On 7 November 2013, the Federal Trade Commission (FTC or Commission) announced that it had completed regulatory review of its Guides for Private Vocational and Distance Education Schools (Vocational School Guides or Guides). See 78 Fed. Reg. 68,989 (18 Nov. 2013). The Guides are intended to advise proprietary schools that offer vocational training courses how to avoid deceptive practices in connection with the advertising, promotion, marketing, or sale of their courses or programs. As described in this memorandum, the FTC revised the Guides in four respects, effective 18 November. View the Federal Register Notice announcing the revisions.
Application of the Guides
The FTC first promulgated the Guides in May 1972. The Guides apply to the operation of “privately-owned schools that offer resident or distance education vocational courses, training, or instruction” in certain topics; they do not apply to resident primary or secondary schools or to institutions of higher education that offer at least a two-year program of accredited college level studies generally acceptable for credit toward a bachelor’s degree. See 16 C.F.R. 254.0(a) and 16 C.F.R. 254.1(a). Therefore, the Guides do not apply to for-profit institutions that (1) are accredited by an accrediting agency recognized by the U.S. Secretary of Education and (2) offer at least a two-year degree.
Nevertheless, in the preamble to the revised rule, the FTC notes that the scope of the Guides “does not alter the scope of section 5 of the FTC Act,” and that the FTC “may use its enforcement authority to remedy deceptive acts and practices” — including “deceptive conduct described in the Guides” — by institutions to which the Guides do not apply. See 78 Fed. Reg. at 68989. Degree-granting for-profit institutions should therefore take note of the revisions because the FTC could apply similar standards in enforcing the FTC Act generally against for-profit institutions.
Modifications to the Guides
In July 2009, the FTC published a Federal Register Notice seeking comment on the Guides as part of the Commission’s ongoing periodic review of its rules and guidance. According to the FTC, many of the comments that it received urged retention of the Guides and encouraged the Commission to focus on recruitment practices and representations of vocational schools.
In response to submitted comments, the FTC revised the Guides in four areas:
- The scope and application section of the Guides was revised to reference specifically the recruitment process and to address with greater specificity representations frequently used in recruitment, such as completion and dropout rates and post-graduation employment prospects (i.e., job placement rates, salaries). See 16 C.F.R. 254.0(b), 16 C.F.R. 254.4(a)(10), and 16 C.F.R. 254.4(e).
- The Guides were revised to address misrepresentations that a course or program of instruction would render a student eligible to take a licensing exam. See 16 C.F.R. 254.3(d).
- The Guides were modified to cover representations relating to admissions testing and students’ suitability for particular courses. In particular, the Guides were revised to state more explicitly that misrepresenting a student’s score on an admission test is a deceptive practice. See 16 C.F.R. 254.5(d). The revised Guides also specify that it is a deceptive practice to provide inaccurate information regarding the time required to complete a course or program of instruction or a student’s likelihood of success. See 16 C.F.R. 254.5.
- In response to comment from the U.S. Department of Education, the Guides were amended to address representations regarding transfer of course credit from another school (see 16 C.F.R. 254.4(a)(9)); assistance provided to students facing language barriers or learning disabilities (see 16 C.F.R. 254.4(a)(8)); the source of funding, interest rate, or repayment terms for student loans (see 16 C.F.R. 254.4(a)(5)); and security policies and crime statistics that the school must retain (see 16 C.F.R. 254.3(a)(11)).
Although the Guides specifically address only for-profit institutions that provide vocational and distance education, “the Commission believes that the Guides can also provide useful guidance to any for-profit colleges that engage in similar practices.” See 78 Fed. Reg. 68,989 at n.10. For-profit institutions should review their marketing, recruitment, and admissions practices in light of the revised Guides.