FTC Settles With For-Profit College Over Alleged Deceptive Job Placement Claims
On October 18, 2023, the Federal Trade Commission announced that it has agreed to a $3.4MM settlement with New Jersey for-profit Sollers College over alleged deceptive ads that lured prospective students into unlawful contracts, purportedly falsely touting relationships with prominent employers and inflating job placement rates. The charges were brought by the FTC and the state of New Jersey.
According to the FTC’s complaint, Sollers, and its parent company, used their website, social media, and email campaigns to falsely advertise their partnerships with prominent employers in the fields of information technology, clinical research and drug safety. According to the complaint, Sollers falsely claimed that its partnerships with prominent employers, such as Pfizer, Weill Cornell Medicine, and Infosys, resulted in jobs for its graduates at those companies. Many of the businesses featured on Sollers’ website had no partnership with the school at all, says the FTC.
The complaint states that, since at least 2018, Sollers advertised that the vast majority of Sollers graduates are placed in jobs. For example, the company purportedly advertised, “90% of our students are placed within 3 months of graduation,” on its website. In reality, the job placement rate for Sollers graduates is substantially lower than the 80 percent, 82 percent, 90 percent or “near perfect” rates featured prominently on its website and in its advertising campaigns, the FTC states. According to the FTC, the school’s own data suggests that the current job-placement rate for graduates of its Life Sciences programs remains as low as 52 percent.
The complaint also alleges that Sollers encouraged students to pay for their education using “income-share agreements.” Under the specific terms of Sollers’s contracts, students agreed to pay Sollers a fixed percentage of their future income on a monthly basis in exchange for covering tuition, typically for two years, according to the FTC. Between August 2018 and April 2021, the school allegedly entered into 392 purportedly unlawful agreements, none of which included certain disclosures mandated by law, alleges the FTC. Specifically, the agreements allegedly failed to include the Holder Rule notice, which protects consumers that enter certain loans or credit contracts by preserving their right to assert claims and defenses, even if the loans or contracts are assigned to a third party. Sollers allegedly later sold a portion of the agreements to third parties.
“Not only did Sollers College use deceptive advertisements to attract students, it trapped them in multi-year income share agreements that broke the law by leaving out important borrower rights,” said Samuel Levine, FTC lawyer and Director of the FTC’s Bureau of Consumer Protection. “Today’s order cancels all income-share agreements issued by the school. Companies that skirt long‑standing consumer protection laws when offering new financing products should be on notice that the FTC takes these violations seriously.”
Under the stipulated order, the for-profit is prohibited from falsely advertising any educational product or service. The order also prohibits the company from denying access to diplomas or transcripts based on any debt forgiven by the proposed order.
Specifically, Sollers must:
- stop collecting debts from students on any income-share agreements it currently holds;
- re-purchase any income share agreements it sold to third parties to stop collection efforts on those agreements;
- request that consumer reporting agencies delete the debt from consumers’ credit reports;
- and provide written notification to consumers who are receiving debt forgiveness under the proposed order.
Interestingly, the settlement addresses claim substantiation and the requirement of having reasonable and reliable proof for express and implied advertising representations. The settlement specifies that Sollers may not make representations about educational products and services unless it possesses “competent and reliable evidence that is sufficient in quality and quantity to substantiate that the representation is true.” Here, “competent and reliable evidence” is defined as “test, analyses, research, studies, or other evidence based on the expertise of professionals in the relevant area, that have been conducted and evaluated in an objective manner by qualified persons, using procedures generally accepted in the profession to yield accurate and reliable results.”
Informational purposes only. Not legal advice. May be considered attorney advertising.
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Hinch Newman LLP’s advertising and marketing practice includes successfully resolving some of the highest-profile Federal Trade Commission (FTC) and state attorneys general digital advertising and telemarketing investigations and enforcement actions. The firm possesses superior knowledge and deep legal experience in the areas of advertising, marketing, lead generation, promotions, e-commerce, privacy and intellectual property law. Through these advertising and marketing law updates, Hinch Newman provides commentary, news and analysis on issues and trends concerning developments of interest to digital marketers, including FTC and state attorneys general advertising compliance, civil investigative demands (CIDs), and administrative/judicial process. This blog is sponsored by Hinch Newman LLP.