The Consumer Financial Protection Bureau, along with 48 attorneys general, have reached a settlement that will see the owner of $330 million in private student loans forgive all of that amount after being accused of engaging in unfair acts and practices in violation of the Consumer Financial Protection Act.
A copy of the complaint, filed in the District Court for the Southern District of Indiana, Indianapolis Division, in the case of CFPB v. PEAKS Trust can be accessed by clicking here. The proposed stipulated final judgment, which must be approved by a judge, can be accessed by clicking here.
PEAKS owned and managed private student loans for individuals who were attending ITT Technical Institute, which shut down all of its campuses in 2016.
Along with forgiving the remaining balances on all of its outstanding loans, the defendants will stop attempting to collect on them and also require the defendants to ask credit reporting agencies to delete any references to the loans from the individuals’ credit reports. The defendant must also notify all affected individuals — about 35,000 in total — about the loan forgiveness and other provisions of the settlement.
PEAKS was created following the Great Recession of 2008, when private student loan funding became tougher to obtain. PEAKS offered students at ITT temporary credits to cover gaps in tuition. But when the credits became due, ITT allegedly pressured students into taking out loans with PEAKS, which carried interest rates well above what was expected for student loans. Students were pulled out of class and threatened with expulsion if they did not accept the terms of the loans, according to the Attorney General of New York’s press release detailing the settlement. PEAKS also was accused of gaining unauthorized access to student accounts to sign them up for loans without their permission, according to the CFPB.
“PEAKS and ITT Tech took advantage of helpless and low-income students and threatened to kick them out of school if they didn’t take out loans at astronomical rates,” said Letitia James, the Attorney General of New York, in a statement. “Today’s settlement will finally right this wrong and provide hundreds of millions in relief to students across the country, including more than $5 million to New York borrowers, because students should never be saddled with a lifetime of debt and bad credit at the hands of predatory lenders.”