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ITT Educational Services, Inc. Calls CFPB Complaint Unfounded, Asks Court To Dismiss

Apr 30, 2014

CARMEL, Ind., April 30, 2014 /PRNewswire/ -- ITT Educational Services, Inc. (NYSE: ESI), has moved to dismiss the complaint filed by the Consumer Financial Protection Bureau (CFPB) in U.S. District Court, because the Bureau's allegations are legally flawed and violate the Constitution.

ESI, a leading private college system, said in its response to the agency's allegations – which primarily attack private student loans issued by third parties during a five-month period in late 2011 – that ESI "does not provide consumer financial products, and its conduct as described in the Bureau's complaint falls outside the Bureau's jurisdiction. The complaint recognizes that the loans at issue in this case were made by third parties—not [ESI]."

ESI noted that the Bureau makes misleading use of "mystery shopper" reports that the company uses to help ensure its activities conform to its policies and are compliant with state and federal regulations: "The complaint provides only out-of-context, edited quotations from select mystery shopper reports. The full quotations reveal a starkly different picture."

On pages 5-6 of the response, ESI cites the Bureau's use of a mystery report that was truncated to create a misleading impression:

For example, the complaint quotes one mystery shopper as describing [ESI]'s insistence on following up with the prospective student as "a bit invasive", yet omitted the remainder of the shopper's report stating that she "was pleasantly overwhelmed at how willing and excited [the school] was to help me in finding a career," and "ha[d] never encountered a career service office as nice and helpful as this one." The shopper also praised [school] staff because "[t]hey truly seem to make it their goal to help their students succeed at making the leap from education to career, which is great!!"

The ESI response notes: "The Bureau does not claim that [ESI] engaged in fraudulent or deceptive conduct…Nearly every allegation in the complaint—including the misleading and out-of-context 'mystery shopper' allegations—is window-dressing that has nothing to do with the third-party loans or the causes of action the Bureau has chosen to plead."

ESI also emphasized that the complaint violates the Constitution's Due Process Clause and that the Bureau itself operates in violation of the Constitution's separation of powers.

"This unprecedented and unfounded lawsuit should be dismissed," ESI said. The CFPB "has limited authority to regulate consumer finance, but wants to override the boundaries set by Congress and extend its power."

The brief in support of ESI's motion to dismiss can be found at: http://www.ittesi.com/download/Brief+in+Support+of+Motion+to+Dismiss.pdf

About ITT Educational Services, Inc.
ITT Educational Services, Inc. (NYSE: ESI) provides accredited, technology-oriented undergraduate and graduate degree programs through its ITT Technical Institutes and Daniel Webster College to help students develop skills and knowledge that they can use to pursue career opportunities in a variety of fields. It owns and operates more than 135 ITT Technical Institutes and Daniel Webster College. ITT/ESI serves more than 55,000 students at its campuses in 39 states and online. Through the Center for Professional Development @ ITT Technical Institute, ITT/ESI provides short-term information technology and business learning solutions for career advancers and other professionals. Headquartered in Carmel, IN, ITT/ESI has been actively involved in the higher education community since 1969 and can be found online at www.ittesi.com.

SOURCE ITT Educational Services, Inc.

For further information: Nicole Elam, Vice President, ITT Educational Services, Inc., (202) 590-6880