Like many for-profit colleges, ITT spends a lot of money on advertising and recruiting students. Many of their students are drawn to the commercials promising students a competitive edge in their chosen industry. Like many for-profit colleges that advertise on television, ITT has a reputation for being aggressive when offering enrollment, and pushing financial aid. This results in loan agents doling out large loans to students who can’t afford them. Many students reported “getting the run around from ITT” when it came time to discuss their student loan. Because of this, the Consumer Financial Protection Bureau (CFPB) stepped in help assist them obtain recourse by launching a lawsuit.
A press release from the Consumer Assistance Project, a nonprofit that specializes in helping students resolve student loan debt, lauds the effort and says this points to the importance of the newly-formed agency, which was established in 2010 in response to response to the financial crisis of 2007–08 and the subsequent Great Recession. (Largely blamed on predatory lending practice and the subsequent government bail-outs.). Consumer Assistance Project says:
“The CFPB has been extremely active and has taken an aggressive approach to establish itself as the watchdog agency in order to regulate student loan servicing firms. In showing its aggressive stance, earlier this year the CFPB initiated a lawsuit against ITT Educational Services, Inc., accusing ITT of predatory lending. The CFPB has alleged within the lawsuit that ITT violated the Dodd-Frank ban on unfair, deceptive or abusive practices by misleading borrowers about job placement rates and salaries after graduation, misrepresenting information about accreditation and the transferability of credits, and strong arming students into high interest loans that the company knew students would be unable to repay. This is the CFPB’s first enforcement action against a for profit education company.”
It’s nice to see a new agency starting to shape and fulfill its mission. Hopefully, they’ll keep going and start holding bankers accountable for predatory lending, too.
In addition to the CFPB’s lawsuit against ITT, the U.S. Department of Education is expected to release a proposed “gainful employment regulation that aims to help protect students from risky programs where students are often set up to fail. A strong gainful employment regulation” that will make it harder for institutions to take advantage of students to receive federal funding. According to Consumer Assistance Project, most, but not all, predatory institutions are “for-profit colleges that make money by tricking students to take on large amounts of debt and a meaningless degree — costing taxpayers millions of dollars in the process.”