A proposed stipulated judgment to forgive $330 million in student loans was filed Tuesday by the federal consumer financial protection agency, along with several states, against a student loan company and one of the largest financial institutions on the globe.
The Consumer Financial Protection Bureau (CFPB) said it filed the proposed judgment against PEAKS Trust 2009-1 as well as Deutsche Bank National Trust Company, Deutsche Bank Trust Company Delaware, and Deutsche Bank Trust Company Americas, in their capacity as trustees to PEAKS.
The bureau’s complaint alleges that PEAKS provided substantial assistance to ITT Educational Services, Inc. (ITT) in engaging in unfair acts and practices in violation of the Consumer Financial Protection Act (CFPA) of 2010. ITT filed for bankruptcy in 2016, and went out of business, after CFPB filed a lawsuit against the company in 2014. CFPB said PEAKS – a subsidiary formed by ITT before it dissolved – owned and managed private loans for students at ITT Technical Institute, and that the company allegedly knew or was reckless in not knowing that many student borrowers did not understand the terms and conditions of those loans, could not afford them, or in some cases did not even know they had them.
If entered by the court, the proposed judgment will require PEAKS to forgive all of its outstanding loans – approximately $330 million in debt – for about 35,000 borrowers who currently have outstanding principal balances. Forty-seven states plus the District of Columbia have also settled with PEAKS Tuesday, the bureau stated.
The bureau said its complaint alleged that ITT arranged for the PEAKS loans to be serviced and collected on after ITT had induced its students to take out the loans by a variety of unfair practices, including “rushing students through financial aid appointments, using aggressive tactics, and in some cases, gaining unauthorized access to student accounts to sign students up for loans without permission.”
The CFPB alleged that PEAKS was actively involved in servicing and managing the PEAKS loan program, including the collection of the loans, and that PEAKS’s conduct constituted substantial assistance of ITT’s unfair acts and practices in violation of the CFPA.
If entered by the court, the proposed stipulated judgment would require PEAKS to stop collecting on all outstanding PEAKS loans, discharge all outstanding PEAKS loans, and ask all consumer reporting agencies to which PEAKS furnished information to delete information relating to PEAKS loans. The order would also require PEAKS to provide notice to all consumers with outstanding PEAKS loans that their debt has been discharged and is no longer owed and that PEAKS is seeking to have the relevant consumer reporting information deleted.