Colleges are known for team sports, but it’s an unfortunate fact that consumer deception can be a team sport, too. A proposed FTC settlement with Career Education Corporation, American InterContinental University, Colorado Technical University, and related defendants alleges they used illegal game plans to lure consumers to their post-secondary and vocational schools. MVP “teammates” in the deceptive venture were lead generators who duped consumers into divulging personal information under false pretenses.
Defendant CEC has operated numerous post-secondary and vocational schools currently attended by 35,000 students, primarily online. In addition to advertising its schools on radio and TV, on the internet, and in social media – promotions that often targeted members of the military – CEC used more than 70 lead generators, some of whom acquired leads by means of deception or illegal phone calls.
If you followed the FTC’s settlement with Sun Key Publishing and related defendants, the tactics may sound familiar. For example, the Sun Key lead generators created webpages with URLs like army.com, air-force.com, or navyenlist.com that led consumers to conclude the sites had an official connection to military recruiting. Exploiting the misimpression they created, the lead generators got consumers to turn over personal data, which was then used by companies like CEC to pitch their schools.
Lead generator Expand, Inc., also the subject of an FTC enforcement action, used a variation on the scheme. Expand targeted consumers looking for work, claiming to need their personal information to help them apply for “job postings.” But just as Sun Key used the deceptive cover of military recruiting to collect data, Expand donned the disguise of a job board. And CEC again used the data to sell its schools.
Another CEC lead generator was Edutrek, a company the FTC has also sued for allegedly using bogus jobs and benefits sites to collect personal information from unsuspecting consumers.
The FTC says CEC should have known that the leads had been acquired through deception. Just like every other company, it’s CEC’s responsibility to make sure it’s not profiting off of deception. This means that companies can’t just turn a blind eye to their lead generators’ practices. And the complaint says that CEC did – or didn’t do – much more than that. CEC didn’t alter the fundamentally deceptive misimpression that the sites were for military recruiting or employment. And the FTC alleges CEC even approved telemarketing scripts that included flat-out falsities – for example, scripts that told telemarketers to identify themselves in voicemail greetings as working at “Military Verification Services.”
The complaint charges that the illegal tactics persisted during the calls. In some instances, CEC lead generators’ telemarketers continued the charade that they were affiliated with the military or potential employers. In addition, the FTC says they illegally called numbers on the National Do Not Call Registry
CEC’s own in-house telemarketers engaged in illegal conduct, too. The lawsuit alleges they used high-pressure sales tactics to get consumers to enroll in its schools, even when the school didn’t offer the course of study the person wanted to pursue. And the calls were often relentless. The FTC says that CEC policy permitted its telemarketers to call the same consumer up to six times a day. In many instances, CEC placed hundreds of outbound autodialed calls to a single phone number.
The complaint against CEC alleges violations of the FTC Act for numerous misrepresentations made by the company’s lead generators. In addition, the lawsuit challenges multiple violations of the Telemarketing Sales Rule, including calling numbers on the National Do Not Call Registry. In addition to a $30 million financial judgment, the settlement requires CEC to review materials that lead generators use to market on its behalf and to refrain from using or buying leads that were obtained illegally.
The proposed settlement has a lot to say to businesses in the lead generation ecosystem. The FTC has brought numerous actions challenging the conduct of companies that extract personal information from consumers under false pretenses and then sell that data as leads. The CEC settlement focuses on businesses that use those leads. The case illustrates the importance of monitoring what others – including lead generators – are doing on your behalf and the need to respond forcefully in the face of misleading claims or conduct. Advertisers should take the lead in ensuring the leads they use weren’t the product of deception.
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