Photo: Dwight Burdette
ITT Educational Services Inc. has agreed to a settlement with the Consumer Financial Protection Bureau or CFPB to resolve the agency’s lawsuit, which alleges that ITT engaged in predatory lending practices in its private loan program.
The CFPB’s lawsuit, filed in federal court in 2014, alleges that ITT helped to create private loan programs for students at ITT Technical Institute, the school run by ITT until it filed for bankruptcy and closed in 2016.
The CFPB alleges that ITT improperly induced students to take out those loans to pay the tuition amounts not covered by loans or other tuition assistance from the federal government. The agency’s lawsuit also alleges that ITT knew that the student borrowers didn’t understand the terms and conditions of the loans and couldn’t afford them, resulting in high default rates.
The terms of the proposed order include a judgment against ITT for $60 million and an injunction prohibiting ITT from offering or providing student loans in the future. The CFPB won’t collect the fine from the bankrupt company because of the limited funds available to be distributed to former students.
In a separate action filed by the CFPB in June, a judgment was entered against the company holding the private loans for ITT, Student CU Connect CUSO. Under the terms of that judgment, all collection on these loans must stop, all outstanding loans need to be discharged, and all negative credit reporting is to be corrected.
