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The Consumer Financial Protection Bureau levied a $83,000 civil money penalty on Monday against Connecticut-based First Alliance Lending, a specialty firm that focuses on providing loss-mitigation financing to distressed borrowers.
February 24 -
Steven Antonakes, the CFPB's deputy director, gave a speech which indicated the agency has shifted to a hard-line stance regarding compliance with a new mortgage servicing rule that went into effect last month. "Business as usual has ended in the mortgage servicing industry," he said.
February 19
WASHINGTON The Consumer Financial Protection Bureau announced Wednesday it filed a civil lawsuit against ITT Educational Services, one of the most expensive for-profit education providers.
It was the agency's first such enforcement action against an educational provider, and CFPB officials signaled more were on their way.
Speaking at a press conference, CFPB Director Richard Cordray accused ITT of luring students with false promises of future employment prospects upon graduation and said it rushed borrowers through financial aid applications without disclosing loan obligations.
The lawsuit alleges that ITT was aware that most of its students would not be able to pay back its private student loans, projecting a default rate of 64%.
"ITT marketed itself as improving consumers' lives, but it was really just improving its bottom line," said Cordray. "We believe ITT used high-pressure tactics to push many consumers into expensive loans destined to default."
Nicole Elam, a spokeswoman for ITT, said the college was prepared to defend itself against such claims made by the CFPB.
"We don't comment on pending litigation other than to say we believe that the bureau's claims are without merit and that we intend to vigorously defend ourselves against the charges," said Elam.
The college provides undergraduate and degree programs through its ITT's Technical Institutes and Daniel Webster College. It provides educational services in 150 institutions in nearly 40 states, according to the bureau.
The CFPB announced the lawsuit even as four state attorneys general launched their own actions. New Mexico filed a separate suit against ITT's nursing school, while Illinois, Kentucky and Iowa announced investigations into ITT.
The CFPB's case was filed in federal court in Indianapolis, near where ITT is based. The lawsuit is seeking restitution for victims, a civil fine and an injunction against the company.
At the press conference, Cordray said the agency intends to take further action against other for-profit colleges, but did not offer any specifics.
All four of the AGs are also conducting investigations of major for-profit colleges, including Westwood College and Corinth College.
At the press conference, Cordray outlined a series of claims about how ITT trapped its students in debt. He alleged that the company offered a zero-interest loan payable in full at the end of the first academic year knowing that most students would not be able to repay it. As a result, many borrowers were forced to take out "high-cost private student loans" from the company to pay for their tuition.
"ITT kept students in the dark about its lending model that it freely shared with investors," Cordray said. "In fact, we found that ITT used its financial aid staff to rush students through an automated application process without affording them a fair opportunity to understand the loan obligations involved. In some cases, students did not even know they had a private student loan until they started getting collection calls."
Cordray alleged that many such loans had interest rates of 16% over 10 years, which Cordray compared to "financing your college education on your credit card."
"These expensive loans were often destined to default, and ITT knew that," Cordray said.
Students who wanted to transfer to a less expensive school often found it hard to do so, as ITT credits do not transfer, Cordray said.
