WASHINGTON — The Consumer Financial Protection Bureau announced a proposed settlement with ITT Educational Services, Inc., the defunct private school that has also resulted in tens of millions of dollars in losses for a number of credit unions.
In announcing its settlement, the Bureau alleged ITT Educational Services, the parent to ITT Technical Institute, engaged in unfair and abusive practices in connection with its private loan program in violation of the Consumer Financial Protection Act of 2010.
As CUToday.info previously reported, in June, a number of credit unions that had invested in a CUSO that specialized in loans to ITT Technical students reached a settlement with the CFPB to forgive nearly $170 million in student loan debt related to ITT.
CUs that have been named as defendants are Elements FCU (formerly known as Eli Lilly FCU), Bellco Credit Union, Credit Union of America, Directions Credit Union, and Veridian Credit Union. The CUs had formed a CUSO called Student CU Connect to make the loans.
The Bureau’s complaint, filed in the U.S. District Court for the Southern District of Indiana in 2014, alleges that ITT helped to create private loan programs for students at ITT Technical Institute until it filed for bankruptcy and ceased operations in 2016. The Bureau alleged ITT improperly induced students to take out loans to pay the tuition amounts not covered by other loans or other tuition assistance from the federal government. The Bureau’s complaint further alleged 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.
The terms of the proposed stipulated order include, among other things, a judgment against ITT for $60 million and an injunction prohibiting ITT from offering or providing student loans in the future.
The proposed stipulated judgment against ITT is available here.
As CUToday.info previously reported, in a separate action filed by the Bureau on June 14, 2019, a final stipulated judgment was entered against the entity holding the private loans at issue, Student CU Connect CUSO, LLC. Under the terms of that judgment all collection on such loans must cease, all outstanding loans must be discharged, and all negative credit reporting must be corrected.
Elements FCU was a key player in establishing the CUSO. As CUToday.info reported, Elements said it did not intend to harm borrowers as a result of its relationship with the CUSO it helped create.
In an e-mailed statement to CUToday.info from New York-based Foley & Lardner LLP, which is representing Elements, the credit union stated, “The CUSO, Elements, and the other related CUSO parties at all times acted properly and in good faith in entering into and administering the student loan program. To the extent that ITT and its management engaged in any wrongful conduct, the CUSO and these other parties were victims of, not accessories to, that misconduct,” stated Foley & Lardner’s Susan J. Schwartz in the email. “The CUSO has worked cooperatively with the CFPB and other government entities to reach a global resolution of issues related to the student loan program, and is gratified that these coordinated settlements are now becoming effective, and that they will be beneficial to ITT students.”
CU Student Choice is not affiliated with Student CU Connect.
The final stipulated judgment against the Student CU Connect CUSO is available here.