New Rules to Prohibit Deceptive Trade Practices by Certain For-Profit Schools

Proposed Rules: Closed to Comments (View Public Comments Received:2)

Agency:
Comment By: 
Thursday, October 17, 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 neither licensed by the New York State Education Department nor 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. In contrast, degree-granting for-profit schools authorized by the New York State Board of Regents (“BOR”) to confer degrees are exempt from the licensing requirements of New York Education Law, though the New York State Education Department regulates the programs offered by these schools. To participate in federal student aid programs under Title IV of the Higher Education Act, these degree-granting schools must also be accredited by a nationally recognized accrediting agency. The BOR is one such agency, and BOR accreditation subjects a school to regulation regarding deceptive business practices. See 8 NYCRR § 4-1.1 et seq. Accreditation by other nationally recognized accrediting agencies, which are typically not government agencies, does not necessarily subject a school to such regulation.    

 

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 for-profit schools engage in a pattern of deceit when dealing with potential students. These 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 manipulation 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. Students are, however, saddled with outsized debt that they can ill afford, and they are sometimes pursued relentlessly by debt collectors.

 

The Department seeks to promulgate rules to ensure that these 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: 

.New Rules to Prohibit Deceptive Trade Practices by Certain For-Profit Schools

Public Hearing Date: 
Thursday, October 17, 2019 - 10:30am
Contact: 

Carlos Ortiz, 212 436 0345, cortiz@dca.nyc.gov

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