The Consumer Financial Protection Bureau filed a lawsuit Wednesday against ITT Educational Services Inc., operator of the for-profit college chain ITT Technical Institute, for what it calls “predatory lending.”
“Simply to enhance its financial statements and appearances to investors, ITT sacrificed its students’ futures by saddling them with debt on which it knew they would likely default,” the agency stated in its complaint, filed in federal court in Indianapolis.
The bureau accuses the Indiana-based company of exploiting its students and pressuring them into high-cost private loans that it knew the majority of its students would default on. ITT predicted in 2011 that 60 percent of students who received private loans through its financial aid program would default, the agency said.
Some students were not even aware they had the loans until they began receiving collection calls, the bureau claims, and others were pushed into the loans through “a variety of aggressive tactics, such as pulling students from class or withholding course materials or transcripts.” The CFPB also alleges that ITT mislead students about their job prospects.
The agency said ITT violated the Dodd–Frank Wall Street Reform and Consumer Protection Act, the same law that led to the CFPB’s creation in 2010. It is seeking restitution for victims, a civil fine, and an injunction against the company.
“ITT marketed itself as improving consumers’ lives but it was really just improving its bottom line,” said Richard Corday, director of the CFPB. “We believe ITT used high-pressure tactics to push many consumers into expensive loans destined to default. Today’s action should serve as a warning to the for-profit college industry that we will be vigilant about protecting students against predatory lending tactics.”
The lawsuit is part of a larger crackdown on for-profit colleges and universities, a controversial sector of higher education known for high costs and low graduation rates. Attorney generals in Illinois, Iowa, Kentucky, and New Mexico have also set their sights on the industry.
ITT, in particular, has been a prominent blip on regulators’ radars as its tuition is among the highest in the industry. Just a two-year associate’s degree in business accounting technology can cost nearly $50,000. Most of the college’s bachelor’s degrees cost more than $88,000. The average cost of a bachelor’s degree for an in-state student at a public university, according to the College Board, is around $35,000.
ITT operates more than 140 institutions in 38 states, providing degree programs to 60,000 students. The college has been sued numerous times before — by students, the State of California, and investors — but the lawsuits have usually ended in settlements.
In a statement released Wednesday, Nicole Elam, ITT’s vice president of government relations, denied the CFPB’s allegations.
“We believe that the Bureau’s claims are without merit and that we intend to vigorously defend ourselves against the charges,” Elam stated.
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