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UPDATE 1-US consumer bureau sues college chain ITT over student loans

(Adds quotes from CFPB, details of complaint, share price)

WASHINGTON, Feb 26 (Reuters) - The U.S. consumer watchdog said on Wednesday it has sued ITT Educational Services Inc for what the agency says are predatory student lending practices that could lead borrowers to default on their loans.

The U.S. Consumer Financial Protection Bureau said the Indiana-based for-profit college chain exploited students and pushed them into "high-cost private loans" that leave them strapped with debt.

The agency, in a complaint filed in U.S. District Court in Indianapolis, Indiana, said it is seeking restitution for victims, a civil fine, and an injunction against the company.

"Today's action should serve as a warning to the for-profit college industry that we will be vigilant about protecting students against predatory lending tactics," CFPB Director Richard Corday said.

Shares of ITT slumped 8.6 percent to $32.56.

The CFPB said that ITT used high-pressure tactics to push students into taking out loans without enough time to understand the details, misled students about future job prospects, and coaxed students into taking out more loans, while knowing they would not be able to pay them back.

ITT has more than 140 institutions in nearly 40 states.

"We believe that the bureau's claims are without merit and we intend to vigorously defend ourselves against those charges," Nicole Elam, a spokeswoman for ITT, told Reuters.

The CFPB has taken a wide interest in the student loan industry and has sought to exercise more oversight over private lenders and for-profit institutions.

(Additional reporting by Aruna Viswanatha; Editing by Franklin Paul and Leslie Adler)