Deceptive Advertising by For-Profit Educational Institutions

Proposed Rules: Closed to Comments (View Public Comments Received:8)

Agency:
Comment By: 
Thursday, April 4, 2019
Keywords:
Download Copy of Proposed Rule (.pdf): 

Statement of Basis and Purpose of Proposed Rules

The Department of Consumer Affairs (“DCA” or “Department”) is proposing new rules to address problems experienced by consumers when they seek to enroll, or are already enrolled, in for-profit schools that are not licensed by the New York State Education Department or accredited by the New York State Board of Regents. These schools intensively market degree programs to consumers and are supported almost entirely by state and federal loans.

Section 2203 of Chapter 64 of the New York City Charter (“Charter”) delegates to the Commissioner of the Department broad authority to enforce laws relating “to the advertising and offering for sale and the sale of all commodities, goods, wares and services” and to investigate and bring actions against businesses for engaging in deceptive or unconscionable trade practices. New York City Administrative Code (“NYC Code”) § 20-700 et seq. and 6 RCNY § 5-01 et seq. (hereinafter the “Consumer Protection Law” or “CPL”) prohibit “any deceptive or unconscionable trade practice in the sale . . . of any consumer goods or services[,]” and define deceptive trade practices to include “any false . . . or misleading oral or written statement . . . which has the capacity, tendency or effect of deceiving or misleading consumers.” Charter §§ 1043, 2203(f) and 2203(h)(1) authorize the Department to promulgate rules, generally, and NYC Code § 20-702 authorizes the Department to adopt “such rules and regulations as may be necessary to effectuate the purposes of this subchapter, including regulations defining specific deceptive or unconscionable trade practices.”

Currently, under New York State law, for-profit career schools must be licensed by the New York State Education Department. See NY Educ. Law § 5001. These licensed schools are subject to requirements contained in state law and regulation. See NY Educ. Law § 5001 et seq.; 8 N.Y.C.R.R. § 126.1 et seq. Separately, some for-profit schools that are exempt from the licensing requirements of New York Education Law because they are authorized by the New York State Board of Regents (“BOR”) to confer degrees may voluntarily seek accreditation by the BOR and be subject to accompanying regulations. See 8 NYCRR § 4-1.1 et seq. However, a subset of for-profit schools that are exempt from the licensing requirements of New York Education Law seek accreditation from a body other than the BOR. These for-profit schools operate in New York City and are subject to no direct oversight or regulation by the government. 

The Department has found, through review of consumer complaints, the Department’s research and investigations, and review of the research and reporting of higher education scholars, regulators and other interested parties, that some unregulated for-profit schools engage in a pattern of deceit when dealing with potential students. Unregulated for-profit schools can mislead consumers about the availability and impact of certain types of financial aid; the transferability of credits to and from the for-profit school; and the actual cost of attendance, among other things. In pursuing potential students, these schools have engaged in behavior so aggressive that some consumers have perceived it as harassment. Once enrolled in these schools, students can be deceived about the cost of continued attendance and are often subjected to behavior by the school designed to extend the period of enrollment to maximize the tuition received by the school. Many students leave these schools without diplomas and graduation rates are very low. They are, however, saddled with outsized debt that they can ill afford, and sometimes pursued relentlessly by debt collectors.

The Department seeks to promulgate rules to ensure that these unregulated for-profit schools operate fairly and honestly, and utilize business practices that are not deceptive. 

Specifically, the Department is proposing new rules that would, among other things:

  • Prohibit false or misleading statements and representations to prospective and enrolled students;
  • Prohibit certain deceptive trade practices; and
  • Require certain material disclosures. 

These proposed rules would also amend the penalty schedule for consumer protection law violations to include violations of these new proposed rules.

 

Public Hearing
Subject: 

.Deceptive Advertising by For-Profit Educational Institutions

Public Hearing Date: 
Thursday, April 4, 2019 - 10:00am
Contact: 

Casey Adams, 212-436-0095, cadams@dca.nyc.gov

Location: 
NYC Department of Consumer Affairs
42 Broadway 5th Floor
New York, NY 10004