We have written recently about the stepped-up scrutiny that the Consumer Financial Protection Bureau (the CFPB) and the Federal Trade Commission (FTC) are placing on for-profit education and related marketing. The opening round of federal enforcement actions started on Wednesday, when the CFPB filed a lawsuit against ITT Educational Services, Inc. with accusations that ITT "used high-pressure tactics to push many students into expensive private student loans that were likely to end in default." The CFPB is seeking restitution for consumers, a civil fine, and an injunction against the company. For-profit schools and marketers of all types can learn important lessons from this enforcement action.
The CFPB brings its lawsuit against ITT under the Dodd-Frank Wall Street Reform and Consumer Protection Act, which grants it authority to take action against institutions engaging in unfair, deceptive, or abusive practices. The CFPB's lawsuit alleges that (1) ITT "misled students by overstating their job prospects and likely salaries upon graduation;" (2) it then pushed students into high-cost private loans that were likely to end in default; and (3) ITT credits typically didn't transfer to nonprofit schools or community colleges, so it used the prospect of expulsion and the loss of the money already spent during the student's first year to coerce students into taking out the private loans.
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