On April 15, 2022, the Federal Trade Commission (FTC) announced that it obtained a permanent injunction against an Illinois-based, offshore, for-profit medical school for deceptive marketing practices. In its complaint and stipulated order filed same-day in the U.S. District Court for the Northern District of Illinois, the FTC alleged that the school violated the Telemarketing Sales Rule (TSR) when it used deceptive marketing practices to lure prospective students. Specifically, the FTC alleged that the school violated the TSR by overstating students’ performance on the medical licensing exam and by overstating the number of students who match with a medical residency program after graduation. The FTC also alleged that the school violated various sections of the FTC Act when it failed to provide appropriate disclosures in its student-loan agreements. For example, the school’s tuition financing contracts, which are credit agreements, failed to include a “Holder Rule Notice,” informing the borrowers of their rights to assert legal claims and defenses against any subsequent holder of their contracts, or a “Credit Practices Rule” notice, notifying cosigners of certain obligations.
The stipulated recovery includes a judgment of $1.2 million, including $375,000 of forgiven debt for former students. The school is also permanently enjoined from misrepresenting its licensing exam pass rates or residency match rates. Samuel Levine, Director of the FTC’s Bureau of Consumer Protection, commented on the order stating, “Schools and others who ignore the Holder Rule do so at their peril.”
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