Update | ITT Trustee to Stop Collection on All “Temporary Credit” Accounts
May 19, 2017
On May 18, the court overseeing ITT’s bankruptcy case approved a motion to stop collection on all ITT “Temporary Credits.” ITT used unfair and deceptive tactics to get students to sign up for Temporary Credits, including by describing Temporary Credits as grants and threatening to expel students if they did not agree to the debt. Even after ITT filed for bankruptcy, its servicers and debt collectors continued to harass students to collect these Temporary Credits.
Former ITT students have consistently objected to ITT’s ongoing collection efforts. In January, the Project on Predatory Student Lending filed an adversary complaint in the bankruptcy case on behalf of hundreds of thousands of former ITT students, arguing that the debts were incurred as a result of ITT’s unfair and deceptive practices and asking the court to block the estate from collecting these accounts. The students then objected to the trustee’s request to hire more contractors to try to collect these Temporary Credits. The class of former students is currently represented by the Project on Predatory Student Lending and Jenner & Block LLP.
Former ITT students are gratified that the trustee has now decided to stop pursuing these accounts. Stopping collection on Temporary Credits is an important first step, but any ongoing collection on ITT-generated debt continues to harm students unjustifiably. Former ITT students continue to face collections on billions of dollars of federal and private student debts that the company generated by its unfair and deceptive practices.
For more information about students’ claims against ITT, click here.
FOR FORMER ITT STUDENTS:
As of yesterday, if you have Temporary Credits from ITT that were serviced by United Accounting Services (UAS), FirstSource/One Advantage or other collection agencies (Premiere Credit NA, General Revenue Corporation, and Security Credit Systems), you should no longer submit any payments. In the next few weeks, the trustee will send out a notice to those students who are affected. In the coming months, the trustee will calculate refund amounts for only those students who continued to make payments on their Temporary Credits after ITT filed for bankruptcy.
ITT issued Temporary Credits to students to pay tuition not covered by federal and private student loans. Many Temporary Credits were later converted to private loans, including Student CU Connect CUSO and PEAKS loans—these debts are no longer considered Temporary Credits. The debts that were not converted to private loans are still considered Temporary Credits, and have been serviced by UAS & FirstSource on behalf of ITT.
This ruling does NOT apply to other types of ITT-related debt, including federal loans, private bank loans, Student CU Connect CUSO loans, or PEAKS loans. This ruling also does not apply to any debt that is not ITT-related, even if UAS or FirstSource are collecting on those debts.
Stopping collection on Temporary Credits is an important first step, but it does not solve all of the problems ITT caused, including federal and private loan collections. The ITT trustee can stop collection on Temporary Credits because ITT’s estate still owns those accounts. The trustee does not own the federal loans or most private loans. Therefore, the trustee has less control over these loans. Below are updates on the status of a few other types of ITT loans:
- Federal Loans. The Department of Education acknowledged that over $3 billion ITT-generated loans could be eligible for borrower defense discharges. The Department of Education has received over 2,000 applications from ITT students, but to date, we are not aware of any borrower defense discharges granted to ITT students. We will continue to advocate for the Department to grant borrower defense discharges to former ITT students.
- Temporary Credits converted into accounts with Student CU Connect CUSO/PEAKS. These accounts are currently outside the control of the ITT trustee. These accounts are the subject of multiple investigations, and we are advocating on behalf of students to discharge these accounts.
- All other private student loans are not part of ITT’s bankruptcy proceeding right now.
Click here to sign up for future updates.