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FTC Joins For-Profit Fight

November 14, 2013

The Federal Trade Commission is getting tougher with for-profit colleges, opening a new front in the latest Obama administration-led attempt to crack down on the sector.

The independent agency functions as the federal government's primary consumer cop. Last week it released stricter guidelines on deceptive marketing practices by for-profit colleges that feature vocational programs. The commission advised colleges against misrepresentations about their accreditation status, transferability of credits, job placements, graduation rates or salaries of graduates.

The new standards followed a tip sheet the commission put out last month to help veterans and members of the military better scrutinize for-profits before enrolling.

Both releases included strong language.

“Not every school has got your back. Some for-profit schools may care more about boosting their bottom line with your VA education benefits,” Carol Kando-Pineda, a lawyer with the commission, wrote in a blog entry. “Some may even stretch the truth to persuade you to enroll, either by pressuring you to sign up for courses that don’t suit your needs or to take out loans that will be a challenge to pay off."

The commission’s recent actions are the culmination of a process that began in 2009, with a request for public comments about its vocational school guidelines, which had not been updated in more than a decade. Several consumer groups responded by describing the fraudulent and deceptive marketing practices of some for-profit institutions.

Agency officials apparently heard the message, said Maura Dundon, senior policy counsel for the Center for Responsible Lending. She said the guidelines should serve as a warning to the entire industry.

“We’d really like to see the FTC actually go after some of these guys,” Dundon said. “The FTC has a much stronger enforcement capability than does the Education Department.”

Eight groups submitted comments to the commission. The Association of Private Sector Colleges and Universities, which is the primary for-profit trade group, was the sole commenter to argue that the guidelines are unnecessary and create additional burdens for institutions.

The revised guidelines cite “problematic practices by a range of for-profit colleges,” and mention the scathing report on the sector that Sen. Tom Harkin, an Iowa Democrat, released last year.

In addition, Kando-Pineda’s blog entry said 70 percent of the fraud investigations the U.S. Department of Education’s Office of Inspector General is currently pursuing focus on for-profits.

A spokesman for the association declined to comment on the new guidelines. But the group sent a letter to the commission about the blog post on veterans, arguing that the commission was wrong to suggest that for-profits are not supporting their military or veteran students.

"The eight questions listed are the exact questions all students should be asking when picking a college and I applaud your efforts to share this information with veteran and military students," wrote Steve Gunderson, the association's president and CEO. "However, it is unfortunate that you used an opportunity to share sound advice to also attack all private sector colleges and universities by accusing institutions of being more interested in the bottom line than our students."

The commission’s guidelines technically apply only to vocational programs at for-profits that do not offer degrees. That means mostly small, mom-and-pop institutions, like cosmetology schools.

However, the agency has a broad jurisdiction. It generally creates guidelines rather than legally binding rules, said Dundon. And those guidelines can be applied more broadly than the specific language suggests.

“Although the guides specifically address only for-profit institutions that provide vocational and distance education,” the commission said in its guidelines, “the commission believes that the guides can also provide useful guidance to any for-profit colleges that engage in similar practices.”

The commission said it has the authority to dial up law enforcement on deceptive or unfair practices, regardless of whether a college is covered under the language.

The guidelines are designed to address several specific forms of misrepresentations. Those broad categories include deception about licensing exams, availability of financial aid, transferability of credits and in the student recruiting process, such as with bogus depictions of graduation rates or job prospects.

For example, the commission said it is deceptive for a college to use any promotional materials that misrepresent the “availability of employment after graduation from a school or program of instruction.” That includes false descriptions of the type of employment available, graduates’ success in landing those jobs and their salary ranges.

Likewise, the commission spelled out eight questions for veterans and military students to ask about an academic program they may be considering at a for-profit. Those questions revolve around cost of attendance, average debt levels, accreditation status and transfer credits. The commission also provided links for students to find some of that information.

David Hawkins is director of public policy and research for the National Association for College Admission Counseling. His group submitted comments about the commission’s guidelines.

He said the revised language is a “substantial re-entry” for the commission in overseeing for-profits, and he hopes it will be a “positive force for compliance.”

(Note: This article has been updated from an earlier version to add new comments from the Association of Private Sector Colleges and Universities.)

 

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