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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowA federal appeals court has affirmed a district court’s $12 million RICO judgement in favor of student loan borrowers associated with ITT Technical Institute, a now-bankrupt for-profit college.
Vervent Inc., the company servicing the loans, had appealed a district court’s decision, arguing that the plaintiffs’ 2020 lawsuit exceeded a 4-year statute of limitations, or window in which the borrowers could file a claim through RICO, the Racketeer Influenced and Corrupt Organizations Act.
Judge Salvador Mendoza of the U.S. Court of Appeals for the Ninth Circuit opined that applying the defendant’s statute of limitations argument depends upon when the plaintiffs discovered the alleged fraud. Mendoza noted that the student borrowers had no way of knowing about ITT Tech’s fraudulent private loan program known as “PEAKS” until after the institution collapsed in Sept. 2016.
“This case also serves as an important reminder that statutes of limitations are designed to promote fairness, not gamesmanship,” Mendoza wrote in his opinion. “The law requires injured parties to act diligently once wrongdoing becomes reasonably discoverable. … It does not subject ordinary persons to the same standard as sophisticated actors.
“Simply put, ordinary borrowers are not required to assume that seemingly routine financial obligations conceal a high-level, sophisticated fraudulent scheme.”
ITT Tech established its PEAKS loan program in wake of the 2008 financial crisis, which curtailed options for students attending for-profit colleges.
The college then filed for bankruptcy and closed all 136 of its campuses in 2016, including those in Indianapolis, South Bend, Fort Wayne and Newburgh, after being hit with a series of sanctions by the Obama administration. The chain’s parent company, ITT Educational Services Inc., was based in Carmel.
ITT was once among the largest for-profit college chains in the nation, with 130 campuses across 38 states. The company abruptly shut down after facing heavy sanctions from the Education Department amid accusations that the company pushed students into risky loans and misled them about the quality of academic programs.
The federal government wound up canceling nearly $4 billion in student debt.
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