On September 15, 2020, the CFPB announced that a proposed stipulated judgment has been filed in the Bureau’s action against a collective of trusts charged with engaging in unfair acts and practices in the course of servicing student loans, thereby providing substantial assistance to a since-bankrupt virtual technical institute. The Bureau previously sued the technical institute for engaging in unlawful and unfair practices by encouraging students to take out private student loans for the sake of improving the institute’s standing to investors, despite the high unlikelihood that these students would not be able to repay their debt.
The complaint alleged that the Defendant trusts were actively involved in servicing and managing loans taken out by students through a program structured by the institute, despite engaging in a variety of unfair practices, such as rushing students through the financial aid review process, and even gaining unauthorized access to student accounts for the sake of signing students up for loans without their permission. It is further alleged that Defendant is alleged to have serviced and collected on these loans with the knowledge that nearly all borrowers were likely to default.
Should the District Court for the Southern District of Indiana grant the proposed stipulated judgment, Defendant would be required to stop collecting on $330 million in loans and discharge all outstanding loans in relation to the institute. Defendant would further be required to ask all credit reporting agencies to delete any information related to these same loans, and provide proof that all of the above actions have been taken.