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Operator
of Colorado Technical University and American InterContinental University
Will Pay $30 Million to Settle FTC Charges it Used Deceptive Lead Generators
to Market its Schools
An Illinois-based operator of several
post-secondary schools will pay $30 million to settle Federal Trade Commission charges that the
operator used sales leads from lead generators that falsely told consumers
they were affiliated with the U.S. military, and that used other unlawful
tactics to generate leads. In its complaint against Career Education Corporation (CEC) and its
subsidiaries, American InterContinental University, Inc., AIU Online,
LLC, Marlin Acquisition Corporation, Colorado Technical University, Inc., and
Colorado Tech., Inc. (collectively, CEC), the FTC alleged that CEC used lead
generators engaged in illegal conduct to market its schools. In addition to falsely representing that its
schools were affiliated with or recommended by the military, CEC’s lead
generators also induced consumers to submit their information under the guise
of providing job or benefits assistance. The FTC also charged that CEC’s lead
generators falsely told consumers that their information would not be shared,
and that both CEC and its lead generators illegally called consumers
registered on the National Do Not Call (DNC) Registry. “You can’t skirt the law by outsourcing
illegal conduct to your service providers,” said Andrew Smith, Director of
the FTC’s Bureau of Consumer Protection. “This case demonstrates that the FTC
will seek to hold advertisers liable for the deceptive or illegal practices
of their affiliates, publishers, or other lead generators. We expect
companies purchasing leads to implement strong vendor management programs and
stay on the right side of the law.” According to the FTC's complaint, since at
least 2012, CEC and its subsidiaries have used an illegal and deceptive
telemarketing scheme to lure consumers to their post-secondary and vocational
schools. CEC’s lead generators tricked consumers into giving their contact
information by pretending to offer services unrelated to post-secondary
education, the FTC alleged. For instance, some of CEC’s lead generators posed
online as official U.S. military recruiters or as job-finding services, then
called consumers whose contact information was solicited under those false pretenses.
CEC’s lead generators then continued to misrepresent that the military, or an
independent education advisor, recommended the CEC school. Three of the lead
generators—Sun
Key, Edutrek,
and Expand—have
themselves been the subject of FTC law enforcement actions. The FTC also charged that CEC and its lead
generators violated the agency’s Telemarketing Sales Rule (TSR) by harassing
consumers registered on the National DNC Registry. Some of the targeted
consumers expressed no interest in college or CEC schools, while others
expressed interest in CEC schools under the false impression that the
military, an independent education advisor, or an employer recommended or
endorsed CEC schools. These consumers nevertheless received a sales pitch,
urging them to attend a CEC school, from a telemarketer who was required to
meet a monthly enrollment quota or face termination. CEC called some
consumers up to six times a day and, in many instances, placed hundreds of
calls to certain phone numbers, the FTC alleged. In addition to the $30 million in consumer
redress, the stipulated order requires CEC to launch a system to review all
materials that lead generators use to market its schools, to investigate
complaints about lead generators, and to not use or purchase leads obtained
deceptively or in violation of the TSR. The order also prohibits
misrepresentations about any other benefits of any post-secondary school or
any other of the defendants' products or services. The FTC’s
education materials can help consumers avoid trouble from imposters
and safeguard their personal information:
If you are interested in information on
military recruitment, please visit this site
from the Department of Defense for more information. The Commission vote authorizing the staff to
file the complaint and stipulated final order was 5-0. The FTC filed the
complaint and final order in the U.S. District Court for the Northern
District of California. NOTE: The Commission files a complaint when it has “reason to
believe” that the named defendants are violating or are about to violate the
law and it appears to the Commission that a proceeding is in the public
interest. Stipulated final orders have the force of law when approved and
signed by the District Court judge. The Federal Trade Commission works to promote
competition, and protect and educate consumers. You can learn more about consumer topics and file a consumer
complaint online or by calling 1-877-FTC-HELP (382-4357). Like the
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read our blogs, and subscribe
to press releases for the latest FTC news and resources. Contact Information CONTACT FOR CONSUMERS: CONTACT FOR NEWS MEDIA: STAFF CONTACTS: Quinn Martin |