Commentary

FTC Reaches Record Deceptive Ads Settlement With University Of Phoenix

In a settlement with the Federal Trade Commission, the University of Phoenix will forgive $141 million in student debt and refund an additional $50 million to students who purportedly were lured by ads featuring attractive corporations such as Microsoft, Twitter, AT&T, Yahoo, Adobe and the American Red Cross that had nothing to do with the programs it was pitching.

“In reality, these companies did not partner with UOP to provide special job opportunities for UOP students or develop curriculum. Instead, UOP and Apollo selected these companies for their advertisements as part of a marketing strategy to drive prospective student interest, the FTC alleges,” the FTC states in a press release that also cites UOP’s current parent company, Apollo Education Group.

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“The FTC has also brought complaints that the University of Phoenix’s deceptive advertising and marketing had aggressively targeted active-duty service members, veterans, military spouses and Hispanic consumers. The FTC said the company had been the largest recipient of Post-9/11 GI Bill benefits since the program began,” Kimberly Chin reports for The Wall Street Journal.

“Before 2012, the school's advertising pitch focused mostly on flexibility, convenience, online classes and accreditation, the FTC wrote in its complaint. But that wasn't differentiating the school enough from other options, and enrollment was declining, the FTC said,” Rachel Leingang writes for Arizona Central.

“A campaign called ‘Let's Get to Work’ was launched, focusing on job opportunities. The companies used in these ads were chosen based on ‘desired brand association,’ the FTC said, not actual partnerships the school had,” she adds.

“The university said in a written statement that it was pleased to have reached the settlement and to have resolved the investigation, adding that it had complied fully with the FTC,” Paul Fain writes for Inside Higher Ed.

The statement reads: “The campaign occurred under prior ownership and concluded before the FTC’s inquiry began. The university continues to believe it has acted appropriately and has admitted no wrongdoing. This settlement agreement will enable the university to maintain focus on its core mission of improving the lives of students through career-relevant higher education, and to avoid any further distraction from serving students that could have resulted from protracted litigation, as well as the time and expense of the litigation itself.”

The UOP also “issued a fact sheet touting both its achievements and its commitments to improve. In it, the school says it devoted 17% of its total spending in the 2018 fiscal year to marketing costs. The fact sheet concludes with a section titled ‘We Are Committed To Responsible Marketing,'” Bill Chappell writes  for NPR.

“The school undertook the campaign as its enrollment was falling. University of Phoenix was once the nation’s biggest online university, with more than 460,000 students in 2010. But increased competition led to sharp drops in enrollment; the school now has around 97,000 students nationwide, and was sold in 2017 to Apollo Global Management, a private equity firm,” Stacy Cowley writes for The New York Times.

“The FTC’s settlement, after an investigation that began more than four years ago, is the agency’s largest with a for-profit school. It previously settled complaints against two other chains, the DeVry Education Group   and the Career Education Corporation, over what it said were false claims,” she adds.

Another for-profit entity, the defunct Trump University, reached a $25 million settlement with New York State, which had charged that it was “an elaborate bait-and-switch” operating as an unlicensed educational institution from 2005 to 2011.

The settlement with UOP yesterday is the largest the FTC “has obtained in a case against a for-profit school. Students making important decisions about their education need the facts, not fantasy job opportunities that do not exist,” ” Andrew Smith, director of the FTC’s bureau of consumer protection, states in the FTC’s release.

“It is important to note that this doesn’t eliminate what student borrowers owe in federal loans. In a statement and a tweet,  FTC commissioner [Rohit Chopra] said that this action could lead to further action to provide debt relief -- a reference to the ‘borrower defense to repayment’ rule that allows the Department of Education to discharge debt when students have been defrauded. However, secretary DeVos and the Department of Education has been slow to provide this relief. Later this week, the secretary will testify before the House Education and Labor Committee on this issue. It is likely this settlement will be mentioned by one of the committee members,” Wesley Whistle points out  for Forbes.

DeVos, as The Washington Post’s Laura Meckler wrote last year, “came to Washington to promote the cause of her life -- school choice” at the primary and secondary level. The National Education Association, among other perceived transgressions, claims that she has “shilled for the for-profit college industry that has defrauded countless students.”

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