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The Consumer Financial Protection Bureau has settled with Student CU Connect CUSO, LLC, a company set up to hold and manage private loans for students at the for-profit ITT Technical Institute.
The bureau filed a complaint and a proposed stipulated judgment in federal district court for the Southern District of Indiana alleging that CUSO provided substantial assistance to ITT Educational Services, Inc., in engaging in unfair acts and practices. ITT operated ITT Technical Institute until it filed for bankruptcy and ceased operations in 2016.
The complaint alleges that CUSO was actively involved in the creation and the implementation of the CUSO loan program. ITT allegedly induced its students to take out the loans by a variety of means. CUSO knew or was reckless in not knowing that many student borrowers did not understand the terms and conditions of the CUSO loans and could not afford them, the bureau said.
The CUSO Loan program originated approximately $189 million in student loans to ITT students. Funding came primarily through an automatic purchase agreement with a credit union that originated the CUSO Loans, the bureau said.
Under the terms of the proposed stipulated judgment, CUSO must stop collecting on all outstanding CUSO loans, discharge all outstanding CUSO loans, and ask all consumer reporting agencies to which CUSO furnished information to delete tradelines relating to CUSO loans.
The order also requires CUSO to provide notice to all consumers with outstanding CUSO loans that their debt has been discharged and is no longer owed and that CUSO is seeking to have the relevant tradelines deleted. The total amount of loan forgiveness is currently estimated to be $168 million.
Forty-four states plus the District of Columbia have also settled with CUSO on the same terms.
