[Congressional Record Volume 145, Number 154 (Thursday, November 4, 1999)]
[Senate]
[Pages S14047-S14049]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




            COLLEGE SCHOLARSHIP FRAUD PREVENTION ACT OF 1999

  Mr. GRASSLEY. Mr. President, I ask unanimous consent that the Senate 
now proceed to the consideration of Calendar No. 357, bill S. 1455.
  The PRESIDING OFFICER. The clerk will report the bill by title.
  The legislative clerk read as follows:

       A bill (S. 1455) to enhance protections against fraud in 
     the offering of financial assistance for college education, 
     and for other purposes.

  There being no objection, the Senate proceeded to consider the 
bill which had been reported from the Committee on the Judiciary, with 
an amendment to strike all after the enacting clause and inserting in 
lieu thereof the following:

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``College Scholarship Fraud 
     Prevention Act of 1999''.

     SEC. 2. FINDINGS.

       Congress makes the following findings:
       (1) A substantial amount of fraud occurs in the offering of 
     college education financial assistance services to consumers.
       (2) Such fraud includes the following:
       (A) Misrepresentations regarding the provision of sources 
     from which consumers may obtain financial assistance 
     (including scholarships, grants, loans, tuition, awards, and 
     other assistance) for purposes of financing a college 
     education.
       (B) Misrepresentations regarding the provision of 
     portfolios of such assistance tailored to the needs of 
     specific consumers.
       (C) Misrepresentations regarding the pre-selection of 
     students as eligible to receive such assistance.
       (D) Misrepresentations that such assistance will be 
     provided to consumers who purchase specified services from 
     specified entities.
       (E) Misrepresentations regarding the business relationships 
     between particular entities and entities that award or may 
     award such assistance.
       (F) Misrepresentations regarding refunds of processing fees 
     if consumers are not provided specified amounts of such 
     assistance, and other misrepresentations regarding refunds.
       (3) In 1996, the Federal Trade Commission launched 
     ``Project Scholarscam'', a joint law enforcement and consumer 
     education campaign directed at fraudulent purveyors of so-
     called ``scholarship services''.
       (4) Despite the efforts of the Federal Trade Commission, 
     colleges and universities, and nongovernmental organizations, 
     the continued lack of awareness about scholarship fraud 
     permits a significant amount of fraudulent activity to occur.

     SEC. 3. SENTENCING ENHANCEMENT FOR HIGHER EDUCATION FINANCIAL 
                   ASSISTANCE FRAUD.

       Pursuant to its authority under section 994(p) of title 28, 
     United States Code, the United States Sentencing Commission 
     shall amend the Federal sentencing guidelines in order to 
     provide for enhanced penalties for any offense involving 
     fraud or misrepresentation in connection with the obtaining 
     or providing of, or the furnishing of information to a 
     consumer on, any scholarship, grant, loan, tuition, discount, 
     award, or other financial assistance for purposes of 
     financing an education at an institution of higher education, 
     such that those penalties are comparable to the base offense 
     level for misrepresentation that the defendant was acting on 
     behalf of a charitable, educational, religious, or political 
     organization, or a government agency.

     SEC. 4. EXCLUSION OF DEBTS RELATING TO COLLEGE FINANCIAL 
                   ASSISTANCE SERVICES FRAUD FROM PERMISSIBLE 
                   EXEMPTIONS OF PROPERTY FROM ESTATES IN 
                   BANKRUPTCY.

       Section 522(c) of title 11, United States Code, is 
     amended--
       (1) by striking ``or'' at the end of paragraph (2);
       (2) by striking the period at the end of paragraph (3) and 
     inserting ``; or''; and
       (3) by adding at the end the following:
       ``(4) a debt in connection with fraud in the obtaining or 
     providing of any scholarship, grant, loan, tuition, discount, 
     award, or other financial assistance for purposes of 
     financing an education at an institution of higher education 
     (as that term is defined in section 101 of the Higher 
     Education Act of 1954 (20 U.S.C. 1001)).''.

     SEC. 5. SCHOLARSHIP FRAUD ASSESSMENT AND AWARENESS 
                   ACTIVITIES.

       (a) Annual Report on Scholarship Fraud.--
       (1) Requirement.--The Attorney General and the Secretary of 
     Education, in conjunction with the Federal Trade Commission, 
     shall jointly submit to Congress each year a report on fraud 
     in the offering of financial assistance for purposes of 
     financing an education at an institution of higher education. 
     Each report shall contain an assessment of the nature and 
     quantity of incidents of such fraud during the one-year 
     period ending on the date of such report.
       (2) Initial report.--The first report under paragraph (1) 
     shall be submitted not later than 18 months after the date of 
     the enactment of this Act.
       (b) National Awareness Activities.--The Secretary of 
     Education shall, in conjunction with the Federal Trade 
     Commission, maintain a scholarship fraud awareness site on 
     the Internet web site of the Department of Education. The 
     scholarship fraud awareness site may include the following:
       (1) Appropriate materials from the Project Scholarscam 
     awareness campaign of the Commission, including examples of 
     common fraudulent schemes.
       (2) A list of companies and individuals who have been 
     convicted of scholarship fraud in Federal or State court.
       (3) An Internet-based message board to provide a forum for 
     public complaints and experiences with scholarship fraud.
       (4) An electronic comment form for individuals who have 
     experienced scholarship fraud or have questions about 
     scholarship fraud, with appropriate mechanisms for the 
     transfer of comments

[[Page S14048]]

     received through such forms to the Department and the 
     Commission.
       (5) Internet links to other sources of information on 
     scholarship fraud, including Internet web sites of 
     appropriate nongovernmental organizations, colleges and 
     universities, and government agencies.
       (6) An Internet link to the Better Business Bureau in order 
     to assist individuals in assessing the business practices of 
     other persons and entities.
       (7) Information on means of communicating with the Federal 
     Student Aid Information Center, including telephone and 
     Internet contact information.

  Mr. LEAHY. Mr. President, one of the singular most important issues 
facing us today is education. Affordable higher education is an 
opportunity that must be made available to all of our young people. To 
that end, public and private scholarships, grants and loans have long 
assisted our nation's students in pursuing college degrees.
  Phony scholarship offerings, scams and frauds do great harm to our 
nation's students. No student seeking to attend a college or university 
should have to worry about whether a scholarship offering is legitimate 
or wonder whether the business to which he or she has mailed an 
application fee actually exists. I am glad to join in the effort of 
Senators Abraham and Feingold to add to the arsenal of our current laws 
to combat these types of frauds.
  I commented at a Judiciary Committee hearing on this bill earlier 
this month that the goals of this legislation are laudable. We need to 
do more to combat scholarship scams and promote the dissemination of 
information about legitimate sources of higher education funding. 
Nevertheless, I raised questions about whether the original bill 
reflected the most effective way to pursue the goals we all share. I am 
pleased to join as a cosponsor of the substitute amendment that 
addresses the concerns I raised.
  For instance, the original bill proposed raising the long-standing 
statutory maximum punishment of five years for mail and wire fraud to 
ten years in cases of scholarship scams. In light of the fact that 
scholarship scams often involve more than one victim and may result in 
multiple charges, raising the statutory penalties may not be necessary 
to effectuate punishment goals. I suggested that a more appropriate and 
effective solution to ensure adequate punishment may be to direct the 
Sentencing Commission to consider a guideline enhancement for cases 
involving fraudulent scholarship offerings. The substitute amendment 
makes this change and directs the Sentencing Commission to amend the 
sentencing guidelines to provide enhanced penalties for any offenses 
involving scholarship scams such that those penalties are comparable to 
the base offense level for misrepresentation that the defendant was 
acting on behalf of a charitable, educational, religious, or political 
organization, or a government agency. In effect, this amendment directs 
the Sentencing Commission to increase the guideline offense levels by 2 
levels.
  The substitute amendment is an improvement since it avoids 
complicating the wire and mail fraud statutes with different penalties 
depending on the nature of the underlying fraud.
  The substitute amendment directs the Attorney General and the 
Secretary of Education, in consultation with the Federal Trade 
Commission to report to Congress on the nature and quantity of 
incidents of scholarship scams. This report will assist the Judiciary 
Committee in monitoring whether additional legislative steps are needed 
in this area.
  The substitute amendment makes important improvements in the original 
bill, and I urge the Congress to pass this legislation promptly.
  Mr. GRASSLEY. I ask unanimous consent the committee amendment be 
agreed to, the bill be considered read the third time and passed, the 
motion to reconsider be laid upon the table, and that any statements 
relating to the bill be printed in the Record.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The committee amendment in the nature of a substitute was agreed to.
  The bill (S. 1455) as amended, was read the third time and passed, as 
follows:

                                S. 1455

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``College Scholarship Fraud 
     Prevention Act of 1999''.

     SEC. 2. FINDINGS.

       Congress makes the following findings:
       (1) A substantial amount of fraud occurs in the offering of 
     college education financial assistance services to consumers.
       (2) Such fraud includes the following:
       (A) Misrepresentations regarding the provision of sources 
     from which consumers may obtain financial assistance 
     (including scholarships, grants, loans, tuition, awards, and 
     other assistance) for purposes of financing a college 
     education.
       (B) Misrepresentations regarding the provision of 
     portfolios of such assistance tailored to the needs of 
     specific consumers.
       (C) Misrepresentations regarding the pre-selection of 
     students as eligible to receive such assistance.
       (D) Misrepresentations that such assistance will be 
     provided to consumers who purchase specified services from 
     specified entities.
       (E) Misrepresentations regarding the business relationships 
     between particular entities and entities that award or may 
     award such assistance.
       (F) Misrepresentations regarding refunds of processing fees 
     if consumers are not provided specified amounts of such 
     assistance, and other misrepresentations regarding refunds.
       (3) In 1996, the Federal Trade Commission launched 
     ``Project Scholarscam'', a joint law enforcement and consumer 
     education campaign directed at fraudulent purveyors of so-
     called ``scholarship services''.
       (4) Despite the efforts of the Federal Trade Commission, 
     colleges and universities, and nongovernmental organizations, 
     the continued lack of awareness about scholarship fraud 
     permits a significant amount of fraudulent activity to occur.

     SEC. 3. SENTENCING ENHANCEMENT FOR HIGHER EDUCATION FINANCIAL 
                   ASSISTANCE FRAUD.

       Pursuant to its authority under section 994(p) of title 28, 
     United States Code, the United States Sentencing Commission 
     shall amend the Federal sentencing guidelines in order to 
     provide for enhanced penalties for any offense involving 
     fraud or misrepresentation in connection with the obtaining 
     or providing of, or the furnishing of information to a 
     consumer on, any scholarship, grant, loan, tuition, discount, 
     award, or other financial assistance for purposes of 
     financing an education at an institution of higher education, 
     such that those penalties are comparable to the base offense 
     level for misrepresentation that the defendant was acting on 
     behalf of a charitable, educational, religious, or political 
     organization, or a government agency.

     SEC. 4. EXCLUSION OF DEBTS RELATING TO COLLEGE FINANCIAL 
                   ASSISTANCE SERVICES FRAUD FROM PERMISSIBLE 
                   EXEMPTIONS OF PROPERTY FROM ESTATES IN 
                   BANKRUPTCY.

       Section 522(c) of title 11, United States Code, is 
     amended--
       (1) by striking ``or'' at the end of paragraph (2);
       (2) by striking the period at the end of paragraph (3) and 
     inserting ``; or''; and
       (3) by adding at the end the following:
       ``(4) a debt in connection with fraud in the obtaining or 
     providing of any scholarship, grant, loan, tuition, discount, 
     award, or other financial assistance for purposes of 
     financing an education at an institution of higher education 
     (as that term is defined in section 101 of the Higher 
     Education Act of 1954 (20 U.S.C. 1001)).''.

     SEC. 5. SCHOLARSHIP FRAUD ASSESSMENT AND AWARENESS 
                   ACTIVITIES.

       (a) Annual Report on Scholarship Fraud.--
       (1) Requirement.--The Attorney General and the Secretary of 
     Education, in conjunction with the Federal Trade Commission, 
     shall jointly submit to Congress each year a report on fraud 
     in the offering of financial assistance for purposes of 
     financing an education at an institution of higher education. 
     Each report shall contain an assessment of the nature and 
     quantity of incidents of such fraud during the one-year 
     period ending on the date of such report.
       (2) Initial report.--The first report under paragraph (1) 
     shall be submitted not later than 18 months after the date of 
     the enactment of this Act.
       (b) National Awareness Activities.--The Secretary of 
     Education shall, in conjunction with the Federal Trade 
     Commission, maintain a scholarship fraud awareness site on 
     the Internet web site of the Department of Education. The 
     scholarship fraud awareness site may include the following:
       (1) Appropriate materials from the Project Scholarscam 
     awareness campaign of the Commission, including examples of 
     common fraudulent schemes.
       (2) A list of companies and individuals who have been 
     convicted of scholarship fraud in Federal or State court.
       (3) An Internet-based message board to provide a forum for 
     public complaints and experiences with scholarship fraud.
       (4) An electronic comment form for individuals who have 
     experienced scholarship fraud or have questions about 
     scholarship fraud, with appropriate mechanisms for the 
     transfer of comments received through such forms to the 
     Department and the Commission.

[[Page S14049]]

       (5) Internet links to other sources of information on 
     scholarship fraud, including Internet web sites of 
     appropriate nongovernmental organizations, colleges and 
     universities, and government agencies.
       (6) An Internet link to the Better Business Bureau in order 
     to assist individuals in assessing the business practices of 
     other persons and entities.
       (7) Information on means of communicating with the Federal 
     Student Aid Information Center, including telephone and 
     Internet contact information.

                          ____________________