CFPB sues for-profit school system for predatory lending

The Consumer Financial Protection Bureau is launching a lawsuit against one of the nation’s largest for-profit college programs.

The watchdog announced Wednesday it was suing ITT Educational Services for predatory lending practices, pushing prospective students into costly loans and misleading them about future job prospects.

CFPB Director Richard Cordray said the suit should serve as “a warning to the for-profit college industry that we will be vigilant about protecting students against predatory lending practices.”

{mosads}In a U.S. District Court, the regulator sued the Indiana-based company and charged that the company pushed students into predatory loans without properly explaining what they were signing up for. The CFPB said some students did not even realize they had taken out the loans until they received calls from collection agencies.

The CFPB also claimed that ITT credits did not transfer to many other schools. That meant that the company would threaten expulsion and the loss of money already spent on a first year to “coerce” students into taking out more loans.

But even as it pushed students to take out loans and touted high-paying jobs after graduating, the CFPB claims ITT projected that 64 percent of its students would default on those loans.

“ITT marketed itself as improving consumers’ lives but it was really just improving its bottom line,” said Corday. “We believe ITT used high-pressure tactics to push many consumers into expensive loans destined to default.”

ITT Educational Services is behind the ITT Tech system of schools, which span roughly 150 institutions in about 40 states. The CFPB said that the cost of an ITT degree was among the highest in the country for a for-profit school — an associate’s degree can cost more than $44,000, and a bachelor’s degree can cost $88,000.

The average cost of a four-year degree for an in-state resident of a public university is less than $35,000, according to The College Board.

The CFPB is seeking restitution for victims, a civil fine, and an injunction against the company.