Settlement results in $7 million in loan relief for former ITT students
FRANKFORT, Ky.(WTVQ) – A multi-state settlement will result in more than $7 million in debt relief for former ITT Technical Institute students in Kentucky with loans from PEAKS Trust.
The settlement resolves allegations that PEAKS and Deutsche Bank divisions violated consumer protection laws by offering deceptive loans to finance student tuition at ITT locations in Louisville, Lexington, and across the country, according to an announcement by Attorney General Daniel Cameron.
PEAKS Trust and Deutsche Bank entities violated consumer protection laws when they failed to explain the terms of temporary credits and coerced students into agreeing to the terms of PEAKS private loan program, said Cameron
“Our settlement will provide debt relief for the financial loss suffered by Kentucky ITT students as the result of PEAKS deceptive business practices,” Cameron stated.
The Attorney Generals Office of Consumer Protection, together with 47 attorneys general and the Federal Consumer Financial Protection Bureau, reached a settlement with Deutsche Bank entities and PEAKS, a private loan program affiliated with Deutsche Bank and operated by bankrupt ITT.
The settlement provides $7.2 million in debt relief to Kentucky borrowers of more than 1,000 PEAKS loans.
Nationally, the settlement will result in debt relief of over $330 million for approximately 35,000 borrowers with outstanding principal balances.
To protect consumers from unfair and deceptive business practices, the multi-state coalition launched an investigation into the origin and servicing of private student loans by PEAKS, their transaction parties, and their relationship with ITT.
The multi-state coalition alleged that ITT took advantage of students for financial gain by developing a plan with PEAKS to offer zero-interest temporary credits to low-income students, enabling them to cover the gap in tuition between federal student aid and the full cost of ITT tuition.
Nine months later, when students could not repay the temporary credit, ITT pressured and coerced students into accepting private loans with PEAKS by threatening to expel them if they did not accept the terms of the loan.
The coalition contends that ITT knowingly saddled students with PEAKS loans to convert uncollectible zero interest temporary credits into revenue to make ITTs financial statements more appealing to investors.
PEAKS loan default rates are projected to exceed 80 percent, due to both the high cost of the loans as well as the lack of success ITT graduates had getting jobs that earned enough to make repayment feasible.
Under the terms of the settlement, PEAKS is required to terminate all loan collection activities, to halt accepting loan payments, and to refrain from selling or transferring loans.
Within 30 days of the settlement, PEAKS, DBNTC, and DBTCA must cancel all outstanding balances of affected student loan accounts, including fees, charges, and interest.
PEAKS is also required to notify loan holders by mail of their cancelled debt and ensure automatic payments are cancelled. The settlement also compels PEAKS to supply credit reporting agencies with information to update the credit scores of affected borrowers.
Students with loans from PEAKS are not required to take action to receive debt relief and should receive notices explaining their rights under the settlement. Students may direct questions regarding the settlement to PEAKS by emailing firstname.lastname@example.org, calling 866-747-0273, or contacting the Consumer Financial Protection Bureauby calling (855) 411-2372.
ITT filed bankruptcy in 2016 amid investigations by state attorneys general and following action by the U.S. Department of Education to restrict ITTs access to federal student aid.Before closing, ITT operated campuses in Louisville, at 4420 Dixie Highway, and in Lexington, at 3000 Old Todds Road.
Attorney General Cameron was joined by attorneys general of Arizona, Arkansas, California, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming in the settlement.