Federal Trade Commission v. For-Profit Colleges
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| Federal Trade Commission v. For-Profit Colleges | |
|---|---|
| Name | Federal Trade Commission v. For-Profit Colleges |
| Court | United States District Courts; United States Courts of Appeals; Supreme Court of the United States (petitions) |
| Date filed | 2014–2019 |
| Parties | Federal Trade Commission v. DeVry University, EDMC, University of Phoenix, ITT Technical Institute |
| Citations | various |
| Keywords | consumer protection, student loans, Higher education act, accreditation |
Federal Trade Commission v. For-Profit Colleges
The litigation and enforcement actions by the Federal Trade Commission against for-profit postsecondary institutions comprise a series of civil suits, administrative proceedings, and settlements involving alleged deceptive advertising, unlawful debt collection, and misrepresentations to students and Department of Education. Major defendants included DeVry University, Education Management Corporation, ITT Educational Services, and University of Phoenix, producing litigation across United States District Court for the Northern District of Illinois, United States Court of Appeals for the Ninth Circuit, and petitions to the Supreme Court of the United States. These matters intersected with regulatory frameworks like the Higher Education Act of 1965 and enforcement instruments exemplified by the FTC Act and administrative orders.
Background
Beginning in the early 2010s, actions arose after investigative reporting by outlets such as The New York Times and The Wall Street Journal and congressional hearings led by members of the United States House Committee on Education and Labor and the United States Senate Committee on Health, Education, Labor, and Pensions. Allegations often referenced recruitment practices similar to controversies involving Career Education Corporation and Corinthian Colleges, Inc. and implicated accreditation issues tied to agencies like the Accrediting Council for Independent Colleges and Schools and the Higher Learning Commission. Parallel enforcement involved the Consumer Financial Protection Bureau and enforcement patterns established under Martin Luther King Jr.-era consumer protections.
Legal Claims and Allegations
The Federal Trade Commission asserted violations of the FTC Act, including counts of unfair or deceptive acts or practices, alleging that entities like DeVry University and ITT Educational Services made false claims about job placement rates, graduate outcomes, and accreditation status. Complaints alleged deceptive marketing akin to litigated claims in Bureau of Consumer Financial Protection v. Navient and United States v. Corinthian Colleges. Plaintiffs and amici referenced statutes such as the Telephone Consumer Protection Act and regulatory guidance from the Department of Education and administrative precedents from the Administrative Procedure Act.
Key Cases and Litigation History
Representative matters included the FTC suit against DeVry University culminating in a settlement; enforcement against Education Management Corporation related to ITT Technical Institute's collapse and University of Phoenix scrutiny culminating in administrative proceedings. Litigation tracked across trial courts and appeals involving judges appointed by presidents like Barack Obama and Donald Trump, with procedural rulings referencing doctrines from cases such as Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. and evidentiary disputes invoking standards from Daubert v. Merrell Dow Pharmaceuticals, Inc.. Separately, lender-driven suits and borrower defense claims echoed rulings in Bates v. State Bar of Arizona on commercial speech.
Regulatory and Legal Issues
Core regulatory tensions involved the interplay among the FTC Act, Higher Education Act of 1965 provisions for student aid, and accreditation procedures involving agencies like the Middle States Commission on Higher Education. Issues of standing, administrative exhaustion, and preemption arose with reference to precedents such as Gonzales v. Raich and Walker v. Waterfield. Disputes over remedies engaged doctrines from Equitable estoppel jurisprudence and the All Writs Act, while civil penalties and restitution calculations referenced methodologies used in SEC v. W.J. Howey Co. securities frameworks by analogy.
Court Decisions and Settlements
Notable outcomes included a multi-million-dollar settlement with DeVry University requiring consumer refunds, administrative enforcement actions against ITT Educational Services resulting in closures and borrower relief, and consent decrees addressing advertising claims similar to relief in FTC v. Wyndham Worldwide Corporation. Several matters produced appellate opinions shaping the reach of the FTC Act when applied to education providers, and some defendants pursued certiorari petitions to the Supreme Court of the United States though the Court declined to grant review in multiple instances. Parallel bankruptcy proceedings, exemplified by In re Corinthian Colleges, Inc., affected creditor and student remedies.
Impact on For-Profit Higher Education
Enforcement actions accelerated declines and restructurings across the proprietary sector, influencing operations at chains like Career Education Corporation and prompting program closures affecting campuses accredited by agencies such as the Southern Association of Colleges and Schools Commission on Colleges. Enrollment declines and heightened oversight led to increased scrutiny from investors including The Carlyle Group and regulatory compliance shifts referencing standards used by Council for Higher Education Accreditation. These cases also stimulated growth in nonprofit conversions by entities informed by precedents involving Grand Canyon University and reshaped recruiting practices in ways reported by Inside Higher Ed and The Chronicle of Higher Education.
Policy Responses and Reforms
Legislative and administrative responses included proposed amendments to the Higher Education Act of 1965, efforts by the Department of Education to tighten borrower defense rules similar to previous regulations under Arne Duncan and Betsy DeVos, and coordination among regulators like the Consumer Financial Protection Bureau and the Office of Inspector General of the Department of Education. Advocacy organizations such as National Consumer Law Center and American Association of Community Colleges mobilized for expanded student protections, while industry groups including the Career Education Colleges and Universities sought statutory clarity and liability shields analogous to debates in S. 2121 and other congressional proposals.