The Consumer Financial Protection Bureau’s (CFPB) announced yesterday that it filed a lawsuit against the for-profit school ITT Educational Services based on allegations of predatory lending and other unfair, deceptive, or abusive practices. According to CFPB Director Richard Cordray, “ITT marketed itself as improving consumers’ lives but it was really just improving its bottom line…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 Chronicle of Higher Education reported that four state attorneys general were on the conference call announcing the CFPB action. The AGs are part of a multistate group that is investigating ITT and three other publicly traded for-profit higher-education companies: Corinthian Colleges, the Education Management Corporation, and the Career Education Corporation. One of the attorneys general, New Mexico’s Gary King, has announced that his office is suing ITT over alleged misrepresentations made to nursing students.
Among other violations, the CFPB lawsuit focuses on ITT’s institutional lending program. We documented many of the problems with these institutional loans made by for-profit schools in our 2011 report, Piling It On: The Growth of Proprietary School Loans and the Consequences for Students. The schools have continued to push these loans despite shockingly high default rates, using the loans to keep the federal dollars flowing. The schools are reaping profits, but vulnerable students trying to get ahead through education are left with lifetimes of devastating debt and damaged credit ratings. The complaint includes other allegations that are unfortunately all too typical in the for-profit higher education sector, including misrepresentations about transferability of credits and about job prospects.
The CFPB and Attorney General actions are critically important in seeking relief for vulnerable borrowers and to alert the for-profit school industry that business as usual will no longer be tolerated. Putting profits above education quality and student success is just not acceptable.
We also urge the CFPB and state Attorneys General to prioritize relief for student borrowers as they pursue these critical actions. Borrowers should review the existing options for loan relief. For example, there are limited cancellation programs currently available to eligible borrowers.