On September 15, 2020, the Consumer Financial Protection Bureau (“CFPB”) announced that it had filed a proposed stipulated judgment against a Delaware statutory trust after a settlement agreement was reached between the trust and forty-seven states plus the District of Columbia. The trust was created to purchase and hold beneficial ownership of third-party private student loans entered into by or originated to students of for-profit ITT Educational Services, Inc. (“ITT”) schools.
In its complaint, filed in the District Court for the Southern District of Indiana, the CFPB alleged that the trust provided substantial assistance to ITT in engaging in unfair acts and practices in violation of the Consumer Financial Protection Act of 2010. The trust allegedly knew or was reckless in not knowing that many student borrowers did not understand the terms and conditions of their loans, could not afford them, or in some cases did not even know they had student loans. If entered by the court, the proposed stipulated judgment requires the trust to forgive all of its outstanding loans – approximately $330 million in debt – for about 35,000 borrowers who currently have outstanding principal balances. The agreement also requires the trust to stop collecting on and discharge all of the outstanding student loans held by the trust, and to request that all consumer reporting agencies to which the trust furnished information delete information relating to the loans.
Today’s settlement marks the third settlement by the CFPB related to ITT’s private loan programs. As we reported last year, the CFPB announced a settlement with another company that had been set up to hold and manage a separate portfolio of private loans for ITT students, by which the company agreed to discharge approximately $168 million in loans.