Settlement between Defunct ITT Educational Services and CFPB Submitted to Indiana District Court
The proposed settlement, pending court approval, stems from allegations of faulty student loan lending practices resulting in consumers enrolling in loans they did not want or realize they were getting.
8/12/2019 10:00 AM
ITT Educational Services Inc. (ITT), a for-profit college that ceased operations in 2016, and its trustee have agreed to settle claims of alleged private student loan violations by the Consumer Financial Protection Bureau.
Pending approval in the U.S. District Court for the Southern District of Indiana—Indianapolis Division, the CFPB, ITT and its trustee appointed during Chapter 7 bankruptcy proceedings agreed to settle claims of alleged violations of the Consumer Financial Protection Act of 2010, which prohibits unfair, deceptive and abusive acts or practices, according to the proposed stipulated final judgment and order.
The CFPB, according to a news release, “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 ceased operations in 2016. The bureau 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 bureau’s complaint also alleges that ITT knew that the student borrowers did not understand the terms and conditions of the loans and could not afford them, resulting in high default rates and other negative consequences.”
Among other relief, the terms of the proposed stipulated final judgment and order include a $60 million judgment against ITT and injunction prohibiting it or its trustee from offering or providing student loans going forward.
Students impacted by ITT’s alleged Consumer Financial Protection Act violations enrolled in loans they did not want or understand, or in some cases realize they were getting, according to the CFPB.
The company holding the private student loans referenced in the order, Student CU Connect CUSO LLC, was ordered to cease collections on all loans, discharge outstanding loans, and correct negative credit reporting, in a separate action by the CFPB in June 2019.
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