Guides for Private Vocational and Distance Education Schools

FEDERAL TRADE COMMISSION

16 CFR Part 254

Guides for Private Vocational and Distance Education Schools

AGENCY: Federal Trade Commission.

ACTION: Final rule.

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SUMMARY: The Federal Trade Commission (FTC or Commission) announces

final amendments to its Guides for Private Vocational Schools to: add a

provision addressing misrepresentations regarding the availability of

employment after completion of training or the success of a school's

graduates in obtaining employment; streamline the Guides by eliminating

redundancies and provisions that do not offer guidance specific to

vocational schools; and change the title of the Guides.

EFFECTIVE DATE: This rule is effective October 9, 1998.

ADDRESSES: Requests for copies of the amended Guides should be sent to

the Consumer Response Center, Room 130, Federal Trade Commission, Sixth

St. and Pennsylvania Ave., NW, Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT:

Joseph J. Koman, Jr., (202) 326-3014, Carol Jennings (202) 326-3010, or

Walter Gross III, (202) 326-3319, Federal Trade Commission, Bureau of

Consumer Protection, Sixth St. and Pennsylvania Ave., NW, Washington,

DC 20580.

SUPPLEMENTARY INFORMATION:

I. Background

The Vocational Schools Guides, adopted by the Commission in 1972,

are intended to advise proprietary businesses offering vocational

training courses, either on the school's premises or through

correspondence or another long-distance method, how to avoid unfair or

deceptive advertising and promotional claims when recruiting and

enrolling students. The Guides address claims that are descriptive of

the school, such as potentially deceptive trade or business names, and

claims about accreditation, content of curricula, teachers'

qualifications, teaching methods, affiliations with other private or

public entities, and approval by other agencies or institutions. The

Guides also address misleading representations regarding financial

assistance and program costs, as well as enrollment qualification or

limitations. Schools are cautioned to avoid using classified

advertisements that appear to be ``help-wanted'' ads, misleading

prospective students about opportunities for employment while

undergoing training, and the deceptive use of diplomas or degrees. The

Guides suggest certain affirmative disclosures prior to enrolling

students and address miscellaneous sales and debt collection practices.

These Guides, like other industry guides issued by the Commission,

are ``administrative interpretations of laws administered by the

Commission for the guidance of the public in conducting its affairs in

conformity with legal requirements.'' 16 CFR 1.5. Conduct inconsistent

with the Guides may result in corrective action by the Commission under

applicable statutory provisions.

As part of the Commission's systematic review of all of its rules

and guides, the Commission published a request for comments concerning

the Vocational Schools Guides on April 3, 1996 (61 FR 14685). The

Commission sought information about the costs and benefits of the

Guides and their regulatory and economic impact. In response to this

notice, nine comments were filed by government agencies, consumers and

consumer organizations, and industry members and trade associations.\1\

These comments indicated general support for relating the Guides,

although some industry members recommended repealing them.

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\1\ Comments were filed by the New York Regional Office of the

U.S. Department of Education Office of Postsecondary Education (two

comments); New York State Beauty Schools Association, Inc.; National

Consumer Law Center; Career College Association; Distance Education

and Training Council; Colorado Aero Tech; American Association of

Cosmetology Schools; and one individual consumer.

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On April 23, 1997, the Commission announced its decision to retain

the Guides and sought supplemental comment on some proposed

modifications (62 FR 19703). The Commission recognized that there is

some overlap between its Guides and regulations of the Department of

Education. Because the Department of Education administers student loan

and grant money for vocational training, it plays the primary role in

addressing abuses in this industry. There is a concurrent role for the

Commission, however, in monitoring and addressing deceptive promotional

practices.\2\ State licensing agencies also regulate vocational

training. Increasingly, however, vocational schools are owned by

national or regional chains; thus, a federal enforcement presence

remains important.

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\2\ For example, the Department of Education uses its

investigative and enforcement resources primarily to address

practices occurring after a student has signed up for training,

rather than advertising and promotional practices that take place

during recruitment of students.

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[[Page 42571]]

In its second Federal Register notice, the Commission also sought

comment on various proposed amendments to the Guides. In particular,

the Commission proposed adding to the Guides a provision addressing

misrepresentations about a school's placement success following

training. While the 1972 Guides addressed claims about placement

assistance and the availability of employment during training, they did

not address false or deceptive claims about employment prospects after

graduation or the success that a school's graduates have realized in

obtaining employment related to the training. The Commission believes

that such claims are important to prospective students of vocational

training and are likely to become even more important in the future.

At the same time, in order to streamline the Guides, the Commission

announced a preliminary decision to delete certain provisions that were

not specific to vocational schools and merely duplicated other general

provisions of law, as well as a section suggesting various affirmative

disclosures prior to the signing of a contract.

II. Amendments to the Guides

The Committee received comments from 39 parties, representing eight

government agencies and one association of state regulators, five

industry trade associations, an accrediting commission for cosmetology

schools, 21 vocational schools in eight states, one consumer

organization, and one individual consumer.\3\ The proposed addition to

the Guides was generally supported by the government agencies and

consumer representatives and generally opposed by the vocational

schools and industry trade associations. Oppositions to the proposal

seems to be based upon a misperception that this statement in the

Guides would somehow increase burdens on schools already subject to

regulations of the Department of Education and state agencies.\4\ The

amendment does not create new requirements, however. As explained in

the Background section, above, the Guides merely clarify the

Commission's interpretation of its existing laws.

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\3\ The comments are listed here with the number assigned to the

comment by the Office of the Secretary: (1) Career College

Association; (2) Texas Higher Education Coordinating Board,

Community and Technical Colleges Division; (3) Silicon Valley

College; (4) Microcomputer Technology Institutes; (5) Alta Colleges,

Inc.; (6) National Accrediting Commission of Cosmetology Arts &

Sciences; (7) Mr. Clifton L. Stewart; (8) Eton Technical Institute;

(9) Pittsburgh Beauty Academy; (10) Seattle Massage School; (11)

Divers Institute of Technology; (12) Pittsburgh Beauty Academy of

Charleroi; (13) International Air Academy; (14) Pittsburgh Beauty

Academy of New Kensington; (15) Private Career School Association of

New Jersey; (17) Apex Technical School; (18) Pennsylvania

Association of Private School Administrators; (19) American

Association of Cosmetology Schools; (20) Florida Association of

Postsecondary Schools and Colleges (21) Gene Juarez Academy of

Beauty; (22) and (26) National Association of State Administrators

and Supervisors of Private Schools (also attaching comments by the

Wisconsin Educational Approval Board, Florida Department of

Education, Idaho Department of Education, Washington Workforce

Training and Education Coordinating Board, Tennessee Higher

Education Commission, and Georgia Nonpublic Postsecondary Education

Commission); (23) The Chubb Institute (North Burnswick, N.J.); (24)

and (25) The Chubb Institute (Parsippany, N.J.); (27) National

Consumer Law Center; (28) Yorktowne Business Institute; (29) Laurel

Business Institute; (30) Montgomery County (MD) Department of

Housing and Community Affairs, Division of Consumer Affairs; (31)

Central Pennsylvania School of Massage; (32) Corinthian Colleges,

Inc.; (33) South Hills Business School; (34) Harris School of

Business; and (35) Technical Career Institute. These comments, as

well as the comments filed in response to the earlier notice, are on

the public record and available for inspection during business hours

at the Federal Trade Commission, Room 130, Sixth St. and

Pennsylvania Ave., NW, Washington, DC 20580.

\4\ Some comments apparently believed that if the proposed

language were adopted, they would be required to report employment

information to the Commission. The Guides do not impose any

reporting requirements, however.

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Like other Guides adopted by the Commission, the Vocational Schools

Guides provide businesses with information regarding the application of

Section 5(a)(1) of the FTC Act, 15 U.S.C. 45(a)(1), to a particular

industry or a specific type of marketing. Section 59a)(1) declares

unlawful ``unfair or deceptive acts or practices in or affecting

commerce.'' The Commission has set forth its interpretation of its

Section 5 authority in its Deception Policy Statement,\5\ its Policy

Statement Regarding Advertising Substantiating Doctrine,\6\ and its

Unfairness Policy Statement.\7\ The Commission will find an

advertisement deceptive if it contains a representation or omission of

fact that is likely to mislead consumers acting reasonably under the

circumstances, and that representation or omission is material to the

decision to purchase. In addition, objective claims about a product or

service imply that they are supported by valid evidence. It is

deceptive, therefore, to make a claim unless, at the time is made, the

marketer possess and relies upon a reasonably basis substantiating the

claim. The Commission will find an advertisement or practice unfair if

it causes, or is likely to cause, substantial consumer injury that is

not reasonably avoidable by consumers and is not outweigh

countervailing benefits to consumers or competition.

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\5\ Letter from the Commission to the Honorable John D. Dingell,

Chairman, Committee on Energy and Commerce, U.S. House of

Representatives (Oct. 14, 1983); reprinted in Cliffdale Associates,

Inc., 103 F.T.C. 110, appendix (1984).

\6\ 49 FR 30999 (1984); reprinted in Thompson Medical Co., 104

F.T.C. 648, appendix (1984).

\7\ Letter from the Commission to Senators Wendell Ford and John

Danforth (Dec. 17, 1980); reprinted in International Harvester Co.,

104 F.T.C. 949, 1070 (1984).

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Consumers considering enrolling in a vocational school are likely

to rely upon claims with regard to employment prospects upon completion

of training and the success of a schools' graduates in securing

employment relevant to the training. Generally, the prospective student

will not be in a position to verify the accuracy of the claim prior to

enrollment and must rely upon the representations of the school. As

stated in the comment of the National Consumer Law Center:

The essence of a vocational school sales presentation is the

availability of employment following graduation. Misrepresentations

of these jobs prospects are certainly material is not only the

student's decision to invest a sizable amount of money in the

schooling, but also considerable amount of the student's time.\8\

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\8\ Comment 27 at page 1.

For example, a claim that a school has a ``90% job placement'' rate

could be highly persuasive to an individual seeking training. If in

fact the placement success is significantly lower than 90%, the claim

would also be deceptive. Similarly, a claim could be deceptive if

significant information is omitted. For example, a claim that ``90% of

graduates find jobs'' could be deceptive if only a small percentage of

those who enroll in the program are able to complete it and graduate.

The claim also could be deceptive if a significant number of graduates

cannot obtain the kind of employment for which the purportedly were

trained, but have to accept other lower level positions at a lower

salary.

As noted in a number of industry comments, Department of Education

regulations also address employment claims by vocational schools. For

example, regulations setting out standards for participation in federal

student financial assistance programs state that school that advertise

job placement rates will make available to prospective students, at or

before the time of enrollment:

(i) The most recent available data concerning employment

statistics, graduation statistics, and any other information

necessary to substantiate the truthfulness of the advertisements;

and

(ii) Relevant State licensing requirements of the State in which

the institution is located for any job for which an educational

[[Page 42572]]

program offered by the institution is designed to prepare those

prospective students.\9\

\9\ 34 CFR 668.14(b)(10).

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In addition, the Department of Education ``may initiate a proceeding *

* * against an otherwise eligible [for participation in the federal

student financial assistance programs] institution for any substantial

misrepresentation * * * regarding the nature of its educational

program, its financial charges or the employability of its graduates.''

\10\ Specific examples of such misrepresentations include (but are not

limited to) ``false, erroneous of misleading statements--

\10\ 34 CFR 668.71(a).

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(a) That the institution is connected with any organization or

is an employment agency or other agency providing authorized

training leading directly to employment;

(b) That the institution maintains a placement service for

graduates or will otherwise secure or assist its graduates to obtain

employment unless it provides the student with a clear and accurate

description of the extent and nature of this service or assistance;

or

(c) Concerning government job market statistics in relation to

the potential placement of its graduates.'' \11\

\11\ 34 CFR 668.74.

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Parts (a) and (b) above are also addressed by the FTC Guides, for

example in Secs. 254.2(b)(2), 254.4(a)(7), and 254.7(a). The Guides

have not, however, until the revisions announced herein, specifically

addressed deceptive claims regarding employability after graduation or

the success a school's graduates have realized in obtaining employment

relevant to the training. In addition, the proposed language has been

modified to include misrepresentations about salaries that can be

expect upon completion of the training. The addition to the Guides of

Sec. 254.4(d) merely complements Department of Education oversight of

these schools, as it also provides industry-specific guidance with

regard to the broad proscription of Section 5 of the FTC Act.

Sections 254.8, 254.9, and 254.10 have been removed from the Guides

to streamline them, eliminate repetition, and eliminate general

principles articulated elsewhere in the CFR. Many of the areas

addressed in Sec. 254.8 are already covered by the Commission's Guides

Against Deceptive Pricing, 16 CFR 233, and Guide Concerning Use of the

Word ``Free'' and Similar Representations, 16 CFR 251. In addition,

section 254.7 of the Vocational Schools Guides, describing deceptive

sales practices, has been revised to include a provision noting that

prior to enrollment students should be informed of the total costs of

the program and the school's refund policy for students who drop out

before completion.

Section 254.9 addressed debt collection and credit practices. These

have been largely superseded by other laws. Debt collection agencies

attempting to collect on behalf of an industry member are covered by

the Fair Debt Collection Practices Act, 15 U.S.C. 1692. Moreover, under

the Commission's Rule on Preservation of Consumer Claims and Defenses

(``Holder-in-Due-Course'' Rule), 16 CFR 433, the right of a consumer to

assert seller misrepresentations in defending against a collection

action is preserved even if the credit contract is assigned to a third

party.

Section 254.10 set forth various affirmative disclosures that

should be made prior to enrollment and signing of a contract. Most of

the areas addressed by these disclosures are now covered elsewhere in

the Guides. Section 254.7(c) advises disclosure of all requirements for

successful completion of the program and the circumstances that would

constitute grounds for terminating the student's enrollment prior to

completion (formerly addressed by Sec. 254.10(a)). Disclosure of total

costs (formerly addressed in Sec. 254.10(b)) is now covered by

Sec. 254.7(b). Misrepresentations regarding the school's facilities and

equipment (formerly addressed by Sec. 254.10(c)) is covered by

Sec. 254.4(a). Misrepresentations concerning placement assistance

offered to graduates (formerly addressed by Sec. 254.10(d)) is covered

by Sec. 254.4(a)(7).

Section 254.0 has been added to explain the scope and application

of the Guides. Various editorial changes have been made to eliminate

redundancies, consolidate provisions, and make the Guides clearer and

easier to read. Finally, the title of the Guides has been changed to

reflect the fact that ``distance education'' is now the term used for

the sale of programs of study--whether offered by correspondence,

computer, or some other means--where work is completed by the student

at home (or some other location of his or her own choosing) rather than

in a school facility.

List of Subjects in 16 CFR Part 254

Advertising, Trade practices.

For the reasons set forth above, the Commission amends 16 CFR Part

254 as follows:

1. The title of Part 254 is amended to read as follows:

PART 254--GUIDES FOR PRIVATE VOCATIONAL AND DISTANCE EDUCATION

SCHOOLS

2. The authority citation for part 254 continues to read as

follows:

Authority: 38 Stat. 717, as amended; 15 U.S.C. 41-58.

3. Section 254.0 is added to read as follows:

Sec. 254.0 Scope and application.

(a) The Guides in this part apply to persons, firms, corporations,

or organizations engaged in the operation of privately owned schools

that offer resident or distance courses, training, or instruction

purporting to prepare or qualify individuals for employment in any

occupation or trade, or in work requiring mechanical, technical,

artistic, business, or clerical skills, or that is for the purpose of

enabling a person to improve his appearance, social aptitude,

personality, or other attributes. These Guides do not apply to resident

primary or secondary schools or institutions of higher education

offering at least a 2-year program of accredited college level studies

generally acceptable for credit toward a bachelor's degree.

(b) These Guides represent administrative interpretations of laws

administered by the Federal Trade Commission for the guidance of the

public in conducting its affairs in conformity with legal requirements.

These Guides specifically address the application of section 5 of the

FTC Act (15 U.S.C. 45) to the advertising, promotion, marketing, and

sale of courses or programs of instruction offered by private

vocational or distance education schools. The Guides provide the basis

for voluntary compliance with the law by members of the industry.

Practices inconsistent with these Guides may result in corrective

action by the Commission under section 5 if, after investigation, the

Commission has reason to believe that the practices fall within the

scope of conduct declared unlawful by the statute.

4. Section 254.1 is revised to read as follows:

Sec. 254.1 Definitions.

(a) Accredited. A school or course has been evaluated and found to

meet established criteria by an accrediting agency or association

recognized for such purposes by the U.S. Department of Education.

(b) Approved. A school or course has been recognized by a State or

Federal agency as meeting educational standards or other related

qualifications as prescribed by that agency for the school or course to

which the term is

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applied. The term is not and should not be used interchangeably with

``accredited.'' The term ``approved'' is not justified by the mere

grant of a corporate charter to operate or license to do business as a

school and should not be used unless the represented ``approval'' has

been affirmatively required or authorized by State or Federal law.

(c) Industry member. Industry members are the persons, firms,

corporations, or organizations covered by these Guides, as explained in

Sec. 254.0(a).

5. Section 254.2 is revised to read as follows:

Sec. 254.2 Deceptive trade or business names.

(a) It is deceptive for an industry member to use any trade or

business name, label, insignia, or designation which misleads or

deceives prospective students as to the nature of the school, its

accreditation, programs of instruction, methods of teaching, or any

other material fact.

(b) It is deceptive for an industry member to misrepresent,

directly or indirectly, by the use of a trade or business name or in

any other manner that:

(1) It is a part of or connected with a branch, bureau, or agency

of the U.S. Government, or of any State, or civil service commission;

(2) It is an employment agency or an employment agent or authorized

training facility for any industry or business or otherwise deceptively

conceal the fact that it is a school.

(c) If an industry member conducts its instruction by

correspondence, or other form of distance education, it is deceptive to

fail to clearly and conspicuously disclose that fact in all promotional

materials.

6. Section 254.3 is revised to read as follows:

Sec. 254.3 Misrepresentation of extent or nature of accreditation or

approval.

(a) It is deceptive for an industry member to misrepresent,

directly or indirectly, the extent or nature of any approval by a State

agency or accreditation by an accrediting agency or association. For

example, an industry member should not:

(1) Represent, without qualification, that its school is accredited

unless all programs of instruction have been accredited by an

accrediting agency recognized by the U.S. Department of Education. If

an accredited school offers courses or programs of instruction that are

not accredited, all advertisements or promotional materials pertaining

to those courses or programs, and making reference to the accreditation

of the school, should clearly and conspicuously disclose that those

particular courses or programs are not accredited.

(2) Represent that its school or a course is approved, unless the

nature, extent, and purpose of that approval are disclosed.

(3) Misrepresent that students successfully completing a course or

program of instruction can transfer the credit to an accredited

institution of higher education.

(b) It is deceptive for an industry member to misrepresent that a

course of instruction has been approved by a particular industry, or

that successful completion of the course qualifies the student for

admission to a labor union or similar organization or for receiving a

State or Federal license to perform certain functions.

(c) It is deceptive for an industry member to misrepresent that its

courses are recommended by vocational counselors, high schools,

colleges, educational organizations, employment agencies, or members of

a particular industry, or that it has been the subject of unsolicited

testimonials or endorsements from former students. It is deceptive for

an industry member to use testimonials or endorsements that do not

accurately reflect current practices of the school or current

conditions or employment opportunities in the industry or occupation

for which students are being trained.

Note to paragraph (c): The Commission's Guides Concerning Use of

Endorsements and Testimonials in Advertising (part 255 of this

chapter) provide further guidance in this area.

7. Section 254.4 is revised to read as follows:

Sec. 254.4 Misrepresentation of facilities, services, qualifications

of staff, status, and employment prospects for students after training.

(a) It is deceptive for an industry member to misrepresent,

directly or indirectly, in advertising, promotional materials, or in

any other manner, the size, location, services, facilities, or

equipment of its school or the number of educational qualifications of

its faculty and other personnel. For example, an industry member should

not:

(1) Misrepresent the qualifications, credentials, experience, or

educational background of its instructors, sales representatives, or

other employees.

(2) Misrepresent, through statements or pictures, the nature of

efficacy of its courses, training devices, methods, or equipment.

(3) Misrepresent the availability of employment while the student

is undergoing instruction or the role of the school in providing or

arranging for such employment.

(4) Misrepresent the availability or nature of any financial

assistance available to students. If the cost of training is financed

in whole or in part by loans, students should be informed that loans

must be repaid whether or not they are successful in completing the

program and obtaining employment.

(5) Misrepresent the nature of any relationship between the school

or its personnel and any government agency or that students of the

school will receive preferred consideration for employment with any

government agency.

(6) Misrepresent that certain individuals or classes of individuals

are members of its faculty or advisory board; have prepared

instructional materials; or are otherwise affiliated with the school.

(7) Misrepresent the nature and extent of any personal instruction,

guidance, assistance, or other service, including placement assistance,

it will provide students either during or after completion of a course.

(b) It is deceptive for an industry member to misrepresent that it

is a nonprofit organization or to misrepresent affiliation or

connection with any public institution or private religious or

charitable organization.

(c) It is deceptive for an industry member to misrepresent that a

course has been recently revised or instructional equipment is up-to-

date, or misrepresent its ability to keep a program current and up-to-

date.

(d) It is deceptive for an industry member, in promoting any course

of training in its advertising, promotional materials, or in any other

manner, to misrepresent, directly or by implication, whether through

the use of text, images, endorsements, or by other means, the

availability of employment after graduation from a course of training,

the success that the member's graduates have realized in obtaining such

employment, or the salary that the member's graduates will receive in

such employment.

Note to paragraph (d): The Commission's Guides Concerning Use of

Endorsements and Testimonials in Advertising (part 255 of this

chapter) provide further guidance in this area.

8. Section 254.5 is revised to read as follows:

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Sec. 254.5 Misrepresentations of enrollment qualifications or

limitations.

(a) It is deceptive for an industry member to misrepresent the

nature or extent of any prerequisites or qualifications for enrollment

in a course or program of instruction.

(b) It is deceptive for an industry member to misrepresent that the

lack of a high school education or prior training or experience is not

an impediment to successful completion of a course or obtaining

employment in the field for which the course provides training.

9. Section 254.6 is revised to read as follows:

Sec. 254.6 Deceptive use of diplomas, degrees, or certificates.

(a) It is deceptive for an industry member to issue a degree,

diploma, certificate of completion, or any similar document, that

misrepresents, directly or indirectly, the subject matter, substance,

or content of the course of study or any other material fact concerning

the course for which it was awarded or the accomplishments of the

student to whom it was awarded.

(b) It is deceptive for an industry member to offer or confer an

academic, professional, or occupational degree, if the award of such

degree has not been authorized by the appropriate State educational

agency or approved by a nationally recognized accrediting agency,

unless it clearly and conspicuously discloses, in all advertising and

promotional materials that contain a reference to such degree, that its

award has not been authorized or approved by such an agency.

(c) It is deceptive for an industry member to offer or confer a

high school diploma unless the program of instruction to which it

pertains is substantially equivalent to that offered by a resident

secondary school, and unless the student is informed, by a clear and

conspicuous disclosure in writing prior to enrollment, that the

industry member cannot guarantee or otherwise control the recognition

that will be accorded the diploma by institutions of higher education,

other schools, or prospective employers, and that such recognition is a

matter solely within the discretion of those entities.

10. Section 254.7 is revised to read as follows:

Sec. 254.7 Deceptive sales practices.

(a) It is deceptive for an industry member to use advertisements or

promotional materials that misrepresent, directly or by implication,

that employment is being offered or that a talent hunt or contest is

being conducted. For example, captions such as, ``Men/women wanted to

train for * * *,'' ``Help Wanted,'' ``Employment,'' ``Business

Opportunities,'' and words or terms of similar import, may falsely

convey that employment is being offered and therefore should be

avoided.

(b) It is deceptive for an industry member to fail to disclose to a

prospective student, prior to enrollment, the total cost of the program

and the school's refund policy if the student does not complete the

program.

(c) It is deceptive for an industry member to fail to disclose to a

prospective student, prior to enrollment, all requirements for

successfully completing the course of program and the circumstances

that would constitute grounds for terminating the student's enrollment

prior to completion of the program.

11. Section 254.8 is removed.

12. Section 254.9 is removed.

13. Section 254.10 is removed.

By direction of the Commission, Commissioner Swindle dissenting.

Donald S. Clark,

Secretary.

DISSENTING STATEMENT OF COMMISSIONER ORSON SWINDLE in Regulatory

Reform-Vocational School Guides, File No. P964220

The Commission today has issued revised Guides for Private

Vocational and Distance Schools (``Guides'') to address certain

claims that private vocational schools make to their students and

prospective students. I have voted against the Guides for two

reasons. One reason is that the Guides are not likely to promote

voluntary compliance because they do not resolve any demonstrated

uncertainly among private vocational schools over what claims are

likely to be considered deceptive. The other reason is that any need

for Commission action would be largely eliminated if other

government regulations and private oversight schemes were more

actively enforced.

The Commission has a number of weapons in its arsenal to prevent

unfair or deceptive acts and practices, each designed to be used for

a specific purpose. Guides are issued when the Commission believes

that guidance as to legal requirements ``would be beneficial in the

public interest and would serve to bring about more widespread and

equitable observance of laws administered by the Commission.''

Commission Rule of Practice 1.6. The purpose of such guidance is to

``provide the basis for voluntary and simultaneous abandonment of

unlawful practices by members of industry.'' Commission Rule of

Practice 1.5.

The Commission has successfully used guides and policy

statements to provide industry with standards that eliminate or

substantially reduce uncertainty over what the Commission is likely

to consider deceptive. See, e.g., Guides for the Use of

Environmental Marketing Claims, 16 C.F.R. Part 260; Federal Trade

Commission Enforcement Policy Statement on Food Advertising (May

1994). However, there is no reason to believe here that private

vocational schools are uncertain over what claims the Commission is

likely to consider deceptive. Indeed, the public comments we

received from schools did not reveal any such uncertainty that needs

to be resolved by the Commission to promote voluntary compliance.\1\

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\1\ The comments received from private vocational schools

overwhelmingly complained that reissuing the Guides would be

confusing, frustrating, and burdensome in light of existing

regulatory and oversight schemes--not an auspicious beginning for

fostering voluntary industry compliance.

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Perhaps a better way of combatting misrepresentations would be

for the government agencies and private bodies that directly

regulate this industry to more vigorously enforce their own

prohibitions. The Department of Education (``DOE'') can bar a

private vocational school from receiving federal financial

assistance if it makes misrepresentations in violation of DOE

regulations. 34 C.F.R. Part 668. DOE's regulatory requirements

provide a particularly powerful incentive for most private

vocational schools not to make misrepresentations, given the

critical importance to most of them of continuing to participate in

federal financial assistance programs. State licensing boards and

private accrediting bodies also can revoke the license or

accreditation of a private vocational school that make

misrepresentations.

Some private vocational schools may make misrepresentations

notwithstanding these layers of regulation and oversight. When this

occurs, DOE, state licensing boards, and private accreditation

bodies should use their authority and their standards to address

these misrepresentations in the first instance. Although Commission

law enforcement action may also be needed to address such

misrepresentations in discrete circumstances, I do not believe this

possibility justifies our issuance of the Guides.

I dissent.

[FR Doc. 98-21296 Filed 8-7-98; 8:45am]

BILLING CODE 6750-01-M