On June 14, the Consumer Financial Protection Bureau announced a settlement that effectively forgives $168 million in private student loans owed by former students of ITT Technical Institute, the for-profit college that filed for bankruptcy in 2016 in the face of regulatory scrutiny concerning its recruitment and student loan practices. The settlement is with Student CU Connect CUSO, LLC (“CU Connect”), which was created to fund and manage loans for ITT students.
The CFPB filed a complaint in the Southern District of Indiana alleging that CU Connect provided substantial assistance to ITT in strong-arming students into CU Connect Loans, characterized by high interest rates and high default rates, while the students were “unaware of the terms, conditions, risks, or even existence of their CU Connect Loans.”
Under the settlement, CU Connect must stop collecting on all outstanding CU Connect Loans, discharge all outstanding CU Connect Loans, and ask all consumer reporting agencies to which CU Connect furnished information to delete tradelines relating to CU Connect Loans. The order also requires CU Connect to provide notice to all consumers with outstanding CU Connect Loans that their debt has been discharged and is no longer owed and that CU Connect is seeking to have the relevant tradelines deleted.
The district court quickly approved the settlement with its entry of the final order on June 20. Forty-four states plus the District of Columbia have also settled with CU Connect on the same terms.