Gombos Leyton Blog

FTC Notifies Proprietary Schools It Intends Assert Authority To Deter Misrepresentations

Posted by Stephen Chema on Oct 8, 2021 2:14:26 PM

On October 7, 2021, the Federal Trade Commission announced that it had sent Notices of Penalty Offenses to 70 postsecondary institutions. The Commission voted unanimously (5-0) to authorize the issuance of the Notices to schools, with FTC Chair Kahn remarking, “The FTC is resurrecting a dormant authority to deter wrongdoing and hold accountable bad actors who abuse students and taxpayers. Working closely with our state and federal partners, we’ll be monitoring this market carefully.”

The FTC acknowledges that it has no evidence that any of the 70 institutions it is targeting have engaged in wrongdoing. Nevertheless, the Commission sent the Notices as a predicate for assessing civil monetary penalties of up to $43,792 against institutions in the event it later determines that an institution has misrepresented, either directly or by implication:

  • the need or demand for consumers who have graduated from, or completed courses at, a specific institution;
  • the employment prospects of an institution’s graduates, the ease with which an institution’s graduates will be able to obtain employment or the opportunities for employment in any field in which a course of instruction is offered;
  • the types of jobs available to an institution’s graduates or for which they would be qualified upon completion of an institution’s courses or program;
  • the number or percentage of consumers attending any course or completing any program or degree who have obtained employment, or the field or nature of such employment;
  • the amount of money consumers who have graduated from, or have completed courses at, an institution will or may earn;
  • the qualifications or requirements necessary to obtain employment in the fields for which an institution offers training, including whether experience or additional education is required or advantageous for employment in any field or for any position; or
  • an institution’s capabilities or facilities for assisting graduates or students of any course in finding employment, or the assistance actually provided to graduates in finding employment, including the existence of a job placement service.

It has been decades since FTC has issued such notices. The decision to do so now is in response to the  U.S. Supreme Court’s recent ruling in AMG Capital Management LLC v. FTC.   The Court held that FTC lacks the authority to seek equitable monetary relief for violations of the Federal Trade Commission Act in federal courts. The fear that the FTC could recover equitable damages from its lawsuits helped drive nine figure settlements with University of Phoenix and DeVry, Inc. in recent years.  Thus, FTC has now retooled its approach by resuming the issuance of Notices of Penalty Offenses as a primary enforcement strategy going forward.

Outgoing Commissioner, Rohit Chopra, who was confirmed by the Senate as the next Director of the Consumer Financial Protection Bureau on September 30, 2021, emphasized the FTC’s intention to cooperate with other state and federal agencies to share investigative findings and expand the reach of investigations.

Given the unprecedented level of scrutiny and the proliferation of result-oriented investigations into the marketing and recruiting of students to career colleges, it is crucial that institutions develop robust compliance systems. If you would like to know more about this topic, please contact Steven Gombos or Stephen Chema at 703-934-2660.


Topics: "Compliance", Career Education, "Higher Education", Regulations, Federal Trade Commission

This blog provides general information; it does not constitute legal advice. Your use of this blog does not create an attorney-client relationship with the firm. If you do need legal advice, please feel free to contact one of Gombos Leyton's attorneys directly.