BLOOMBERG BUSINESSWEEK: Activists Fight Merger of Two Companies Accused of Preying on Students
Career College Central Summary:
On a biting day in December, 11 activists marched into the headquarters of Educational Credit Management Corp. in Oakdale, Minn., and asked to see David Hawn, the chief executive officer. ECMC, an agency that once quietly worked on behalf of the U.S. government to collect and service student loans, was catapulted into the public eye late last year when it announced it planned to buy Corinthian Colleges, a chain of for-profit schools with a history of questionable practices, for $24 million. Hawn didn't meet with the protestors, they said. Instead, his head of communications walked out and listened as Maggie Thompson, a campaign manager for the nonprofit Higher Ed, Not Debt, listed concerns about the proposed deal, including the proposal that students won't be allowed a refund on their student loans, and delivered a stack of more than 2,600 signed petitions from Corinthian students.
The surprise visit was part of a broader battle waged by advocates and members of Congress to block the sale of Corinthian's campuses or make the terms of the transaction more favorable to students. The merger may have stalled; ECMC missed a Jan. 5 deadline to complete the purchase of 56 Corinthian campuses; it then missed a second, Jan. 12 deadline. The closing date has been pushed back to Feb. 2.
"We have been able to successfully highlight the many ways in which this proposed deal is a bad deal for students," says Thompson, who contends that growing pressure on the companies and state governments, levied by her group and others, have probably slowed the sale. The same day that Thompson dropped in on ECMC, the advocacy group sent letters to six state governors demanding they scrutinize the merger.
ECMC says bureaucracy is holding up the purchase. “While we continue to make good progress, the enormity of the transaction and the regulatory approvals needed prior to close have extended our target closing date to early in February,” Hawn said in a statement. In a regulatory filing on Jan. 13, Corinthian suggested it wouldn't be ready to sell all the originally planned 56 campuses when the transaction closes.
Opponents of the agreement have protested various aspects of it—first and foremost, the buyer. “Serious consideration should be given before transitioning management of Corinthian’s campuses from one company that profited off deceptive lending practices to an umbrella company that also has a checkered history in student loans,” said a letter sent by three Democratic congressmen to Secretary of Education Arne Duncan in December. ECMC has been criticized for its aggressive tactics against borrowers in court.
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