Final Program Integrity Rules: Misrepresentation

Final program integrity regulations were published on October 29, 2010, based on a Notice of Proposed Rulemaking (NPRM) published on June 18, 2010. This article is part of a series on final program integrity regulations. The series details the regulatory changes and additional information contained in the preamble to the final rules in response to comments submitted to the U.S. Department of Education. Most provisions are effective July 1, 2011 (verification being the notable exception, with an effective date of July 1, 2012). Unlike previous final rule packages in recent years, early implementation at an institution’s option has not been approved for any provision.  

Misrepresentation

Misrepresentation regulations provide a compliance tool by which the Department of Education (ED) can ensure that institutions not only meet various disclosure requirements elsewhere in regulation, but supply accurate information in doing so. The regulations apply to all institutions that participate in the Title IV programs.

The misrepresentation section of regulation does not itself require any disclosures or reports; the rules seek to prevent deceptive practices. They are based on section 487 of the Higher Education Act, which authorizes ED to fine, suspend or terminate an institution that engages in substantial misrepresentation of the nature of its educational program, its financial charges, or the employability of its graduates. The final rules spell out the types of activities that constitute misrepresentation and describe the actions that ED may take in cases of substantial misrepresentation. NASFAA generally supported these changes as a strong compliance tool to separate out those "bad actors" whose actions would otherwise provide impetus for harsher and more burdensome measures against all schools in other areas of regulation.

Definitions (668.71)

Effective July 1, 2011, misrepresentation is defined as:

"Any false, erroneous or misleading statement an eligible institution, one of its representatives, or any ineligible institution, organization, or person with whom the eligible institution has an agreement to provide educational programs, or to provide marketing, advertising, recruiting or admissions services makes directly or indirectly to a student, prospective student or any member of the public, or to an accrediting agency, to a State agency, or to the Secretary. A misleading statement includes any statement that has the likelihood or tendency to deceive or confuse. A statement is any communication made in writing, visually, orally, or through other means. Misrepresentation includes the dissemination of a student endorsement or testimonial that a student gives either under duress or because the institution required the student to make such an endorsement or testimonial to participate in a program."

Substantial misrepresentation is defined as:

"Any misrepresentation on which the person to whom it was made could reasonably be expected to rely, or has reasonably relied, to that person's detriment."

The definition of "substantial misrepresentation" is unchanged from current regulation. The definition of "misrepresentation" itself, however, has been expanded to clarify whose statements are subject to liability for misrepresentation, and nature and form of misleading statements.

Although the final definition of misrepresentation is expanded as compared to current regulation, it was narrowed somewhat from the proposed rule, to ensure that "statements made by students through social media outlets would not be covered by these misrepresentation regulations. Also, statements made by entities that have agreements with the institution to provide services, such as food service, other than educational programs, marketing, advertising, recruiting, or admissions services would not be covered by these misrepresentation regulations."

However, the new definition emphasizes that marketing, advertising, recruiting and admissions are important activities in communicating information to students and prospective students, and are subject to scrutiny for misrepresentation.

In the preamble to the final rule, ED states: "In determining whether an institution has engaged in substantial misrepresentation and whether to impose penalties, the Department uses a rule of reasonableness and considers various factors." These factors include whether the misrepresentation was intentional or inadvertent.

ED assures the higher education community that it understands "the many complexities of domain name ownership, trademark infringement and the like and will ensure that we are targeting the correct entities in any enforcement action we take under these regulations."

In response to concerns about including testimonials and endorsements in the definition of misrepresentation, ED distinguishes between those that are given under duress or are required for participation in a program (which are considered to be false, erroneous, or misleading) and endorsements or testimonials for which students are given incentives or rewards. ED does not believe that an endorsement or testimonial for which a student was given a token reward such as a mug or t-shirt should automatically be considered false, erroneous, or misleading.

Revised section 668.71 also outlines the actions that ED may take as a result of a determination that an eligible institution has engaged in substantial misrepresentation. In such cases, ED may:

  • Revoke the eligible institution's program participation agreement;
  • Impose limitations on the institution's participation in the Title IV programs;
  • Deny participation applications; or
  • Initiate a fine, limitation, suspension, or termination proceeding against the institution.

Nature of Educational Program (668.72)

The final rules give more details about academic information that is subject to misrepresentation scrutiny. The current rule, for example, lists statements about whether a student may transfer course credits earned at the institution to any other institution. The new rules also include conditions under which the institution will accept transfer credits earned at another institution.

The final rule adds detail about possible misrepresentation concerning graduates' qualifications to:

  • Receive certifications required for employment, including to apply to take or to take requisite examinations;
  • Perform certain functions in the States in which the educational program is offered; or
  • Meet additional conditions that the institution knows or reasonably should know are generally needed to secure employment in a recognized occupation for which the program is represented to prepare students.

The new rule expands the sources and kinds of claimed outside recommendations that may constitute misrepresentation. Unsolicited testimonials or endorsements may, under certain circumstances, be considered misrepresentation, as noted in the discussion of the definition of misrepresentation. The following topics have been added as examples of information to which misrepresentation rules may apply:

  • Requirements for successfully completing the program and circumstances that would constitute grounds for terminating the student's enrollment;
  • The subject matter, content, or any other fact related to the program credential;
  • Whether the degree has been authorized by the appropriate State educational agency, including any failure by the institution to disclose in advertising or promotional materials the fact that the degree that has not been authorized by the State or that the degree requires specialized accreditation.

Note that the new rules specify that institutions are responsible for making statements that are not false, erroneous, or misleading in states in which the institution's educational programs are offered, not only in the state where the institution is located.

ED also points out in the preamble that new disclosures required under gainful employment rules applicable to training programs are protected from misrepresentation by the language in 668.72 concerning the availability, frequency, and appropriateness of an institution's courses and programs to the employment objectives that it states its programs are designed to meet.

Nature of financial charges (668.73)

Possible misrepresentation about an institution's financial charges has also been expanded, and exceptions in current regulation have been eliminated. Added to the examples in section are:

  • Program cost and refund policy;
  • Availability or nature of any financial assistance offered to students, including a student's responsibility to repay any loans, regardless of whether the student is successful in completing the program and obtaining employment;
  • The student's right to reject any particular type of financial aid or other assistance, or whether the student must apply for a particular type of financial aid, such as financing offered by the institution.

Employability of graduates (668.74)

Examples in current regulation of misrepresentation about employability have been broadened. New examples include claims or information concerning:

  • The institution's knowledge about the current or likely future conditions, compensation, or employment opportunities in the industry or occupation for which the students are being prepared;
  • Whether employment is being offered by the institution or that a talent hunt or contest is being conducted, including, but not limited to, through the use of phrases such as "Men/women wanted to train for * * *," "Help Wanted, " "Employment, " or "Business Opportunities";
  • Other requirements that are generally needed to be employed in the fields for which the training is provided, such as requirements related to commercial driving licenses or permits to carry firearms, and failing to disclose factors that would prevent an applicant from qualifying for such requirements, such as prior criminal records or preexisting medical conditions.

Information provided by state and federal governments, general statements and opinions, and predictions that are not based on false or misleading information, would not be the basis for a misrepresentation claim.

Relationship with the Department of Education (668.75)

The new rules provide that an eligible institution, its representatives, or any ineligible institution, organization, or person with whom the institution has an agreement may not describe the eligible institution's participation in Title IV programs in a manner that suggests approval or endorsement by the U.S. Department of Education of the quality of its educational programs.

Section 668.75 in the current regulation describes procedures by which ED handles complaints of misrepresentation against institutions. Because this section codifies the difference in treatment between minor readily correctible incidences and substantial misrepresentation, a number of objections were made to its proposed deletion. ED explained in the preamble to the proposed rule that the procedures described in current 668.75 have not been used to take enforcement actions in favor of other administrative remedies. ED states in the preamble to the final rule that it does not overreact to single, isolated transgressions and intends to enforce the misrepresentation regulations fairly.

ED further assures institutions that nothing in the proposed regulations diminishes the procedural rights that an institution otherwise possesses to respond to an action based upon a violation of the misrepresentation regulations. As noted above, section 668.71 outlines the actions that ED may take in cases of substantial misrepresentation.

There were a number of misrepresentation-related comments to other sections of the June 18 NPRM upon which these final rules were based. Some of the comments resulted in changes to those other sections of proposed regulation to avoid unintentional misrepresentation. For example, changes were made to gainful employment disclosure under section 668.6 concerning placement rates and representative SOC codes associates with a training program.

 

Publication Date: 11/10/2010


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