FTC Announces $30 Million Settlement with Operator of For-Profit Post-Secondary Schools

On August 27, 2019, the Federal Trade Commission (FTC) announced it had reached a $30 million settlement with an Illinois-based operator of for-profit post-secondary schools and related subsidiaries resolving allegations that the company used lead generators who engaged in deceptive conduct to market its schools in violation of Section 5(a) of the Federal Trade Commission Act (FTC Act), 15 U.S.C. § 45(a).  According to the FTC, lead generators represented to consumers that the company’s schools were associated with the military when they were not.  The lead generators also allegedly called consumers on the National Do-Not-Call Registry in violation of the FTC’s Telemarketing Sales Rule (TSR), as amended, 16 C.F.R. Part 310.  The FTC’s complaint claims that the company knew or approved of the lead generators’ acts and practices, and/or benefitted from those acts and practices.

The FTC alleges that the company was liable for the conduct of the third-party lead generators through a common enterprise theory, and advised in its press release:  “We expect companies purchasing leads to implement strong vendor management programs and stay on the right side of the law.”  Although the FTC claims that the company used over 70 different lead generators, only three of these lead generators have been the subject of FTC enforcement actions.

The Stipulated Order for Permanent Injunction and Monetary Judgment orders the defendants to pay the FTC $30 million and requires ongoing compliance and reporting for up to twenty years.