An organization that was collecting and servicing student loans for a bankrupt for-profit university will forgive $168 million in loans and ask credit bureaus to delete tradelines relative to the debts under a settlement that has been reached with the Consumer Financial Protection Bureau.
Student CU Connect CUSO, LLC was created to service loans made to individuals who attended ITT Technical Institute, which filed for bankruptcy protection and ceased operating in 2016. The CUSO was sued by the CFPB in 2016 for allegedly being reckless in not knowing that students did not understand the terms of their loans and could not afford to repay them. When ITT shut down, it enrolled about 43,000 students across 130 campuses.
Along with discharging the loans and notifying the credit bureaus that the debts no longer exist, the CUSO must also notify all affected consumers about the forgiveness and deletion of the tradelines. A copy of the stipulated judgment between the CFPB and the CUSO can be accessed by clicking here.
Students took out more than $189 million in loans from the CUSO to attend ITT Technical Institute, according to the CFPB’s complaint. The CUSO and ITT knew that as many as 60% of borrowers with credit scores below 600 were going to default on their student loans, according to the CFPB’s complaint. Even though the default rate was significantly higher than expected, the CUSO continued making loans.