated inability to pay more.