Attorney General Lori Swanson is expanding her legal battle against Globe University, accusing the company of violating state law by offering unlicensed college loans to thousands of students and charging "usurious interest rates" of up to 18 percent.
On Friday, Swanson asked a Hennepin County court to invalidate those loans, known as Educational Opportunities and Student Access loans, and to order the company to reimburse students for all payments on them since 2009.
"It's not a bank, it's not a credit union, it's not a credit card company," Swanson said. But Globe made "illegal loans" to nearly 6,000 Minnesota students, according to the court filing, which was an amendment to a 2014 consumer fraud lawsuit against the company.
According to the complaint, Globe was charging interest on some loans at "a staggering rate of 18%," more than twice the 8 percent maximum allowed by state law.
"Accordingly, these students are under no obligation to pay any amount owing and are entitled to recover all amounts paid," the lawsuit asserts.
Officials at Globe University, a for-profit college system based in Woodbury, issued a statement denying the new claims, saying they would try to get them dismissed.
"We continue to express our desire to come to an amicable resolution with the Attorney General," the statement said. "Unfortunately ... rather than working with us toward a resolution, the Attorney General appears to be continuing to solicit publicity for her own political agenda."
Last July, Swanson filed a consumer-fraud lawsuit against Globe and its affiliate, the Minnesota School of Business, accusing them of luring students into criminal justice degree programs with misleading claims and high-pressure sales tactics.
Globe, which has campuses in Minnesota, South Dakota and Wisconsin, has denied those charges. The case is slated to go to trial in November. Swanson said she learned about Globe's lending program from students who said they were pressured into taking out the private loans after their federal aid or other student aid ran out.
In some cases, she said, students were called out of class and told they'd have to drop out of school if they didn't sign up for those loans. "[They] were caught between a rock and a hard place," she said. Many told her they were rushed through the process so fast that they had no paperwork on the loans.
That may be one reason, Swanson said, that Globe was able to continue making the loans for so many years without attracting notice.
"We were interviewing many many students, trying to figure out what kind of loans they have," she said.
Unlike other types of college loans, these required students to make payments while they were still in school, Swanson said. In some cases, she said, students were threatened with expulsion if they fell behind in their payments.
If the court rules that the loans were illegal, Swanson said, it could render them invalid and allow students to recoup their money.
But for now, she said, she's not advising students to stop payment. "Because I don't know what the school will do to them."