A credit union that holds loans on thousands of prospective college students is suing an Indianapolis-based college test preparation company, alleging that it owes it more than $12 million.
Southeast Financial Credit Union's federal lawsuit also contends that The College Network is insolvent and its owners are illegally trying to shield remaining assets from creditors. The Franklin, Tennessee-based credit union holds about $35 million in loans taken out by about 10,000 of the college test preparation company's nationwide customers.
College Network executive Mark Ivory said the company has not yet been served with the lawsuit, which was filed in Indianapolis, but vowed to fight the "unfair allegations."
"We will continue to support our customers, which are our main business function, and we will continue to defend our company against unfair allegations," Ivory wrote in a statement to The Indianapolis Star.
Southeast Financial contends The College Network's internet portal is the company's "sole remaining asset" and that the defendants are trying to move that to a newly formed company to avoid obligations to creditors.
The credit union has had a business relationship with The College Network since 2003, and was the largest supplier of personal loans to its customers.
Southeast Financial alleges that when it signed a contract extension with the company last year, it wasn't made aware that it was "insolvent, financially weakened by years of dwindling and slow sales and poor business performance."
The company's customers pay up front for years' worth of the company's online "learning modules." Those customers use personal loans with payments beginning immediately — not student loans with lower interest and deferred payments — because The College Network is not a school.
Indiana Attorney General Greg Zoeller sued the company in June, saying it made personal loans for customers at high interest rates, but that relatively few people actually complete its program and go on to earn a college degree.
New York Attorney General Eric Schneiderman also sued the company, contending that its customers "were duped into buying expensive, inadequate study materials and access to 'academic advisors' who were falsely touted as experts."
The Indianapolis Star reported last year that The College Network allegedly used outright fraud and high-pressure sales tactics to sign up customers, often nurses, seeking to improve their professional lives.
The newspaper reported that "program advisers" working on commission came to Indianapolis for training and then fanned out nationally, signing up customers in places such as Starbucks restaurants and visiting the homes of prospective students.