The CFPB bares its teeth

The CFPB bares its teeth

In a move applauded by consumer advocates, the Consumer Financial Protection Bureau filed suit against ITT Technical Institute.  The Huffington Post reports that this marks the first suit brought by the new consumer protection agency against a for-profit school.

The complaint alleges that ITT violated the Consumer Financial Protection Act and the Truth in Lending Act by enticing students through deceptive marketing and strong-arm recruiting tactics. ITT allegedly misrepresented its graduation and placement rates, and misled consumers about the school’s accreditation.

The complaint also alleges that ITT coerced students into taking out private loans for ITT’s own private gain. How? Well, tuition at ITT is much higher than students can afford, even after maxing out federal financial aid. To close the tuition gap, ITT offered students temporary credit from ITT. That credit came due within nine months–something many of the students were not told during a rushed financial aid discussion. When many of those students were unable to pay the hefty tuition price tag within the required nine months, ITT allegedly forced those students into private loans, due within 10 years, with a 16% interest rate. Defaults at ITT on those private loans topped 70%.

This isn’t ITT’s first legal rodeo.   Former students sued ITT for misrepresentation in 1995.  In 2005, ITT settled a lawsuit with the state of California for inflating grades in order to get more state aid. And ITT’s problems don’t end there; it revealed in an recent SEC filing that a long list of state Attorneys General have issued subpoenas or “civil investigative demands” under state consumer protection statutes.

Wherefore Art Thou, Higher Education Act?

This week’s guest post is contributed by Marie Vanderbilt, a 3L at American University Washington College of Law.  Marie breaks down the past, present and future of the Higher Education Act, the umbrella statute for most federal aid.

Will Congress manage to reauthorize the Higher Education Act of 1965 (HEA) before it sunsets at year’s end? The HEA formed one of the main pillars of the Johnson Administration’s War on Poverty (watch LBJ deliver the 1964 State of the Union, minute 20:20.)  The goal was to ensure that no one would be denied an education because of their financial situation.  The HEA removed financial barriers to higher education by authorizing a program of need-based grants and student-support programs. Since 1965, the HEA has been repeatedly reauthorized, most recently in 2008. Each time, the HEA has been amended, edited, and expanded. However, the foundational belief in the importance of access to education remains.

With Congress deadlocked over the budget, it is hard to imagine a serious conversation about how we should fund our system of higher education.  The Senate HELP Committee held new hearings this past month, at least a glimmer of activity.  The last time, Congress didn’t manage to reauthorize until five years after the deadline.  The purpose of having laws sunset is to open up programs for inspection and debate.  In the case of higher education, that moment will soon be overdue.