On October 10, 2024, the CFPB 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 CFPB found that Ejucate was actually a debt collection for Prehired, a company permanently shut down in 2023 for illegal lending practices.
CFPB Director Rohit Chopra said the following in a statement:
“Ejudicate ran bogus arbitration proceedings, deceived borrowers, and hid its financial conflicts of interest. Arbitration outfits cannot rig the process against consumers to enrich their corporate clients.”
Ejudicate is a private arbitration company offering an online dispute resolution platform. One of its clients, Prehired, ran an online vocational training program and provided “income share” loans before being shut down by the CFPB and state attorneys general. When Prehired's debt collection practices were questioned, it changed contract terms to compel consumers into arbitration with Ejudicate.
According to the CFPB, Ejudicate illegally started arbitration proceedings against consumers who had allegedly defaulted on loans from Prehired and misrepresented itself to those borrowers. Specifically, the CFPB found that Ejudicate harmed borrowers by:
Falsely claiming to be a neutral arbiter. The company claimed to be “neutral and unbiased” in its communications with consumers, despite its financial interest in their settling with Prehired, which agreed to pay Ejudicate contingency fees for each settled claim.
Unfairly attempting to bind consumers to sham proceedings. Ejudicate required consumers to "agree" to its terms of service, binding them to its dispute resolution process even when they only wanted to review claims. This flawed process limited student borrowers' chances to gather evidence or clarify facts needed for their defense.
Starting arbitration proceedings without borrower consent. Despite knowing that consumers had not agreed to arbitrate on its platform, Ejudicate initiated arbitration proceedings for claims seeking tens of thousands of dollars from student borrowers.
The CFPB permanently banned 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.
Read the CFPB’s press release here.
The consent order can be found here.