219 F. Supp. 3d 878
S.D. Ind.2015Background
- CFPB sues ITT Educational Services for CFPA and TILA violations; motion to dismiss under Rules 12(b)(1), 12(b)(6), and 12(b)(7) denied in part and granted in part.
- ITT is a for-profit education provider reliant on Title IV aid; ITT offered “Temporary Credit” no-interest loans to cover tuition gaps.
- Bureau alleges ITT used Temporary Credit as an entry point to steer students into expensive private loans; misrepresentations about career prospects and accreditation alleged.
- Recruiting and enrollment processes allegedly rushed; students signed enrollment and financial aid documents without full disclosure.
- After first year, ITT allegedly repackaged aid into SCUC private loans; executive statements described balance-sheet motivations behind private-loan programs.
- Allegations also include coercive tactics and leverage over students (e.g., withholding transcripts) to induce loan uptake.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| CFPA constitutionality and removal power | CFPB's removal protections constitutional under Humphrey’s Executor | CFPA creates unconstitutional insulation and delegation | CFPA removal structure permissible; not unconstitutional as applied |
| CFPA vagueness and due process | CFPA provisions give fair notice to unfair/abusive conduct | Terms like ‘unfair’/‘abusive’ vague | CFPA terms provide sufficient notice; no due process violation |
| Whether ITT is a covered entity | ITT engages in financial services for students; fits CFPA | ITT is primarily educational; not engaged in CFPA activities | ITT qualifies as covered entity via financial advisory services or service provider roles |
| Adequacy of pleadings for CFPA Counts One–Three | Allegations show coercive, abusive, and unfair practices harming students | Pleadings fail plausibly to show coercion/causation | Counts One–Three survive; pleadings plausible at this stage |
| Count Four (TILA) statute of limitations | CFPB actions governed by §1607, not §1640(e) one-year limit | Count Four time-barred under §1640(e) | Count Four dismissed as time-barred |
Key Cases Cited
- Myers v. United States, 272 U.S. 52 (S. Ct. 1926) (removal power inherent in executive authority; President’s removal power protected)
- Humphrey's Executor v. United States, 295 U.S. 602 (S. Ct. 1935) (for-cause removal for independent agencies like the FTC)
- Morrison v. Olson, 487 U.S. 654 (S. Ct. 1988) (independent counsels' removal for cause upheld; inferior officer standards)
- Free Enterprise Fund v. Public Company Accounting Oversight Board, 561 U.S. 477 (S. Ct. 2010) (two layers of for-cause protection unconstitutional for central officers)
- Bowsher v. Synar, 478 U.S. 714 (S. Ct. 1986) (limits on independent financial oversight by Congress; removal/power considerations)