Education Company to Pay $30 Million to Settle FTC Charges of Deceptive Marketing

The FTC has entered into a stipulated order with an education company about the use of deceptive marketing, as well as the deceptive practices carried out by the education company’s third-party lead generators, in violation of the FTC Act and the Telemarketing and Consumer Fraud and Abuse Prevention Act.

The stipulated order requires the education company to pay $30 million in consumer redress and permanently restrains and enjoins the education company from misrepresenting or assisting others in misrepresenting the products or services offered, military endorsements or affiliations, neutrality and independence of educational advisors, prospective employer affiliations, and eligibility for government benefits, among others.  The education company must also provide notice of the stipulated order to lead generators and is permanently restrained and enjoined from using or purchasing consumer information unless it establishes, implements and maintains a system to monitor and review its lead generator sources.  In addition, no calls can be placed to consumers listed on the Do Not Call Registry, subject to certain exceptions.

The FTC’s related complaint alleged that the education company knowingly purchased consumer leads obtained through deceptive practices.  The lead generators allegedly engaged in deceptive statements to induce consumers to provide their contact information.  Deceptive practices included the use of websites and advertisements that appeared to be official military recruitment sites, and websites that claimed to help consumers apply for a variety of government benefits.  The complaint alleged that the education company had authority over its lead generators; the education company received the marketing materials and had the ability to review, reject, or opt out of the use of such materials.  Once the consumers’ contact information was obtained and sold to the education company, the education company’s telemarketers allegedly used high-pressure sales tactics to urge consumers to attend the one of the education company’s schools, including calls to numbers on the Do Not Call Registry.  The telemarketers had to meet monthly enrollment quotas or face termination.

Andrew Smith, director of the FTC’s Bureau of Consumer Protection, stated in a press release that “You can’t skirt the law by outsourcing illegal conduct to your service providers.  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.”