Court rules for-profit school loans weren’t deceptive or illegal

Published 8:57 am Wednesday, September 14, 2016

By Christopher Magan

St. Paul Pioneer Press

Private loans a for-profit college chain made to students did not amount to deceptive and unlicensed lending, a state Court of Appeals panel ruled Monday.

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The appellate panel’s decision to uphold an earlier district court ruling is a bright spot in a court case that could lead to the eventual closure of Globe University and the Minnesota School of Business. Attorney General Lori Swanson filed a lawsuit against the schools in 2014 alleging fraud, deception and illegal loans with unethically high interest rates.

While the deceptive lending allegations were thrown out, the rest of the case went to trial in April. Last week, Hennepin County District Court Judge James A. Moore found the two schools committed fraud when they led students to believe their criminal justice degrees would get them closer to careers as police and probation officers.

In coming months, Moore is expected to decide how much of a civil penalty the schools should pay and whether students should receive restitution.

A spokesman for Swanson said Monday’s appellate court decision was inconsequential given last week’s fraud ruling. Shortly after the fraud finding, the state Office of Higher Education moved to shut both schools down by revoking their authorization to operate.

Moore also found state attorneys did not convince him that the schools systemically lied to students about the transferability of credits they earned or misled them about job placement rates.

Leaders of Globe University and the Minnesota School of Business said the schools are currently complying with state laws and closing them would hurt thousands of residents. A school spokeswoman was unable to be reached for comment about Monday’s appeals court ruling.

U.S. Department of Education records show about 2,300 students were enrolled in the two schools at 11 Minnesota campuses in 2015. In May, school officials said they would close some campuses and consolidate others because of the impact of the state lawsuit.

The appeals panel agreed with Globe and Minnesota School of Business attorneys that the loans made to students were better described as “open-ended credit plans” allowed under state and federal laws at the time. That means they did not violate state rules that require lenders be licensed and generally prohibit annual interest rates of more than 8 percent.