The purpose of a Notice of Penalty Offenses is to establish that a company has “actual knowledge” that those practices violate the law.

The FTC announced on October 6, 2021, that it is providing notice that certain marketing activities in the for-profit education sector are deceptive or unfair under Section 5 of the Federal Trade Commission Act, and that 70 for-profit schools will receive a Notice of Penalty Offenses. The notice is not an indication of any wrongdoing and simply establishes that the recipient has actual knowledge of the FTC’s findings. With these notices, the FTC is signaling that it will likely target for-profit schools with an enforcement campaign. All schools who receive such a notice should review it with counsel and ensure that they do not engage in any of the prohibited practices. Schools that do not receive a notice should also ensure that their marketing activities are compliant with the FTC findings.

What Is a Notice of Penalty Offenses?

Under the FTC Act, the FTC may notify companies that certain acts or practices have been determined to be deceptive or unfair in a litigated administrative decision. The purpose of a Notice of Penalty Offenses is to establish that a company has “actual knowledge” that those practices violate the law. Companies that receive this notice and engage in any of the enumerated prohibited practices can face civil penalties of up to $43,792 per violation.

What Offenses Were Identified?

The notice sets out seven education-related marketing practices the FTC has found to be deceptive or unfair―namely that it is an unfair or deceptive trade practice to misrepresent directly or by implication:

1. The need or demand for people who have graduated from, or completed courses at, a specific institution;
2. Graduates’ employment prospects, the ease with which they will be able to obtain employment or the employment opportunities in any field in which a course of instruction is offered;
3. The types of jobs available to graduates or for which they would be qualified upon completion of an institution’s courses or program;
4. The number or percentage of consumers attending any course or completing any program or degree who have obtained employment or the field or nature of that employment;
5. The amount of money that graduates will or may earn;
6. The qualifications necessary to obtain employment in the fields for which an institution offers training, including whether experience or additional education is required or advantageous for employment; and
7. The institution’s capabilities or facilities for assisting students in finding employment or the assistance actually provided to graduates, including the existence of job placement services.

What Does This Mean for the Sector?

Receiving a Notice of Penalty Offenses does not mean that a school has violated the law or that the FTC has reason to believe it is breaking the law. However, it is a clear indication that the FTC will likely engage in an enforcement campaign targeted at the sector. All schools, whether they receive a notice or not, should review the notice with counsel and ensure that they do not engage in any of the cited marketing activities and/or that any claims related to the listed marketing activities can be appropriately substantiated.

For More Information

If you have any questions related to this Alert, please contact Michelle Hon Donovan, Edward Cramp, any of the attorneys in the Higher Education Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.