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Comment by lsiebert | Hacker News Reader

Wanted to clarify two things, since I saw some confusion.

The law changed to make a deceptive statement about what can and can't be discharged in bankruptcy illegal, but it was always false to say that it couldn't be discharged in bankruptcy, even before the law changed.

This isn't a new California department, it's the old DBO under a new name as the DFPI, with enhanced powers to regulate financial matters that were previously unregulated and protect Californians against unfair, deceptive, and abusive practices. Basically there have been lots of innovative financial agreements that weren't well regulated under California law. They also weren't well regulated federally, but that's a whole other issue.

More info on the law here.

https://dfpi.ca.gov/california-consumer-financial-protection...

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Thank you, if possible, would like some more clarification, since I'm still a bit confused (if not more confused) after reading this.

Are you suggesting this isn't an introduction of new regulations per se, since it was always a deceptive statement?

Or was the law actually changed by this California department specifically because of what Lambda was doing?

I get that the finance agreement was "innovative", but either it's dischargeable under bankruptcy -- or it's not -- and if it IS dischargeable, language implying that it is not dischargeable is deceptive. My understanding is that they have no power over bankruptcy proceedings, so whether they would LIKE it to be dischargeable or not bears no interest here.

This isn't some heavy-handed regulator stepping in and stopping innovation -- as a private for-profit business, you simply can't twist existing federal law around student loans to your benefit here, and that's always been the case all along. Deception aside, which I believe the word for is "fraud"; there's been a history of predatory financing around education. I was happy when it was DeVry University getting the book, and I'm also happy when it was some "cool" startup company as well.

> Are you suggesting this isn't an introduction of new regulations per se, since it was always a deceptive statement?

It was always false and deliberately deceptive to claim that Lambda’s California Retail Installment Contracts were qualified education loans under federal law, and therefore subject to discharge only on cases of undue hardship.

Lying about that in commerce in CA was not previously something for which there was previously a clear cause of action, especially one which would allow the State to take action. It’s not, at least in purpose, classic fraud: it is designed not to induce purchases but to dissuade past purchasers from seeking bankruptcy relief.

100%. It might have been a civil cause of action before, but now it's regulated by the DPFI.

Obviously ask your lawyer if you need legal advice, don't rely on anyone commenting on HN, but just as a general rule of thumb it's a bad idea to make deceptive or misleading statements to people you do business with.

But they didn't say that the loan couldn't be discharged in bankruptcy -- they said it was a fully qualified educational loan subject to the limitations on being discharged that are contained in the law. It seems like you are relying on people making connections that are not spelled out in the contract.

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