Career Education Corporation: $30 Million for Its Lead Generators' Conduct

The bottom line: a company that buys leads can be held responsible for how those leads were generated.

Here is what happened

The FTC filed its complaint in the U.S. District Court for the Northern District of Illinois (case no. 1:19-cv-05739) against Career Education Corporation (CEC) and subsidiaries American InterContinental University, Inc., AIU Online, LLC, Marlin Acquisition Corporation, Colorado Technical University, Inc. and Colorado Tech., Inc. According to the FTC, since at least 2012:

• Some of CEC's lead generators posed online as official U.S. military recruiters or as job-finding services, then called consumers whose information was collected under those pretenses.
• Lead generators claimed that the military, or an independent education advisor, recommended CEC schools.
• Lead generators induced consumers to submit information for supposed job or benefits assistance, and falsely said the information would not be shared.
• CEC and its lead generators called consumers on the Registry. Some consumers had expressed no interest in college.
• CEC called some consumers up to six times a day and, in many instances, placed hundreds of calls to certain numbers. Its telemarketers had to meet monthly enrollment quotas or face termination.

Three of the lead generators, Sun Key, Edutrek and Expand, had been the subject of their own FTC actions.

Read the FTC's complaint against Career Education Corporation.

"You can't skirt the law by outsourcing illegal conduct to your service providers," said Andrew Smith, then Director of the FTC's Bureau of Consumer Protection. "We expect companies purchasing leads to implement strong vendor management programs and stay on the right side of the law."

The settlement

The stipulated order:

1. Requires $30 million in consumer redress.
2. Requires CEC to set up a system to review all materials lead generators use to market its schools.
3. Requires CEC to investigate complaints about lead generators.
4. Prohibits CEC from using or buying leads obtained deceptively or in violation of the Telemarketing Sales Rule (TSR).
5. Prohibits misrepresentations about the benefits of any post-secondary school or other products and services.

In June 2021, the FTC sent payments totaling approximately $30 million to more than 8,000 people. The FTC said the average refund, more than $3,700, was the largest per-person average in its history. CEC was then operating as Perdoceo Education Corporation.

The law in plain English

The TSR's Do Not Call provisions apply to the seller as well as the telemarketer. A seller that causes calls to Registry numbers is liable even if a vendor places them. To call a Registry number based on consent, the TSR requires a signed, written agreement that clearly shows the consumer agreed to receive calls from or on behalf of that specific seller. The FTC Act also reaches deceptive claims made on the seller's behalf.

What this means for you

1. Review every lead source's ads, forms and scripts before you buy.
2. Do not accept leads generated under a different pretense.
3. Investigate vendor complaints and cut off bad sources.
4. Scrub against the Registry and your internal do-not-call list, and cap call frequency.