[Congressional Record Volume 146, Number 115 (Monday, September 25, 2000)]
[House]
[Pages H8005-H8006]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




            COLLEGE SCHOLARSHIP FRAUD PREVENTION ACT OF 1999

  Mr. UPTON. Mr. Speaker, I move to suspend the rules and pass the 
Senate bill (S. 1455) to enhance protections against fraud in the 
offering of financial assistance for college education, and for other 
purposes.
  The Clerk read 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.
       (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.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Michigan (Mr. Upton) and the gentleman from Michigan (Mr. Kildee) each 
will control 20 minutes.
  The Chair recognizes the gentleman from Michigan (Mr. Upton).


                             General Leave

  Mr. UPTON. Mr. Speaker, I ask unanimous consent that all Members may 
have 5 legislative days within which to revise and extend their remarks 
on S. 1455.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Michigan?
  There was no objection.
  Mr. UPTON. Mr. Speaker, I yield such time as he may consume to the 
gentleman from Pennsylvania (Mr. Goodling), the chairman of the 
Committee on Education and the Workforce.
  Mr. GOODLING. Mr. Speaker, I rise today in support of S. 1455 which 
mirrors the provisions of H.R. 3210 introduced by my friend and as I 
said earlier a very important colleague on the Committee on Education 
and the Workforce the gentleman from Michigan (Mr. Upton).
  Scholarships, grant aid, student loans and other forms of financial 
assistance have long assisted our Nation's college students in pursuing 
a postsecondary education. The College Board in its Trends in Student 
Aid for 1999 estimated that $64.1 billion was awarded to students in 
the form of scholarships, grants, loans, and other student aid for the 
1998-99 academic year. Student aid comes from various sources, 
including the Federal Government, States, private and public entities 
and postsecondary institutions.
  Unfortunately, not all scholarship offers are legitimate. Phony 
scholarship offerings, scams and other fraudulent offerings do great 
harm to our Nation's students who are searching for ways to help pay 
the ever-increasing costs of a college education. This bill addresses 
this issue and allows for enhanced criminal penalties for offenses 
involving scholarship scams.
  In addition, this bill directs the Secretary of Education, working 
with the Federal Trade Commission, to maintain a scholarship fraud 
awareness site on the department's Internet Web site. This Web site 
will provide valuable information with respect to scholarship fraud so 
students will have a source of information for verifying whether they 
are being offered legitimate scholarship aid.
  Again, I congratulate and thank the gentleman from Michigan (Mr. 
Upton) for presenting this legislation.

[[Page H8006]]

  Mr. KILDEE. Mr. Speaker, I yield myself such time as I may consume. I 
rise in support of S. 1455.
  Mr. Speaker, as we are all aware, the cost of a college education is 
becoming increasingly high, causing more and more students to seek some 
type of financial assistance. Fortunately there are a number of private 
and Federal scholarship opportunities available to needy and deserving 
students. However, some unscrupulous companies are making money off 
unsuspecting students and their families by imitating legitimate 
government agencies and grant-giving foundations.
  Often these fraudulent companies guarantee scholarships in exchange 
for an advanced fee. Other times they trick students into divulging 
their checking account numbers and access their accounts without their 
consent. Whatever the particular scheme, more than 350,000 students and 
their families lose over $5 million to scholarship fraud every year.
  To address this growing problem, in 1996 the Federal Trade Commission 
launched Project Scholarscam, a joint law enforcement and consumer 
education effort aimed at purveyors of fraudulent scholarship services. 
While the FTC should be commended for its efforts to educate and 
prevent the exploitation of students and their families, the agency 
lacks the authority to prosecute scholarship scam artists to the 
fullest extent of the law.
  S. 1455 not only increases the criminal penalties for fraud in 
connection with the provision of scholarship services, it removes the 
shield of bankruptcy that many financial assistance services hide 
behind when prosecuted. In addition, S. 1455 requires the Department of 
Education, in conjunction with the FTC, to create a Web site of 
legitimate sources of scholarship information.
  I urge Members to support this legislation.
  Mr. Speaker, I reserve the balance of my time.
  Mr. UPTON. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I commend the speakers that have spoken on this bill and 
those who helped lead the way in the Senate as well. Again we have seen 
bipartisan cooperation.
  I rise today in support of S. 1455, the College Scholarship Fraud 
Prevention Act of 1999. This bill will prevent unscrupulous businesses 
from defrauding vulnerable students and their families seeking to 
finance their education. In essence we identified a scam that needs to 
be corrected and we have done it with common sense, bipartisan 
legislation. I urge my colleagues to follow the lead of the other body 
and pass this legislation this afternoon.
  Students in Michigan and across the Nation are targeted by corrupt 
companies who prey on their hopes and dreams for a college education. A 
college education is one of the most important investments a person 
will ever make. College is not only a place where students decide what 
professions to follow but, more importantly, a place that begins their 
journey into adulthood. While education is central to students, it is 
even more vital to our Nation. Our political system depends on an 
educated citizenry who are able to make informed decisions. Also in 
light of the continual technological advances, businesses require an 
educated workforce. Thus, we want to encourage more students to in fact 
pursue a college education.
  But each year crooked companies send literally thousands of letters 
out to hopeful students offering bogus scholarships. Scam artists 
target some of the most vulnerable members of our society. They collect 
millions of dollars, not thousands but millions of dollars, by preying 
on the hopes and dreams of students who desire to improve their life 
through higher education.
  The FTC, the Federal Trade Commission, has been aware of this growing 
problem. In fact, in 1996 the FTC initiated Project Scholarship Scam, a 
nationwide crackdown on fraudulent scholarship search services. Though 
the FTC is dedicated to stopping these con artists, the FTC can only 
file civil charges that include redress to defrauded consumers and 
injunctions prohibiting or restricting future market activity. In most 
cases, the defendants settle with the FTC because evidence of their 
fraudulent conduct is so overwhelming. For example, in one case Student 
Assistance Services paid $300,000 to defrauded consumers and agreed not 
to offer further scholarship services and to pose, in fact, a $75 bond 
before telemarketing. Reluctantly, the FTC can only use injunctions to 
deter these con artists from their activities because they lack the 
authority to prosecute them on criminal charges.
  It is clear that what this bill will do is in fact provide more 
protection for the most vulnerable members of our community, needy 
students and their families, than ever before. I urge my colleagues to 
support this bipartisan legislation and commend the remarks of my 
previous colleagues who spoke in support of this bill.
  Mr. Speaker, I have no further requests for time, and I yield back 
the balance of my time.
  Mr. KILDEE. Mr. Speaker, I yield back the balance of my time.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentleman from Michigan (Mr. Upton) that the House suspend the rules 
and pass the Senate bill, S. 1455.
  The question was taken; and (two-thirds having voted in favor 
thereof) the rules were suspended and the Senate bill was passed.
  A motion to reconsider was laid on the table.

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