FTC Resurrects Penalty Tool in Crackdown on For-Profit Universities

The Federal Trade Commission yesterday announced a crackdown on deceptive and unfair practices used by for-profit universities by reviving a long-dormant enforcement tool that could have implications into how the regulator takes action against companies in the accounts receivable management industry.

The FTC had been using a provision in the FTC Act — Section 13(b) — to levy monetary penalties against companies it found to have violated consumer protection laws, but the Supreme Court ruled earlier this year found that the FTC had been mis-applying its authority.

So now, the agency has unanimously approved a new directive, the Penalty Offense Authority, found in Section 5 of the FTC Act. Once it sends a Notice of Penalty Offense — to a for-profit institution in this case — other companies will have considered to be put on notice that they could be fined for engaging in similarly unlawful practices. The penalties could be fined up to $43,792 per violation.

“The FTC is resurrecting a dormant authority to deter wrongdoing and hold accountable bad actors who abuse students and taxpayers,” said Lina Khan, the chair of the FTC, in a statement. “Working closely with our state and federal partners, we’ll be monitoring this market carefully.”

The FTC has sent a notice to 70 of the nation’s largest for-profit universities, informing them of specific practices that must be avoided, including whether a particular career field is in demand, misrepresenting job placement rates, and information about salaries in specific fields.

Yesterday’s announcement was made by Rohit Chopra, currently a commissioner at the FTC who has been confirmed by the Senate to be the next director of the Consumer Financial Protection Bureau, and Samuel Levine, the director of the FTC’s Bureau of Consumer Protection. The pair published a paper last year outlining how the FTC should revive the Penalty Offense Authority.

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