CFPB Accuses For-Profit College Company of Predatory Lending

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The federal Consumer Financial Protection Bureau has filed a civil lawsuit against ITT Educational Services, a for-profit college company that operates 149 schools in 40 states.

The lawsuit reportedly accuses ITT of pressuring students into predatory loans and misleading consumers about their colleges’ accreditation, job placement rates, and the transferability of credits. The suit seeks a civil fine, an injunction against the company, and restitution to students allegedly harmed by ITT’s private loan programs.

At ITT, federal aid typically can’t cover the full cost of a program, so students are forced to find other ways to pay for their tuition. According to The Wall Street Journal:

The CFPB’s suit alleges that ITT encouraged new students to enroll at the college by providing funding for this tuition gap with a zero-interest loan. This loan typically has to be paid off at the end of the student’s first academic year, though ITT knew many students couldn’t repay, the CFPB said.

It’s alleged that when they couldn’t pay, many “were pushed into a long-term, private, ITT-backed loan with interest rates as high as 16.25 percent,” according to the Los Angeles Times.

In a press conference, CFPB director Richard Cordray described the abuse of students by the for-profit college industry as “truly an American tragedy,” said The Huffington Post. “While many students got poorer, the investors and shareholders got richer,” Cordray said.

ITT’s tuition is among the highest in the U.S. for for-profit colleges. An associate degree can cost upward of $44,000, while a bachelor degree program can exceed $88,000, the CFPB said.

A spokeswoman for ITT told the LA Times, “We believe that the bureau’s claims are without merit and … we intend to vigorously defend ourselves against the charges.”

The ITT lawsuit is the latest step in a for-profit college crackdown, headed by state and federal regulators, like the CFPB. For-profit college students receive about $30 billion annually in taxpayer-funded loans.

Kentucky Attorney General Jack Conway, who heads a group of 32 attorneys general investigating for-profit colleges, told the WSJ: “Some of these schools are more interested in getting their hands on federal and state dollars than educating students.”

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This article was originally published on MoneyTalksNews.com as 'CFPB Accuses For-Profit College Company of Predatory Lending'.

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