Trouble continues to mount for ITT Educational Services. The for-profit college operator behind the ITT Technical Institute chain is already under investigation over concerns it may have defrauded the federal government, and now faces a lawsuit from the Massachusetts Attorney General for allegedly engaging in a slew of abusive and misleading practices.
Mass. AG Maura Healey announced the suit earlier today, accusing ITT of using unfair and harassing sales tactics, and misleading students about the quality of its Computer Network Systems programs, and the success of the program’s graduates in finding jobs.
According to the complaint [PDF], from 2010 to 2013, ITT used misleading advertisements and recruitment tactics to aggressively enroll prospective students in the Computer Network Systems program at two Massachusetts campuses.
Specifically, the complaint alleges that ITT misrepresented the historical success of program graduates finding job in or related to their field of study, the amount of money those graduates earned in the field, the quality of the program, and the availability of financial aid.
Fuzzy Math On Job-Placement Stats
Students interested in the two-year, associated degree Computer Network Systems program were allegedly given disclosures showing anywhere from 80% to 100% of graduates were employed in jobs that required the direct or indirect use of skills taught in the program.
ITT’s Norwood, MA, campus told prospective students that it had placed 100% of the 43 students who graduated in 2009 into computer-related position. However, according to the complaint, the actual placement rate for those graduates was approximately 50% or less.
The statements were similar at the school’s Wilmington, MA, campus, with disclosures stating that 84% of students who graduated in 2009 were placed in jobs, while the actual number was less than 50%.
The AG’s office claims that ITT used several different falsification techniques to count Computer Network Systems graduates as placed in jobs. For example, the school counted as placements jobs that were not in or related to their field of study, as well as counting internships or short-term, unsustainable positions as placements.
ITT allegedly counted any graduate of the program as placed as long as that graduate’s employment somehow involved the use of a computer. These placements included a graduate to sold computers at a big box store, and one who performed janitorial duties.
The for-profit chain’s vice president of career services justified these as placements to the AG’s office by saying: “I see bullets [on the job description] that support the fact that there would be IT systems within the facility” and that “somebody is doing IT work to ensure that those systems are up, operational,” according to the complaint.
The school justified careers selling computers as placements, by stating that the course gave these sales associates the knowledge to walk a customer through what they would need in their own computers.
The chain also allegedly falsely advertised the type of training students would receive when enrolling in the program.
“ITT also advertised and promoted hands-on training and personalized attention through its program, but students said their experience involved the use of outdated technology, absent teachers, or being told to ‘Google’ the answers to questions,” the complaint states.
Keeping The Pressure On
In addition to allegedly falsifying job-placement rates and misrepresenting the program, the Attorney General’s office claims that ITT’s recruitment strategies were often harassing in nature.
For example, former admissions representatives were allegedly expected to call up to 100 prospective students per day and were publicly shamed or fired if they failed to meet their quotas.
Along with placing advertisements on the radio, television, and Internet, ITT also persuaded current and prospective students to provide the contact information for family and friends. The company then purportedly used this information to inundate new targets with direct mail and phone calls.
“When an admissions representative called a prospective student but was unable to reach him or her, the representative was instructed to keep calling the prospective student at least every 24 hours,” the complaint states, noting that one former admissions rep said he was required to contact each prospective student at least three times per day.
Several former Computer Network Systems program students reported received “many calls & emails sometimes daily,” “harassing calls and emails,” “constant phone calls,” and “so many calls and emails every day.”
To further increase its reach to perspective students, ITT contracted with telemarketing firms. When the firms successfully scheduled an appointment, an “ITT admissions rep had to contact the student immediately and, if the appointment was scheduled for more than 72 hours in the future, attempt to schedule a sooner appointment,” the complaint states.
Pushing For Costly Loans
Finally, the AG’s office claims that while federal loans accounted for most of the enrolled students’ debt, ITT would push students into costly short-term private loans.
According to the complaint, ITT offered Computer Network Systems students short-term loans that it called “Temporary Credits” that were meant to bridge the gap between the cost of tuition and the other loans students received.
A Temporary Credit was an interest-free loan most frequently offered to new students and due in one lump sum payment, usually within a year of receiving the credit and during the student’s course of study.
However, a Cost Summary Payment Addendum given to each student gave the impression that they would not have to repay their Temporary Credits during their courses of study.
When student borrowers were unable to repay the credits, ITT steered them to expensive, private loans that they were unable to afford. These funds — provided though the Private Student Loan Program or a credit union service organization — had high interest rates and high default rates, according to the Massachusetts Attorneys General office.
“These students were exploited and pressured to enroll with the promise of great careers and high salaries, but were instead left unable to repay their loans and support their families,” AG Healey said in a statement.
ITT Education Services denied the complaint in a statement on Monday, saying the company was “disappointed” with the lawsuit and called the Attorneys General office’s investigation a “wide-ranging fishing expedition.”
“Although ITT/ESI cooperated fully in the investigation, and presented evidence that its conduct was lawful, the Attorney General’s Office has suddenly elected litigation over working with ITT/ESI to address any legitimate concerns it might have about ITT/ESI’s practices,” the company said in a statement.
ITT claims that many of the allegations in the lawsuit are based on biased and selective portrayals of the facts.
“The complaint also quotes testimony out of context and disregards key facts demonstrating the institution’s genuine commitment to securing outstanding job opportunities for its graduates and to producing reliable and well-documented placement statistics,” the company said.
This isn’t the first time accusations of abuse and deceptive practices have been levied against ITT Tech.
In May 2015, the SEC filed fraud charges against current and former executives with the company for their part in concealing problems with company-run student loan programs.
The charges against the company, former CEO Kevin Monday and current CFO Daniel Fitzpatrick stem from their alleged fraudulent concealment of the poor performance and looming negative financial impact of two student loan programs the company financially guaranteed to investors.
According to the SEC complaint [PDF], the loans performed so poorly by 2012 that the company’s guarantee obligations were triggered. However, instead of disclosing the issue to investors, the SEC alleges that ITT and the executives engaged in a fraudulent scheme and made a number of false and misleading statements to hide the magnitude of ITT’s guaranteed obligations to the loan programs.
Before that, in February 2014, the Consumer Financial Protection Bureau sued ITT for allegedly pressuring students into predatory loans and misleading students on future job prospects and salaries.
In January, a unsealed whistleblower lawsuit against for-profit college chain ITT Technical Institute accused the school of operating a “systematic scheme” to defraud the government by using a litany of abusive, deceptive practices to enroll students.
by Ashlee Kieler via Consumerist
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