September 15, 2020
CFPB, 48 attorneys
general secure agreement over PEAKS loans at defunct for-profit school
Carson City, NV – Today, Nevada Attorney General Aaron D. Ford secured
an agreement to obtain $6,198,820.30 in debt relief for former ITT Tech students
in Nevada as part of a settlement with 48 attorneys general and the federal
Consumer Financial Protection Bureau (CFPB).
Nationally, the settlement will result in debt relief of
about $330 million for 35,000 borrowers who have outstanding principal balances.
The attorneys general have settled with PEAKS Trust, a
private loan program run by the for-profit college and affiliated with Deutsche
Bank entities. ITT filed bankruptcy in 2016 amid investigations by state
attorneys general and following action by the U.S. Department of Education to
restrict ITT’s access to federal student aid.
“Thousands of Nevada students have been duped by PEAKS
Trust’s mounting interest rates and predatory practices,” said AG Ford. “In
addition to academic rigor, these students had the added pressure of facing
expulsion if they didn’t make tuition. My Bureau of Consumer Protection has
been working hard to hold PEAKS Trust accountable, and I’m proud that $6,198,820.30
will be rightfully delivered into the hands of Nevada students.”
PEAKS was formed after the 2008 financial crisis when
private sources of lending available to for-profit colleges dried up. ITT
developed a plan with PEAKS to offer students temporary credit to cover
the gap in tuition between federal student aid and the full cost of the
According to the Assurance of Voluntary Compliance filed today,
ITT and PEAKS knew or should have known that the students would not be able to
repay the temporary credit when it became due nine months later. Many students
complained that they thought the temporary credit was like a federal loan and
would not be due until six months after they graduated.
When the temporary credit became due, ITT
pressured and coerced students into accepting loans from PEAKS, which for many
students carried high interest rates, far above rates for federal loans.
Pressure tactics used by ITT included pulling students out of class and
threatening to expel them if they did not accept the loan terms. Many of the
ITT students were from low-income backgrounds and were left with the choice of
enrolling in the PEAKS loans or dropping out and losing any benefit of the
credits they had earned, because ITT’s credits would not transfer to most
The default rate on the PEAKS loans is projected to exceed
80%, 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. The defaulted loans continue to affect students’ credit ratings
and are usually not dischargeable in bankruptcy.
Under the settlement, PEAKS has agreed that it will forgo
collection of the outstanding loans and cease doing business. PEAKS will send
notices to borrowers about the cancelled debt and ensure that automatic
payments are cancelled. The settlement also requires PEAKS to supply credit
reporting agencies with information to update credit information for affected
Students eligible for this settlement will receive notices
for debt relief. The notices will explain their rights under the settlement.
Students may direct questions to PEAKS at email@example.com or
866-747-0273, or the
Consumer Financial Protection Bureau at (855) 411-2372.
ITT had operated campuses in ITT Technical
Institute-Henderson - Henderson, Nevada and ITT Technical Institute Las Vegas -
North Las Vegas, Nevada.
In addition to Nevada, the settlement was signed by the
attorneys general of Arizona, Arkansas, California, Colorado, Connecticut,
Delaware, the District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois,
Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts,
Michigan, Minnesota, Mississippi, Missouri, Nebraska, 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.
The Assurance of Voluntary Compliance is attached.