High-Risk Student Lending

Endeavour invested in Beaverton, Oregon financial services company Genesis Financial Solutions in 2012. Genesis claims it operates the largest subprime credit program in the country, financing more than 600,000 “less-than-perfect” consumers who have been turned down by prime banks.

Genesis Financial Services provided servicing and debt collection for the now defunct for-profit education provider Corinthian Colleges which ran Everest Institute, Wyotech, and Heald College. According to the Oregonian, Genesis “originated and serviced Corinthian’s in-house student loans since 2008”.

The Consumer Financial Protection Bureau sued Corinthian in 2014 for what they described as the company’s “illegal predatory lending scheme.” Upon reaching a later settlement, the CPFB noted that Corinthian “used illegal debt collection tactics to strong-arm students into paying back those loans while still in school.”9

Federal law requires that no more than 90% of for-profit tuition comes from federal loans and grants. Because Corinthian couldn’t raise the 10% from other sources (such as employers, scholarships, and state or local funding), they placed the burden on their students.

Then, when federal loan amounts were raised enough sufficiently to cover the full cost of their programs, they raised tuition.

According to the Oregonian, “Corinthian admitted to stock analysts in February 2011 that it increased tuition 11 percent in part to comply with the 90-10 rule. Students would have to turn to Genesis to cover the cost.

Since most Corinthian students were low-income and ineligible for other financing, they had no choice but to turn to predatory private loans.