Settlement with post-secondary school operator to provide education on lead generation

Colleges are known for team sports, but unfortunately, consumer fraud can also be a team sport. The Federal Trade Commission intends to reach a settlement with Career Education Corporation, American Intercontinental University, Colorado Technical University, and related defendants, alleging that they used illegal game schemes to attract consumers to their postsecondary and vocational schools. MVP “teammates” in deceptive companies are the main generators and use false pretenses to trick consumers into revealing personal information.

Defendant CEC operates numerous post-secondary and vocational schools, currently enrolling 35,000 students, primarily online. In addition to advertising the school on radio, television, online and social media (often with promotions targeted at military personnel), CEC uses more than 70 lead generators, some of which obtain leads through spoofed or illegal phone calls .

If you’ve followed the FTC’s settlement with Sun Key Publishing and related defendants, these tactics may sound familiar. For example, the Sun Key lead generator creates web pages that contain URLs such as Army.com, air-force.com, or navyenlist.com, which lead consumers to conclude that these sites have an official connection to military recruiting. Taking advantage of the false impression they create, lead generators get consumers to hand over personal data, which is then used by companies like CEC to market their schools.

Lead Generator Expand, Inc. (also the subject of an FTC enforcement action) used a variation of this scheme. Expand the target consumers looking for jobs, claiming that their personal information is needed to help them apply for “job postings”. But just as Sun Key used the deceptive cover of the military draft to collect data, Expand also took on the guise of a job board. CEC again used this data to sell its schools.

Another major producer of CEC is Edutrek, which was also sued by the FTC for allegedly using fake job and benefits websites to collect personal information from unsuspecting consumers.

The FTC said CEC should have known the tips were obtained through deception. Like every other company, CEC has a responsibility to ensure that it does not profit from deception. This means the company cannot turn a blind eye to the practices of its leading generators. The complaint alleges that the CEC did (or failed to do) much more than that. The CEC does not change the fundamentally deceptive impression that these sites are used for military recruitment or employment. The FTC alleges that CEC even approved telemarketing scripts that contained outright false content, such as one that told telemarketers to identify themselves as working for the “Military Verification Service” in their voicemail greetings.

The complaint alleges that the illegal tactics continued during the call. In some cases, telemarketers for CEC’s leading generators continued to falsely claim they had ties to the military or potential employers.Additionally, the FTC said they illegally called the National Do Not Call Registry number

CEC’s own in-house telemarketing staff also engaged in illegal conduct. The lawsuit alleges that they used high-pressure sales tactics to get consumers into their schools even though the schools did not offer the courses the person wanted to study. And the calls are often relentless. The FTC said the CEC policy allowed its telemarketers to call the same consumer up to six times per day. In many cases, CEC places hundreds of robocalls to a single phone number.

The complaint against CEC alleges that the company’s primary power generator made numerous false statements in violation of the Federal Trade Commission Act. Additionally, the lawsuit challenges multiple violations of telemarketing sales rules, including calls to numbers on the National Do-Not-Call Registry. In addition to the $30 million financial judgment, the settlement requires CEC to review materials used by prospects for marketing on its behalf and to avoid using or purchasing illegally obtained leads.

The proposed settlement has a lot to say for businesses in the lead generation ecosystem. The Federal Trade Commission has taken multiple actions to challenge the practices of companies that extract personal information from consumers under false pretenses and then sell that data as leads. The CEC settlement focuses on businesses that use these potential customers.This case illustrates the importance of monitoring what others, including potential clients, are doing on your behalf, and the need for a strong response when faced with misleading claims or conduct. Advertisers should take the lead in ensuring that the leads they use are not the product of deception.