Accreditor Victory in Duel With CFPB

Federal judge rules Consumer Financial Protection Bureau lacks the authority to investigate for-profit-college accreditors.

April 22, 2016

A federal judge on Thursday struck a blow to the Consumer Financial Protection Bureau’s recent foray into college accreditation, ruling that the bureau lacks the authority to investigate how accreditors approve for-profit colleges.

U.S. District Judge Richard J. Leon rejected the CFPB’s attempt to force an embattled national accreditor, the Accrediting Council for Independent Colleges and Schools, to turn over information about how it decided to approve several controversial for-profit college chains.

“Although it is understandable that new agencies like the CFPB will struggle to establish the exact parameters of their authority, they must be especially prudent before choosing to plow headlong into fields not clearly ceded to them by Congress,” wrote Leon, who was nominated by President George W. Bush. “Thus, having concluded that the CFPB lacks authority to investigate the process for accrediting for-profit schools, I am compelled to deny its petition to enforce civil investigative demand.”

The CFPB had asked the court to force ACICS to answer its questions about how the accreditor green-lighted several Corinthian Colleges campuses that operated under the Everest brand name, as well as FastTrain College, ITT Technical Institute and Westwood College, according to an unredacted copy of the CFPB’s civil investigative demand obtained by Inside Higher Ed earlier this year.

The demand for information from ACICS was part of an investigation by the consumer bureau into what it described as possible illegal activities “in connection with accrediting for-profit colleges.”

The case was being watched closely by accrediting organizations and others in higher education. A group of five accreditors and the Council for Higher Education Accreditation, which advocates for accreditation on behalf of colleges, told the judge that the CFPB’s investigation threatened the integrity of the accreditation process. Accreditors were particularly concerned that the CFPB had sought from ACICS the names of individuals who were involved in reviewing and approving individual campuses.

Accreditors’ concerns about the CFPB’s inquiry also have been buoyed by some Republicans in Congress, who have slammed the bureau’s investigation as an “unprecedented overreach” of its authority.

CFPB Director Richard Cordray previously defended the bureau’s investigation involving college accreditation.

“If an accrediting agency is facilitating for-profit colleges’ misleading consumers, treating them unfairly and deceptively, then that’s something that we should look at,” Cordray said last fall.

Thursday’s decision in favor of ACICS comes as the accreditor is fighting for its survival amid growing criticism that it is too lax in approving for-profit colleges. Twelve state attorneys general and a coalition of higher education, consumer and labor groups have called on the U.S. Department of Education to deny federal recognition of ACICS. Such an action, which the Education Department will have to make a decision on later this year, would essentially be a death knell for the accreditor and jeopardize the federal funding of hundreds of for-profit colleges.

As it looks to stave off calls for its demise, the accreditor has been making some changes. Albert Gray, the group's chief executive officer, resigned last week, less than a year after he sparred with Senator Elizabeth Warren at a congressional hearing over ACICS’s approval of Corinthian Colleges until its collapse.

ACICS also now is taking a more aggressive posture with one of the largest for-profit college chains it oversees, ITT Technical Institutes. Citing a range of federal and state lawsuits against ITT Tech, ACICS ordered the company to prove why it shouldn’t lose its accreditation or otherwise be sanctioned, ITT told investors Thursday.

Anthony S. Bieda, who is temporarily running the day to day operations of ACICS, said in a statement that the organization was “pleased” with the ruling.

“ACICS is a federally recognized accreditor of higher education institutions,” Bieda said. “It does not provide loans or any other financial service to the institutions that it accredits, or to the students that they enroll.”

A spokeswoman for the CFPB declined to comment on the ruling. 

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Michael Stratford

Michael Stratford, Reporter, covers federal policy for Inside Higher Ed. He joined the publication in August 2013 after a stint covering the Arkansas state legislature for The Associated Press. He previously worked and interned at Kiplinger’s Personal Finance magazine and The Chronicle of Higher Education. At The Chronicle, he wrote about federal policy and covered higher education issues in the 2012 elections. Michael grew up in Belmont, Mass. and graduated from Cornell University, where he was managing editor of The Cornell Daily Sun.

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