Initial Filings: Adversary Complaint
The Complaint seeks to establish ITT students as creditors of the ITT bankruptcy estate. This lawsuit filed in ITT’s bankruptcy to establish the liability of ITT for consumer protection and contract violations against the class of students who attended ITT over the past ten years. Such a legal finding from the bankruptcy court could create a path to debt cancellation for students’ federal student loans. The Complaint also seeks to stop the collection of certain ITT student loans, including debts allegedly owed to ITT itself.
Declarations Attached to Adversary Complaint
Two additional sets of declarations and exhibits were filed along with the Complaint.
One presents documentation of some of ITT’s most egregious recruiting and financial aid practices and trainings, as well as its extraordinary cost.
Proof of Claim
Plaintiffs have filed a Proof of Claim. This is an assertion that Plaintiffs, and the proposed class they seek to represent, are unsecured creditors of ITT with unliquidated claims against the bankruptcy estate. The validity and amount of their claim will most likely be resolved in the Adversary Proceeding.
Initial Filings: Proof of Claim & Motion for Class Treatment
Motion for Class Treatment Filed with Proof of Claim
Plaintiffs seek to be treated as a class during the “claim-filing” stage of the bankruptcy proceeding. The date for creditors to file claims in the bankruptcy proceeding, known as the “bar date,” was January 30, 2017. To preserve the rights of students, many of whom will not be aware of the deadline for filing claims, the Students have asked for their claim to be treated as asserted on behalf of all ITT students.
Declaration Describing Student Testimony
The student testimony was collected from ITT Tech students via the Debt Collective’s online tool for creating and submitting Defense to Repayment applications, which launched in March of 2015. By November 1 2016, over 2000 students had used it to present claims to the Department of Education about ITT’s wrongdoing, and these 29 exhibits demonstrating common student claims are drawn from their testimony.
ITT degree operating as a disadvantage in the job market (521 statements)
ITT inflating job placement statistics and expected earnings (362 statements)
ITT misrepresenting its job placement services (162 statements)
ITT guaranteed job placement (90 statements)
ITT misrepresenting the certifications needed for jobs and whether ITT would prepare students for those certifications (224 statements)
ITT misrepresenting the quality of their instructors, training, curriculum, or facilities (326 statements)
ITT falsifying student attendance and grades to keep financial aid flowing (134 statements)
ITT concealing illegal behavior to students and regulators (71 statements)
ITT engaging in bait-and-switch tactics (enrolling students in different programs, in online courses rather than in-person instruction) (37 statements)
ITT misrepresenting that credits would transfer (670 statements)
ITT misrepresenting total cost of program (310 statements)
ITT misrepresenting nature and terms of “temporary credit” (which were actually private loans issued by a company ITT controlled) (82 statements)
ITT obfuscating the distinction between loans and grants, private and public loans (499 statements)
ITT taking out unnecessarily high number of loans, apparently to take advantage of fees (60 statements)
ITT downplaying debt burden (142 statements)
ITT failing to disburse grant money to students (42 statements)
ITT unilaterally changing the costs or adding fees (54 statements)
ITT engaging in pressure tactics to prevent students from asking too many questions (381 statements)
ITT signing documents on behalf of students or parents without their consent (69 statements)
ITT lost or misused aid meant for veterans (45 statements)
Descriptions of ruined credit ratings (166 statements)
Descriptions of being harassed by debt collectors (104 statements)
Descriptions of involuntary collection through garnishment (88 statements)
Descriptions of impact of debt on mental and physical health (223 statements)
Descriptions of ITT ruining people’s lives (62 statements)
Descriptions of impact on family members (252 statements)
Description of how ITT prevented other opportunities (473 statements)
Description of being homeless due to too much debt (18 statements)
Description of shame and embarrassment (52 statements)
Order to Suspend Collection
ITT used unfair and deceptive tactics to get students to sign up for Temporary Credits, including by describing them as grants and threatening to expel students if they did not sign. Even after ITT filed for bankruptcy, its servicers and debt collectors continued to harass students to collect these Temporary Credits. The student class objected to the trustee’s request to hire more contractors to try to collect these Temporary Credits, and the Trustee eventually stopped collecting in May 2017.
Student Class Settlement Motion
Proposed settlement between student class and ITT Tech’s bankruptcy estate that would cancel all of the more than $500 million in “temporary credits”, return all of the almost $3 million students paid directly to ITT since ITT declared bankruptcy in September 2016, correct credit reporting on these accounts, and allow the student class’s claim in the amount of $1.5 billion.
Student Class Settlement Motion Exhibits
THIS CLASS ACTION SETTLEMENT AGREEMENT (the “Agreement”) is made this 18th day of December, 2017 by and among, on the one hand, Deborah J. Caruso, not individually but as the chapter 7 trustee for ITT Educational, Services, Inc., ESI Service Corp., and Daniel Webster College, Inc. (the “Trustee”).
Settlement Notice and Opt Out Form
Form providing information about the settlement; form by which class members can opt out of the settlement until May 10, 2018.
Final Order Granting Settlement Agreement
On November 30, 2018, the court made a final order granting the Trustee's motion to enter into a settlement agreement with the student class.
Student Class Settlement Agreement
Final settlement agreement between student class and ITT Tech’s bankruptcy estate that cancels all of the more than $500 million in “temporary credits”, returning all of the almost $3 million students paid directly to ITT since ITT declared bankruptcy in September 2016, correcting credit reporting on these accounts, and allowing the student class’s claim in the amount of $1.5 billion.
Other Relevant Filings
Trustee's Adversary Complaint
On May 31, 2018, the Trustee in the bankruptcy of ITT Educational Services, Inc. filed a complaint against ITT's former Chief Executive Officer ("CEO"), Kevin Modany.
Motion of Student Claimants' for Order 2004
Request for documents from the Department of Education relating to Borrower Defense Applications of ITT Class Members.
Department of Education's Objection to Order 2004
The Department of Education submitted an objection to the Student Claimants motion for order 2004.
Declaration of Julian Schmoke
Department of Education Chief Enforcement Officer's statement in opposition to student class’s discovery request.
Student Claimants' Reply to the Department of Education's Objection to Order 2004
Student Claimants filed a reply to the Department of Education's objection to providing documents relating to the Department's processes and adjudications of borrower defense claims and information regarding ITT's wrongdoing.
Notice to Potentially Affected Individuals Regarding Trustee's Disclosure of Protected Information
On July 11, 2018, the Judge granted a Protective Order filed by the Trustee describing the process by which access to certain documents, including student and business records, can be obtained.
Proposed Protective Order
Protective order filed by the Trustee describing the process by which access to certain documents, including student and business records, can be obtained.
Student Claimants' Supplemental Brief in Support of Order 2004
Student Claimants filed a supplemental brief requesting documents under rule 2004.
On September 7, 2018 the Trustee in the bankruptcy of ITT Educational Services, Inc. filed a Complaint against the PEAKS Trust.
Trustee's Adversary Complaint
On September 7, 2018 the Trustee in the bankruptcy of ITT Educational Services, Inc. filed a Complaint against the Department of Education.
Letters to Representatives
Letters to Representatives
The Project on Predatory Student Lending wrote to members of Congress with testimony of constituents who are former ITT students, asking members to push for loan forgiveness for former ITT students.