For-Profit Career Colleges Under Fire for Alleged Fraud, Predatory Lending Practices

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By Consumers Union on Thursday, February 27th, 2014

It’s been a bad week for career colleges – those for-profit schools that promise to help you find a rewarding career in a specific field like auto tech, nursing, or cosmetology.  Two big court cases have just been announced targeting for-profit schools that may have done little more than put their students into mountains of debt.

First up, a beauty school that took federal dollars, enrolled a bunch of students, and then closed its doors: the Wilfred Academy.  Yesterday, the New York Times reported that a group of former students filed a class action lawsuit against the Department of Education for failing to crack down on the school’s bad practices.  The former students, represented by the nonprofit New York Legal Assistance Group (NYLAG), filed charges asking for debt relief and reimbursement from the Department for charges they paid to enroll in a cosmetology program. According to lawsuit, students at Wilfred Academy were deceived into believing that their education would help them build stable, lucrative careers in the field of cosmetology. Instead, students faced predatory lending tactics and were left with a burdensome student loans that were likely to end in default. (Check out Wilfred’s deceptive advertisements from the late 80’s here and here.)

Second, a career college that has gotten itself in hot water for its lending practices: ITT Educational Services.  The Consumer Financial Protection Bureau (CFPB), our top consumer watchdog, announced that it has filed a lawsuit against ITT for tricking students into taking out predatory loans to pay for their 2-year and 4-year programs.  According to the CFPB’s complaint, ITT allegedly gave students zero-interest loans called “Temporary Credit” that would convert after a year into high-cost private loans with interest rates as high at 16.25%.

Do you or someone you know have an experience dealing with career colleges like these?  If so, share your story here.

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