The Consumer Financial Protection Bureau (CFPB) sued national college chain ITT Educational Services this week, accusing it of predatory lending.
"ITT marketed itself as improving consumers' lives but it was really just improving its bottom line," read a statement from CFPB director Richard Cordray. He said the agency believes that ITT used high-pressure tactics to encourage consumers to take out expensive loans that were highly likely to default. This is the regulator's first public enforcement action involving the for-profit college industry.
The lawsuit alleges that ITT provided new students with so-called "tuition gap" funding with a zero-interest loan called "Temporary Credit." The loan typically had to be paid in full at the end of the student's first academic year; but ITT already knew that many students would not be able to repay, according to the suit. Between July and December 2011, ITT allegedly encouraged students to repay their temporary credit and fund their second year of school with high-cost private student loans. Students allegedly did not receive a fair chance to understand their obligations.
ITT's tuition is among the highest in the for-profit industry in the United States, says CFPB. An associate's degree at ITT can cost more than $44,000, and bachelor's degrees can cost up to $88,000.