Lisa Madigan, Illinois Attorney General, recently filed a motion in a state court lawsuit against a for-profit college and its owners and operators seeking leave to further amend her complaint to add new counts alleging that the defendants’ practices were unfair and abusive under the federal Consumer Financial Protection Act (CFPA) (Title 10 of Dodd-Frank).  The AG’s amended complaint alleged that the defendants violated the Illinois Consumer Fraud Act (ICFA) by making various misrepresentations, including misrepresentations about the cost of a particular academic program, likely outcomes for graduates of such program, and the costs and terms of an in-house financing program for students.  

The AG’s second amended complaint would add an allegation that the defendants knew but failed to inform prospective students that a majority of students enrolled in the academic program default on the in-house financing.  In three new counts, the second amended complaint alleges that, based on the misrepresentations and facts not disclosed to students and the financing program’s high default rate, the financing program is unfair under the ICFA and CFPA and is also abusive under the CFPA. 

Last month, Ms. Madigan became the first state AG to use her CFPA authority (Dodd-Frank Section 1042) to bring a civil action for a violation of the Dodd-Frank prohibition of unfair, deceptive or abusive acts or practices (UDAAP) when she filed a state court lawsuit against a small loan lender alleging UDAAP as well as state law violations.  In a related development just last week, Benjamin Lawsky, the Superintendent of the New York Department of Financial Services (DFS), became the first state regulator to use his CFPB authority (also under Dodd-Frank Section 1042) to bring a civil action for a UDAAP violation.  The DFS lawsuit was filed in a New York federal court against a large subprime auto lender and its CEO and president.