COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2021

COMMITMENTS AND CONTINGENCIES [Abstract]

16.	COMMITMENTS AND CONTINGENCIES

Litigation and Regulatory Matters—In the ordinary conduct of our business, we are subject to periodic lawsuits, investigations and claims, including, but not limited to, claims involving students or graduates and routine employment matters. Although we cannot predict with certainty the ultimate resolution of lawsuits, investigations and claims asserted against us, we do not believe that any currently pending legal proceeding to which we are a party will have a material effect on our business, financial condition, results of operations or cash flows.

Following a wave of hundreds of class action lawsuits being served upon colleges and universities across the country by students in connection with transitioning from in-person to online classes due to COVID-19, a class action lawsuit, captioned John Gaviria vs. Lincoln Educational Services Corporation, was filed against the Company in New Jersey Federal District Court and served on December 21, 2020. Like most of the other similar lawsuits across the country, the suit alleges breach of contract, unjust enrichment and conversion. In lieu of an answer, on January 25, 2021, the Company filed a Motion to Dismiss Plaintiff’s Complaint for Failure to State a Claim. On July 9, 2021, the court granted the Company’s Motion to Dismiss three of the four claims finding that the ruling on the claim for student and technology fees was premature. In response to the Company’s Motion for Reconsideration as to the remaining claim, the court granted the Company’s Motion to Dismiss the lawsuit in its entirety whereupon the Plaintiff filed an appeal to the Third Circuit Court. On January 27, 2022, counsel for the Plaintiff contacted the Company’s counsel to request a voluntary dismissal of the case and the Company agreed to and accepted the dismissal with prejudice.

In December 2021, we received a letter from the Consumer Financial Protection Bureau (“CFPB”) stating that the CFPB is assessing whether we are subject to CFPB’s supervisory authority based on our activities related to certain extensions of credit to our students and requesting certain information. The letter states that the CFPB has the authority to supervise certain entities in the private education loan market and certain other consumer financial products and services. We have provided the requested information to the CFPB and are waiting for the CFPB to respond.

Student Financing Plans—At December 31, 2021, the Company had outstanding net financing commitments to its students to assist them in financing their education of approximately $30.0 million, net of interest.

Executive Employment Agreements—The Company entered into employment contracts with key executives that provide for continued salary payments if the executives are terminated for reasons other than cause, as defined in the agreements. The future employment contract commitments for such employees were approximately $7.9 million at December 31, 2021.

Change in Control Agreements—In the event of a change of control several key executives will receive continued salary payments based on their employment agreements.

Surety Bonds—Each of the Company’s campuses must be authorized by the applicable state education agency in which the campus is located to operate and to grant degrees, diplomas or certificates to its students. The campuses are subject to extensive, ongoing regulation by each of these states. In addition, the Company’s campuses are required to be authorized by the applicable state education agencies of certain other states in which the campuses recruit students. The Company is required to post surety bonds on behalf of its campuses and education representatives with multiple states to maintain authorization to conduct its business. At December 31, 2021, the Company has posted surety bonds in the total amount of approximately $12.8 million.