The federal Consumer Financial Protection Bureau filed a lawsuit on Wednesday accusing ITT Educational Services Inc. of predatory lending to college students.
It’s the first time the CFPB has taken action against a for-profit college company. ITT has some 150 post-secondary technical schools across the country, including some in Charlotte, Miami, Kansas City and many other places in some 35 states.
“ITT marketed itself as improving consumers’ lives but it was really just improving its bottom line,” CFPB director Richard Corday said. “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.”
ITT’s vice president for government relations and external affairs, Nicole Elam, said in a prepared statement: “We don't comment on pending litigation, other than to say that we believe that the Bureau's claims are without merit and that we intend to vigorously defend ourselves against the charges.”
The CFPB is seeking restitution for victims, a civil fine, and an injunction against the company.
The consumer protection agency said that ITT’s tuition costs are some of the highest in the country among for-profit schools, and significantly higher than public two- and four-year schools.
The agency said that many students borrow federal loans, but they’re not enough to cover ITT tuition. It said the school provided zero-interest loans for one year, called a Temporary Credit, that had to be paid in full at the end of the student’s first academic year. The lawsuit alleges that ITT “pushed its students into repaying their Temporary Credit and funding their second-year tuition gaps through high-cost private student loan programs.” The suit said that ITT rushed students through an automated application process without helping them understand the loan obligations involved.
In addition, ITT credits were could not be transferred to community colleges or other nonprofit schools.