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ITT Educational Services, Inc. Calls CFPB Complaint Unfounded, Asks Court To Dismiss

Stocks in this article: ESI

CARMEL, Ind., April 30, 2014 /PRNewswire/ -- ITT Educational Services, Inc. (NYSE: ESI), has moved to dismiss the complaint filed by the Consumer Financial Protection Bureau (CFPB) in U.S. District Court, because the Bureau's allegations are legally flawed and violate the Constitution.

ESI, a leading private college system, said in its response to the agency's allegations – which primarily attack private student loans issued by third parties during a five-month period in late 2011 – that ESI "does not provide consumer financial products, and its conduct as described in the Bureau's complaint falls outside the Bureau's jurisdiction. The complaint recognizes that the loans at issue in this case were made by third parties—not [ESI]."

ESI noted that the Bureau makes misleading use of "mystery shopper" reports that the company uses to help ensure its activities conform to its policies and are compliant with state and federal regulations: "The complaint provides only out-of-context, edited quotations from select mystery shopper reports. The full quotations reveal a starkly different picture."

On pages 5-6 of the response, ESI cites the Bureau's use of a mystery report that was truncated to create a misleading impression:

For example, the complaint quotes one mystery shopper as describing [ESI]'s insistence on following up with the prospective student as "a bit invasive", yet omitted the remainder of the shopper's report stating that she "was pleasantly overwhelmed at how willing and excited [the school] was to help me in finding a career," and "ha[d] never encountered a career service office as nice and helpful as this one." The shopper also praised [school] staff because "[t]hey truly seem to make it their goal to help their students succeed at making the leap from education to career, which is great!!"

The ESI response notes: "The Bureau does not claim that [ESI] engaged in fraudulent or deceptive conduct…Nearly every allegation in the complaint—including the misleading and out-of-context 'mystery shopper' allegations—is window-dressing that has nothing to do with the third-party loans or the causes of action the Bureau has chosen to plead."

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