New York Attorney General Continues Crackdown on For-Profit Colleges

New York Attorney General recently announced a $375,000 settlement with Flatiron School, Inc., a New York city-based coding school that operated without a license from the New York State Education Department and for allegedly promoting its job placement rate and the average starting salary of its graduates in an improper fashion.

The settlement follows a series of actions taken by the NY OAG to hold for-profit colleges accountable and to provide relief to victimized students. 

“Coding boot camps have become popular as students seek careers in the tech industry, but for-profit coding schools must comply with state requirements, including obtaining a license before operating,” said AG Schneiderman.  “Schools must also provide clear explanations of advertised job placement rates and salary claims of their graduates.” 

According to the NY AG, Flatiron, a for-profit career school doing business in New York City, offers web applications and computer coding classes at its physical location and online.  According to the Attorney General’s investigation, Flatiron operated without a license from SED and without authorization to provide online classes between October 2013 and September 2017.

The Attorney General’s investigation also alleges to have uncovered unsubstantiated claims on Flatiron’s website concerning the percentage of its graduates that obtained employment after completing courses and the average salaries of graduates.  According to the NY AG, Flatiron failed to clearly and conspicuously disclose that the represented employment rate included not only full time salaried employees but also apprentices, contract employees and self-employed freelance workers, some who were allegedly employed for less than twelve weeks. 

The NY AG also alleges that Flatiron failed to clearly and conspicuously disclose that its average salary claim included full time employed graduates only, which represent only slightly more than half of classroom graduates and approximately 40% of online graduates. 

In order to obtain a SED license, a non-degree granting career school must meet certain criteria, including use of an approved curriculum and employing a licensed director and teachers.  The school must also demonstrate financial viability.  These requirements help safeguard students that attend licensed schools.

The settlement terms provide that Flatiron:

• May not operate any educational institution without obtaining necessary licenses and complying with SED laws, rules and regulations
• Must clearly and conspicuously disclose the method and categories by which its employment rate and average salaries were calculated in any advertising or oral or written disclosure to students
• Must clearly and conspicuously disclose the population comprising the average salary, as well as the population comprising the employment rate calculation wherever it discloses both its employment rate and average starting salary of its graduates
• May not count non-permanent graduates as employed unless they (i) receive compensation in return for services provided; (ii) are anticipated to be employed for at least three months; and (iii) the position requires that the individual work at least 20 hours a week  

The announcement comes on the heels of DeVry University’s settlement with the FTC for allegedly harming consumers by deceptive advertisements that touted employment and earning potential.

Contact the author if you are interested in implementing preventative advertising compliance measures, or if you are the subject of a state or federal investigation or enforcement action.  You can also follow him on LinkedIn at FTC Defense Lawyer.

Richard B. Newman is an Internet marketing compliance and regulatory defense attorney at Hinch Newman LLP focusing on advertising and digital media matters. His practice includes conducting legal compliance reviews of advertising campaigns, representing clients in investigations and enforcement actions brought by the Federal Trade Commission and state Attorneys General, commercial litigation, advising clients on promotional marketing programs, and negotiating and drafting legal agreements.

HINCH NEWMAN LLP. ADVERTISING MATERIAL. These materials are provided for informational purposes only and are not to be considered legal advice, nor do they create a lawyer-client relationship. No person should act or rely on any information in this article without seeking the advice of an attorney. Information on previous case results does not guarantee a similar future result.