FTC Targets False Claims by For-Profit Colleges

The Federal Trade Commission put 70 for-profit higher education institutions on notice that the agency is cracking down on any false promises they make about their graduates’ job and earnings prospects and other outcomes and will hit violators with significant financial penalties.

The Commission is resurrecting its Penalty Offense Authority, found in Section 5 of the FTC Act, to ensure that bad actors pay a price when they break the law. By sending a Notice of Penalty Offenses to the institutions, which represent the largest for-profit colleges and vocational schools across the country, the companies operating these colleges will be on notice that they could incur significant sanctions for engaging in certain unlawful practices. The notice outlines a number of practices that the FTC has previously found to be unfair or deceptive, and notes that these practices could lead to civil penalties of up to $43,792 per violation.

“For too long, unscrupulous for-profit schools have preyed on students with impunity, facing no penalties when they defraud their students and drive them into debt,” said FTC Chair Lina M. Khan. “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.”

This broad-based initiative to deter for-profit college fraud marks the agency’s first use of its Penalty Offense Authority to protect students and their families. The Notice of Penalty Offenses allows the agency to seek civil penalties against a company that engages in conduct that it knows has been found unlawful in a previous FTC administrative order, other than a consent order.

Many of the practices outlined in the Notice relate to claims made by institutions about the career outcomes of their graduates, including whether a particular career field is in demand, the percentage of graduates who get jobs in their chosen field, whether the institution can help a graduate get a job, the amount of money a graduate can expect to earn and other related practices. Complaints to the FTC around education-related issues surged roughly 70 percent between 2018 and 2020, and the Commission is committed to rooting out practices that harm students and their families.

The Notice cites a number of administrative cases brought by the FTC against for-profit institutions in which the Commission found practices like those outlined in the Notice unlawful.

A full list of the institutions that received the Notice from the FTC is available on the FTC’s website.  A school’s presence on this list does not reflect any assessment as to whether they have engaged in deceptive or unfair conduct.

The Commission vote to authorize the Notice and its distribution was 5-0.