Claims about employment prospects and income levels are like any other objective advertising representation – and Job #1 for advertisers is to support those promises with solid evidence. DeVry University and its parent company have entered into a $100 million settlement to resolve the FTC’s allegations that the defendants’ claims didn’t make the grade.
According to the FTC, DeVry violated the law by deceptively claiming that 90% of its grads actively seeking employment landed jobs in their field within six months of graduation. The complaint also challenged as misleading DeVry’s representation that one year after graduation, its bachelor’s degree grads had, on average, incomes that were 15% higher than the incomes of bachelor’s degree grads from all other colleges and universities.
How will the $100 million settlement be distributed? DeVry will pay $49.4 million in cash to qualifying students who were harmed by the deceptive ads. The proposed order includes an additional $50.6 million in debt forgiveness. That figure represents the full balance owed on all unpaid private student loans issued to DeVry undergrads between September 2008 and September 2015 – $30.35 million – plus $20.25 million in student debt for things like tuition, books, and lab fees.
But that’s not all the defendants will be doing for students the FTC alleges were deceived. The order also requires DeVry to:
- directly notify consumers who will be receiving debt forgiveness;
- inform credit bureaus and collection agencies of the debt forgiveness;
- release transcripts and diplomas that DeVry withheld from students because of outstanding debt and cooperate with future requests for diplomas, transcripts, and related enrollment or graduation information; and
- set up a dedicated telephone hotline where consumers can call with questions about debt forgiveness, their credit reports, or collections concerns.
The settlement also includes provisions that will change how DeVry does business from here on in. Among other things, the order prohibits DeVry from misrepresenting the likelihood that graduates will get a job as a result of their degree. In addition, if the defendants want to make future claims about its graduates’ success in finding jobs near graduation, they can’t include jobs that students landed more than six months before graduating. The settlement also prohibits DeVry from misrepresenting the compensation students or grads have earned or can expect to earn.
What lessons can others can learn from the FTC’s action against DeVry University?
1. For many consumers, education is the second-largest purchase they’ll ever make. Companies in that sector and within the FTC’s jurisdiction are held to the same truth-in-advertising standards as any other business.
2. Say “substantiation” and some advertisers erroneously assume the term refers just to things like health claims. Wrong. If your company makes any objective representation expressly or by implication – including statements about employment or earnings prospects – you need solid proof to back up those promises.