News Release Issued by the Office of the Attorney General
November 21, 2013
AG Proposes New Regulations to Address Deceptive Practices in For-Profit School Industry
BOSTON – A former for-profit school in Massachusetts that abruptly closed in January has been sued over allegations that it engaged in a range of deceptive schemes to meet accreditation requirements and maximize profit to which it was not entitled, Attorney General Martha Coakley announced today.
In addition, AG Coakley has proposed new consumer protection regulations to address problems experienced by consumers when enrolling in some for-profit and occupational schools throughout the Commonwealth.
Lawsuit Filed Against American Career Institute:
The AG’s lawsuit against American Career Institute (ACI), filed today in Suffolk Superior Court, alleges the school falsified student signatures, enrollment records, attendance, and grades to receive government-funded student loan proceeds, and failed to provide students the course material and training for which they incurred tens of thousands of dollars in debt.
According to the complaint , ACI also enrolled students who did not meet minimum education qualifications, and failed to disclose that students with criminal backgrounds may have been ineligible for employment in their field of study.
“We allege this for-profit school sacrificed the wellbeing of its students for financial gain by falsifying documents,” AG Coakley said. “As a result, hundreds of former students are now left with debt and without the skills they need for a promising career.”
The AG’s Office alleges that ACI failed to refund tuitions for approximately 1,400 students in Massachusetts after the school abruptly closed in January 2013.
According to the complaint , ACI’s profits depended upon the school’s access to federal grants and loans. In fiscal year 2012, ACI collected more than $30 million in federal “Title IV” funding, an amount equal to 89 percent of its revenue. Additionally, ACI collected tuition on behalf of veterans pursuant to the Post-9/11 GI Bill and other veterans programs. Defendants allegedly falsified records to show that ACI was meeting the student grade and attendance requirements necessary to maintain its accreditation and continue collecting government-funded tuition payments.
According to the complaint, students had to complete a 160-hour externship program before ACI could collect its entire tuition disbursement. ACI students were allegedly hurried through their coursework in order to complete the externship required to graduate from its allied health programs. Without necessary course materials and without attending required classes, students were often unprepared for externships.
Between 2008 and early 2013, ACI operated career training schools at five locations in Massachusetts – Braintree, Cambridge, Framingham, Springfield, and Woburn – offering certificate programs in the information technology and medical assistant fields that cost approximately $25,000 for one year. ACI also had campuses in Baltimore, Columbia, and Wheaton, Maryland.
Also named in the complaint, collectively doing business as ACI, are The Career Institute LLC, Advanced Career Technologies, Inc., and ABC Training Center of Maryland, Inc.
The complaint seeks restitution to affected students, civil penalties and attorney’s fees, as well as injunctive relief to prevent additional harm arising from the defendants’ unfair or deceptive acts or practices. Investigations of other for-profit educational institutions operating in the state remain ongoing.
This case is being handled by Assistant Attorneys General Jonathan Engel, Jeffrey Walker and Division Chief Stephanie Kahn, all of AG Coakley’s Consumer Protection Division.
Proposed For-Profit and Occupational School Regulations:
In response to ongoing concerns about the practices of some for-profit schools, AG Coakley today also filed proposed amendments to existing regulations to better protect students from potentially unfair or deceptive practices.
The new regulations would require all for-profit and occupational schools in Massachusetts to provide accurate information to the public, prohibit misleading advertising practices, and address unfair lending practices.
The proposed changes to regulations promulgated pursuant to Massachusetts General Laws Chapter 93A include:
“Students are going further and further into debt, and these regulations will help protect them from high pressure sales tactics and ensure they are getting the benefits that the school has promised,” AG Coakley said. “Prospective students should at least have the most complete and accurate information possible when they are making their decisions.”
"The National Consumer Law Center applauds Attorney General Coakley's continued focus on stopping for-profit schools' use of high-pressure sales tactics and other deceptive practices," said Robyn Smith, Of Counsel for the National Consumer Law Center. "We look forward to reviewing the draft regulations and are hopeful that an expanded description of unfair and deceptive for-profit school practices will lead to increased student protection, as well as redress for students harmed by unscrupulous trade schools."
“We commend Attorney General Coakley for her leadership in protecting Massachusetts families against deceptive practices by the for-profit and occupational colleges and universities industry,” said Mary Kay Henry, president of the 2.1 million-member Service Employees International Union. “While for-profit colleges and universities have a potentially important role in helping working adults meet the growing demand for higher education, it is important that these institutions are held accountable for their promises to the public.”
“As our organization works to promote women's economic independence and education in Massachusetts, we are pleased with the Attorney General’s ongoing efforts to enhance protections for consumers enrolling in for-profit and private occupational schools,” said Elisabeth Babcock, President and CEO of Crittenton Women’s Union. “These updated regulations, once finalized, represent an important step in ensuring that low-income individuals are protected from abusive practices in the marketplace, so that they can continue creating better futures for themselves and their families.”
The proposed regulations were filed Wednesday with the Secretary of State’s Office, amending current regulations concerning private career schools. The new regulations will establish a separate chapter to deal specifically with all occupational and for-profit schools in Massachusetts. AG Coakley has significant concerns about the for-profit education industry in Massachusetts and across the country.
The AG’s Office will continue to work cooperatively with the Division of Professional Licensure and the Board of Higher Education to ensure consistency and clarity in our respective regulations regarding these educational businesses.
Before the regulations are officially promulgated, the AG’s Office will hold two public hearings on the proposed regulations. The first will be in Boston on Tuesday, Jan. 7, 2014 from 10 a.m. – 2 p.m. at the Leverett Saltonstall Building, 100 Cambridge Street, 2nd Floor, Room C. A second hearing will take place in Springfield on Thursday, Jan. 9, 2014 from 10 a.m. – 2 p.m. at the Santander Bank Building, 1350 Main Street, 3rd Floor, Room A. Copies of the proposed regulatory changes, the notice of hearings, and small business impact statement will be available on the Attorney General's website at www.mass.gov/ago/regulations, or at the Attorney General’s Office, 1 Ashburton Place, Boston, MA 02108. Interested parties are encouraged to attend the hearings and provide testimony, or provide written testimony to the address provided in the notice of hearings.
AG Coakley’s Examination of For-Profit Schools:
Today’s actions are a result of AG Coakley’s comprehensive and ongoing investigation into the for-profit education industry. In April, AG Coakley launched Eliminate Deceptive Education Business Tactics (D.E.B.T.), an extensive consumer protection campaign with free educational trainings across the state and a new website offering resources for consumers related to for-profit schools.
In October, AG Coakley reached a $425,000 settlement to reimburse former students of Sullivan & Cogliano Training Centers, Inc., a Brockton-based for-profit career school, for allegedly misrepresenting job placement numbers and making other misleading statements about its medical field training programs. The settlement resolved the AG’s lawsuitfiled in April.
In March, AG Coakley signaled her support for proposed federal legislation which would stop for-profit schools from spending taxpayer money on marketing. In June 2012, AG Coakley obtained $225,000 for the state in a multistate settlement with QuinStreet which resulted in the deceptive for-profit marketing website GIBill.com being taken down and handed over to the U.S. Department of Veterans Affairs.