Greenberg: What ITT Education Doesn't Say in its Defense
NEW YORK (TheStreet) -- ITT Education (ESI - Get Report) Thursday insisted that the Consumer Financial Protection Bureau's suit against the operator of for-profit schools "never should have been filed."
According to the press release:
"The complaint overwhelmingly focuses on issues that are unrelated to consumer finance, and attempts to cast a negative light on aspects of ITT Tech's activities that are extensively regulated by other government agencies. The core claims concern a mere six months of loans, but the Bureau knows that independent third parties provided those loans, and the loan programs ended years ago. Significantly, ITT Tech did not make any money, in interest or fees, from those third-party programs, which were designed to help students during the recent economic downturn. We are disappointed that the Bureau chose to sue rather than work with ITT Tech to address any legitimate concerns about efforts to help students pay for their education."
But, notes Brad Safalow of PAA Research, a longtime for-profit schools analyst: "I think it's telling that they didn't deny the grievances identified by the CFPB, but just referenced that those practices are regulated by other entities."
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Reality: This is a serious issue for not just ITT but for much of the for-profit industry. As I wrote on CNBC.com, the bigger issue is what CFPB director Richard Cordray said in his press release announcing the suit: "We are taking our first public enforcement action against a for-profit college." Key phrase: "first public enforcement action." Does that mean there will be more? Stay tuned.
-- Written by Herb Greenberg in New York