October 21, 2019

October 21, 2019

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FTC and Veterans Affairs Announce MOA On Referrals For Deceptive Advertising, Sales Or Enrollment Practices Targeting Veterans Using Military Education Benefits

At the end of last week, the Federal Trade Commission (FTC) and the Department of Veterans Affairs (VA) announced that they have entered into a Memorandum of Agreement (MOA) “to provide mutual assistance in the oversight and enforcement of laws pertaining to the advertising, sales, and enrollment practices of institutions of higher learning and other establishments that offer training for military education benefits recipients.”

Pursuant to 38 U.S.C. section 3696, the Secretary of Veterans Affairs is prohibited from approving the enrollment of a veteran eligible for military education benefits “in any course offered by an institution which utilizes advertising, sales, or enrollment practices of any type which are erroneous, deceptive, or misleading either by actual statement, omission, or intimation.”  Section 3696 also requires the VA Secretary to enter into an agreement with the FTC “to utilize, where appropriate, its services and facilities, consistent with its available resources, in carrying out investigations and making the Secretary’s determinations [whether an institution has used erroneous, deceptive or misleading practices.]”  The agreement must provide for referrals to the FTC where the VA believes an institution is engaging in erroneous, deceptive or misleading advertising, sales, or enrollment practices and the FTC “in its discretion will conduct an investigation and make preliminary findings.”

The MOA is intended to implement the requirements of Section 3696.  It provides that the VA can request that the FTC investigate an institution approved for the enrollment of veterans eligible for military education benefits and that, when making a referral, the VA’s Director of Education Services must “provide a written explanation of the basis for his or her belief that the institution subject to the referral is utilizing or has utilized, advertising, sales, or enrollment practices of any type that are deceptive.  Upon receiving a referral, the FTC’s Director of the Bureau of Consumer Protection (Director) must evaluate the information provided by the VA and “in his or her discretion, determine whether acceptance of the referral is consistent with the Commission’s existing investigative, enforcement, and resource priorities.”  The MOA lists factors the Director can consider in determining whether to accept a referral, such as “whether the violations allegedly occurred on a regular and ongoing basis” and “the nature and amount of consumer injury at issue and the number of consumers affected.”

The MOA also provides that:

  • The FTC’s acceptance or rejection of a referral is not to be construed as a decision by the FTC on the merits of the referral and a rejection of a referral may not be the sole basis on which the VA determines whether an institution is engaging in erroneous, deceptive or misleading advertising, sales, or enrollment practices.

  • If the FTC accepts a referral, the Director must direct the FTC staff to conduct an investigation and prepare preliminary findings.  For purposes of the MOA, “preliminary findings” means “either a nonpublic analysis prepared by FTC staff or an administrative or federal district court complaint approved by the Commission and which contains the FTC’s allegations regarded the referred institution’s practices.”

  • The FTC’s preliminary findings are intended to be used by the VA in deciding whether or not to approve an eligible veteran’s enrollment in an institution because the institution is engaging in erroneous, deceptive or misleading advertising, sales, or enrollment practices.  However, the MOA provides that the FTC’s preliminary findings “are not a determination by the Commission as to whether the institution has been or is violating Section 5 of the FTC Act, an order finalized thereunder, or any other laws enforced by the FTC.”

  • The MOA does not require the FTC, or limit the FTC’s authority, to investigate whether educational institutions or others have violated [Section 5 of the FTC Act] by committing unfair or deceptive sales, advertising, or enrollment practices, or any other laws enforced by the FTC” and the FTC can use materials obtained pursuant to the MOA when carrying out investigations under the FTC Act and other laws.

Copyright © by Ballard Spahr LLP

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Culhane, Ballard, Partner
Partner

John L. Culhane, Jr., is known for his work advising on interstate direct and indirect consumer and residential mortgage loan and leasing programs, through both traditional brick-and-mortar facilities and e-commerce. Before joining Ballard Spahr, Mr. Culhane was associate counsel with Mellon Bank, N.A.; associate counsel with Bank of America NT&SA; and senior attorney (section chief) with the National Credit Union Administration, the federal agency regulating federal credit unions.

Mr. Culhane addresses issues involving licensing,...

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Anthony Kaye, Ballard Spahr Law Firm, New York, Business Litigation Attorney
Partner

Anthony C. Kaye focuses on business litigation and complex civil litigation at both the trial and appellate levels in federal and state courts throughout the United States. Mr. Kaye has defended high-stakes, complex matters in a wide variety of areas, including consumer financial and mortgage banking services, intellectual property, business governance disputes, communications, product liability and mass torts, and real estate and construction.

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