FTC Announces Record Settlement with University of Phoenix of $ 191 million
By Charlene Crowell
(Trice Edney Wire) – The University of Phoenix (UOP), one of the largest for-profit colleges in the country, will pay a record $ 191 million severance pay to resolve allegations emerging from a five-year investigation by the Federal Trade Commission ( FTC). On December 10th, Andrew Smith, director of the FTC’s Consumer Protection Bureau, stated that it was the largest deal the commission had reached in a case against a for-profit school.
“Students making important decisions about their education need facts, not fantasy jobs that don’t exist,” said Smith.
The numerous charges brought against UOP included misleading lead generation, false claims of government or large employer membership, false credit transfer information, and lack of evidence of the university’s advertised position and earnings. The FTC also noted that enforcement actions against bad actors in the for-profit college arena can also trigger actions related to student debt relief, termination of access to tax-funded college programs, and specific protection of military education benefits.
The settlement was also unanimously supported by the FTC’s Board of Commissioners, two of which have made separate statements on the deal: Commissioners Rohit Chopra and Rebecca Kelly Slaughter.
“The fraudulent allegations in the Commission’s complaint particularly annoy me because they sell false hopes – they rob consumers of their time and money for the prospect of a job that didn’t exist,” said Commissioner Rebecca Kelly Slaughter. “We know that many consumers are still victims of or are vulnerable to abuse by unscrupulous, for-profit schools.”
UOP’s “Let’s Get to Work” marketing campaign called for nearly 2,000 corporate partnerships that did not exist. Firms like Staples, Microsoft, Red Cross and Twitter have been falsely portrayed as partners who would accelerate employment opportunities for Phoenix students. The effort was also started at a time when UOP’s enrollment was declining over a four-year period.
“In the post-recession years, when good jobs were scarce, that message was very attractive to struggling Americans,” remarked Commissioner Rohit Chopra. “But – as claimed in the lawsuit – it was wrong. There were no such partnerships … Today’s order returns millions of dollars to students who have been deceived by this campaign. “
According to the FTC, former students enrolled October 2012 through December 2016 may be eligible for a $ 50 million refund and an additional $ 141 million cancellation for unpaid tuition fees. This comparison does not apply to federal loans taken out during this period. Apollo Education Group, the parent company of UOP, was given 15 days after the billing date to notify former students who are covered by the agreement. In addition, Apollo and Phoenix must notify credit bureaus within 55 business days to remove related debt from affected student credit reports.
“While Education Secretary Betsy DeVos continues to make it easier for predatory education companies to attract and rip off students, the FTC has proven that they have the backs of borrowers and their families,” added Whitney Barkley-Denney, a senior policy advisor. added the Center for Responsible Lending (CRL). “The students defrauded by the University of Phoenix deserve nothing less than a full loan from the department.”
On the same day as the FTC’s record enforcement move, Secretary of State DeVos announced a new plan to limit loan waiver to only partial amounts determined by a formula, a different and controversial approach to the borrower defense rule adopted under the Obama administration (BD) of the Ministry.
The ministry said it had admitted that it had received over 290,000 defense applications from borrowers by November 12 this year and that more than 225,000, or 77%, were still pending. Nonetheless, the ministry’s official policy statement on the change states: “Successful BD applicants whose program income is below the median can receive a 25, 50, 75 or 100 percent discount, depending on where their median income is in the program. ”
“Despite the chaos we inherited from the previous administration, we made a commitment from day one to make this right for students and taxpayers,” said Minister DeVos. “We cannot tolerate fraud in higher education, nor can we tolerate taxpayers’ money being angrily given away to those who have filed a false application or are not entitled to relief. This new method treats students fairly and ensures that taxpayers who have not attended college or have faithfully paid off their student loans do not pay student loan costs for those who have not suffered harm. “
The reactions of student loan advocates appeared to be the opposite of DeVos’.
In a statement to the Washington Post, Virginia’s US Representative Bobby Scott, chairman of the House of Representatives Education Committee, said: “The Department of Education has clear powers to grant full debt relief to students who have been defrauded by their college. Instead of simply exercising this authority and granting cheated borrowers life-changing facilities, the ministry is inventing a different system to exonerate students less than the law allows. “
“Secretary DeVos has again shown that her goal is to protect predatory for-profit institutions at the expense of borrowers and taxpayers,” said Ashley Harrington, also CRL’s senior policy counsel. “The Borrower Defense For Repayment Rule was created to ensure accountability for state investments in higher education. The premise of the rule is that predatory for-profit colleges like ITT Tech and Corinthian Colleges deserve their loans to be redeemed in full. “