A class action lawsuit has been filed by former students of now bankrupt ITT Education Services, alleging that its partner Vervent Inc. is a sham student loan program that is still collecting money from students.
Vervent’s ITT student loans program, called PEAKS, was allegedly perpetrated by the defendant and Deutsche Bank.
According to the ITT student loans class action, the purpose of the program was to generate cash for the school and to show that ITT had a non-federal independent source of tuition revenue – part of federal requirements for financial aid.
The plaintiffs maintain that the loans were made to borrowers who had little to no repayment ability and that the terms of the loans were unconscionable and abusive.
The interest rate on the student loans went as high as 17.5 percent, accruing daily, and the students had to pay an undisclosed 10 percent origination fee, the plaintiffs allege.
The ITT student loans class action lawsuit says that ITT was responsible for creating more than $7 billion in student debt loans with more than 80 percent of the debt having been defaulted. ITT students allegedly earn the same or less than high school graduates with no college education and cannot sustain the debt.
One plaintiff, Jody Aliff, says that he was a student of ITT at the San Dimas and Orange Country campuses of ITT during 2008 through 2013. He allegedly obtained an associates degree from ITT and then a bachelor’s degree in information systems and cybersecurity.
Aliff claims that he incurred roughly $120,000 in student loan debt while attending ITT, which includes around $13,000 in PEAKS loans. He says that he currently works as a computer repairman for a bank in Los Angeles, a job that does not require a bachelor’s degree.
In 2010, when funding from other private loans ran out, Aliff obtained ITT student loans from the PEAKS program, the Vervent class action lawsuit states.
Aliff was allegedly informed that he couldn’t continue his second year courses unless he obtained a PEAKS loan, which he did. In addition, according to Aliff, he was told that he could not graduate with his associate’s degree unless he obtained another loan from PEAKS, which he did as well.
The plaintiff claims that his PEAKS loans were for approximately $5,000 and $8,000, totaling $13,000. Aliff says he started paying off his PEAKS loans through payments to First Associates Loan Servicing, the loans servicing company for ITT student loans. He ceased making payments in April 2015 due to financial problems, according to the Vervent class action lawsuit.
After he was unable to pay for the loans, he allegedly started receiving calls from First Associates regarding payments on his PEAKS loan. Aliff told the servicing company that he could not afford to pay the loans.
At one point, Aliff reportedly obtained a one year deferment on the loans hoping that his income would increase and he would be able to make payments in the future. However, after the deferment, he could still not pay for the loans.
Beginning in 2018, Aliff states that he started receiving further calls from Activate Financial, a collection agency for the PEAKS ITT student loans and, to this day, he still receives calls from Activate concerning the debt.
Aliff says he received notices from Activate Financial that they were willing to accept a lower payment for his two loans, but only if payments were made within 30 days and if they were in lump sums.
These notices reportedly did not inform him that the statute of limitations had passed and that Activate Financial could not collect the loans via legal proceedings.
“At no time did Activate Financial inform Mr. Aliff that the statute of limitations had run on his PEAKS loans or that Activate Financial could not bring legal action seeking payment of the loans,” the Vervent class action lawsuit maintains.
The common issues of facts in this class action lawsuit include: 1) whether PEAKS was a real student loan program or a sham which did not have any underwriting, and was just a way for ITT to defraud students, its investors, and the Department of Education; 2) whether the defendants misrepresented the legal name of PEAKS loan obligation; and 3) the extent to which PEAKS loan obligations were subject to expired statutes of limitations.
Prospective Class Members include: “all individuals who (i) attended any ITT campus, and (ii) have a balance owed on a PEAKS loan, or (iii) made any payment on a PEAKS loan within the applicable statutes of limitations and until notice is provided to the class.”
Did you go to school at ITT and obtain ITT student loans to pay for your education? Leave a message in the comments section below.
The plaintiffs are represented by Timothy G. Blood, Leslie E. Hurst, and Aleksandr J. Yarmolinets of Blood Hurst & O’Reardon LLP, Irv Ackelsberg and John J. Grogan of Langer Grogan & Diver PC and Paul Arons of the Law Office of Paul Arons.
The ITT Student Loans Class Action Lawsuit is Jody Aliff, et al. v. Vervent Inc., et al., Case No. 3:20-cv-00697, in the U.S. District Court for the Southern District of California.
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