FTC “resuscitates dormant authority to deter wrongdoing”

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The Federal Trade Commission (FTC) is cracking down on for-profit schools by imposing new college fines that mislead students about employment and income prospects.

The regulatory agency sent notices to 70 for-profit higher education institutions on Wednesday, warning them that any false promises they make regarding their graduates’ job and income prospects and other outcomes could lead to “significant financial penalties,” the FTC said.

“For too long, unscrupulous for-profit schools have attacked students with impunity, facing no penalties for defrauding their students and pushing them into debt,” said FTC President , Lina M. Khan, in a press release. “The FTC is resurrecting a dormant authority to deter wrongdoing and hold accountable bad actors who abuse students and taxpayers. In close collaboration with our state and federal partners, we will closely monitor this market.

This authority is the “Criminal Offenses Authority, found in Section 5 of the FTC Act, to ensure that bad actors pay a price when they break the law. “

The notices that were sent informed operating for-profit schools that they could face significant penalties if they engaged in certain illegal practices. They also explained how the FTC found the for-profit schools to be unfair or deceptive.

UNITED STATES – FEBRUARY 14: Federal Trade Commission candidate Rohit Chopra testifies during a Senate Trade, Science and Transportation Committee confirmation hearing at Hart Building on February 14, 2018 (Photo by Tom Williams / CQ Roll Call)

During a press call, FTC Commissioner Rohit Chopra, who was also newly confirmed as director of the Consumer Financial Protection Bureau, added that “there is a lot of work to be done to restore public confidence in monitoring our system of student loans and higher education” and that “the activation the FTC’s sanctioning authority is one of many examples where the FTC needs to put its tools to good use, rather than let them languish or pretend they don’t exist. “

“Restore public confidence in the oversight of … higher education”

Director of Consumer Protection Samuel Levine noted that the FTC, which has jurisdiction only over for-profit colleges, sent out the first set of notices in October 2021 and that “nothing is stopping us from l ‘send to other schools’.

The 70 schools reported were the largest for-profit schools, and the full list of schools can be found here. Schools that have received a notice include big names like Capella University, DeVry University, Full Sail, and Grand Canyon University, among others.

While the fact that a school has been put on formal notice is not directly an indication that it has done something wrong, Levine said that “if we can show that a school has real knowledge of the practices that the FTC is doomed and nevertheless engages in these practices, so we have a basis to call for civil sanctions. “

The civil penalties that schools would ultimately have to pay if the FTC finds sufficient evidence of continued deceptive practices could be as high as $ 43,792 per violation, although penalties vary depending on the violations, degree of harm, and other factors. . And debt relief might be a possibility later, the FTC said.

“The kind of fraud that we find out may actually be a basis for students to seek debt relief from the Department of Education,” Levine said.

The Department of Education has a separate process called defending the borrower which aims to help defrauded student debtors who attended predatory for-profit schools obtain loan forgiveness.

Indianapolis, USA - November 18, 2016: Location of ITT Educational Services.  ITT Technical Institute has closed all of its campuses following devastating federal sanctions IV

The ITT Technical Institute closed all of its campuses following the devastating IV federal sanctions in 2016.

Education complaints jump 70% in two years

The move to end for-profit college fraud is the first time the agency has used its Penalty Offence Authority to protect students and their families, according to the FTC.

“Many of us are familiar with these practices because we come across them year after year. You may have seen ads in schools promising your dream job and your chosen field,” Levine said. “These arguments sound good, especially to Americans who may be struggling. But we have seen that these claims can be baseless designed to push students out, but ultimately push them into debt.”

The moves come after the Trump-era Education Department relaxed several Obama-era regulations aimed at holding for-profit schools accountable, including rules based on whether their graduates were able to repay their student loans and how college information was presented on the ministry’s website.

According to the FTC, complaints about education-related issues increased by about 70% between 2018 and 2020.

The practices in which schools are said to be engaged consist of misrepresenting “the career outcomes of their graduates, particularly whether a particular career field is in demand, the percentage of graduates who obtain employment in the field of their choice, if the institution can help a graduate obtain employment, the amount of money a graduate can expect to earn, and other related practices. “

The Federal Trade Commission seal is seen at a press conference to announce that Facebook Inc has accepted a settlement for allegations it mismanaged user privacy at FTC headquarters in Washington, United States, July 24, 2019. REUTERS / Yuri Gripas

The Federal Trade Commission seal is seen at a press conference to announce that Facebook Inc has accepted a settlement for allegations it mismanaged user privacy at FTC headquarters in Washington, United States, July 24, 2019. REUTERS / Yuri Gripas

The FTC had previously taken enforcement action, including against the for-profit channel Phoenix University, securing payments for alumni on the school’s use of deceptive advertising.

“To be clear, sending notices to the 70 for-profit schools does not indicate that they are currently involved in wrongdoing… we are sending a decisive message to the industry as a whole that the conduct described in our notice of penalty violations, is a violation of the FTC, “Levine pointed out.” If your school engages in this conduct, we can take action, and we will. ”

The for-profit lobby group said it was disappointed with the FTC’s actions.

“The FTC’s announcement does not include any findings of wrongdoing at any for-profit institution. Publicly announcing that it is sending warning letters to 70 of the largest for-profit institutions arbitrarily calls into question the integrity of institutions that are in full compliance with FTC regulations, ”said Jason Altmire, President and Chief Executive Officer from the management of Career Education Colleges and Universities, in a press release. We were also surprised that only for-profit institutions are subject to these enhanced civil monetary penalties, while other bad actors under the FTC’s jurisdiction will not be subject to the same standard.

Aarthi is a reporter for Yahoo Finance. She can be contacted at [email protected] Follow her on Twitter @aarthiswami.

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