Markets Wired

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:

• Before you fill out forms or applications on a site, find out more about who is actually requesting your information and for what purpose by doing an online search for the site operator with words like “complaint” or “review.”
• If you think you have gotten a call from a government imposter, report it to the FTC at FTC.gov/complaint.
• Think long and hard before you give out your Social Security number or bank or credit card information. In the wrong hands, they can lead to identity theft.

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 Illinois.

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 FTC on Facebook, follow us on Twitter, read our blogs, and subscribe to press releases for the latest FTC news and resources.