[Federal Register Volume 63, Number 153 (Monday, August 10, 1998)]
[Rules and Regulations]
[Pages 42570-42574]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-21296]


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FEDERAL TRADE COMMISSION

16 CFR Part 254


Guides for Private Vocational and Distance Education Schools

AGENCY: Federal Trade Commission.

ACTION: Final rule.

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SUMMARY: The Federal Trade Commission (FTC or Commission) announces 
final amendments to its Guides for Private Vocational Schools to: add a 
provision addressing misrepresentations regarding the availability of 
employment after completion of training or the success of a school's 
graduates in obtaining employment; streamline the Guides by eliminating 
redundancies and provisions that do not offer guidance specific to 
vocational schools; and change the title of the Guides.

EFFECTIVE DATE: This rule is effective October 9, 1998.

ADDRESSES: Requests for copies of the amended Guides should be sent to 
the Consumer Response Center, Room 130, Federal Trade Commission, Sixth 
St. and Pennsylvania Ave., NW, Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT:
Joseph J. Koman, Jr., (202) 326-3014, Carol Jennings (202) 326-3010, or 
Walter Gross III, (202) 326-3319, Federal Trade Commission, Bureau of 
Consumer Protection, Sixth St. and Pennsylvania Ave., NW, Washington, 
DC 20580.

SUPPLEMENTARY INFORMATION:

I. Background

    The Vocational Schools Guides, adopted by the Commission in 1972, 
are intended to advise proprietary businesses offering vocational 
training courses, either on the school's premises or through 
correspondence or another long-distance method, how to avoid unfair or 
deceptive advertising and promotional claims when recruiting and 
enrolling students. The Guides address claims that are descriptive of 
the school, such as potentially deceptive trade or business names, and 
claims about accreditation, content of curricula, teachers' 
qualifications, teaching methods, affiliations with other private or 
public entities, and approval by other agencies or institutions. The 
Guides also address misleading representations regarding financial 
assistance and program costs, as well as enrollment qualification or 
limitations. Schools are cautioned to avoid using classified 
advertisements that appear to be ``help-wanted'' ads, misleading 
prospective students about opportunities for employment while 
undergoing training, and the deceptive use of diplomas or degrees. The 
Guides suggest certain affirmative disclosures prior to enrolling 
students and address miscellaneous sales and debt collection practices.
    These Guides, like other industry guides issued by the Commission, 
are ``administrative interpretations of laws administered by the 
Commission for the guidance of the public in conducting its affairs in 
conformity with legal requirements.'' 16 CFR 1.5. Conduct inconsistent 
with the Guides may result in corrective action by the Commission under 
applicable statutory provisions.
    As part of the Commission's systematic review of all of its rules 
and guides, the Commission published a request for comments concerning 
the Vocational Schools Guides on April 3, 1996 (61 FR 14685). The 
Commission sought information about the costs and benefits of the 
Guides and their regulatory and economic impact. In response to this 
notice, nine comments were filed by government agencies, consumers and 
consumer organizations, and industry members and trade associations.\1\ 
These comments indicated general support for relating the Guides, 
although some industry members recommended repealing them.
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    \1\ Comments were filed by the New York Regional Office of the 
U.S. Department of Education Office of Postsecondary Education (two 
comments); New York State Beauty Schools Association, Inc.; National 
Consumer Law Center; Career College Association; Distance Education 
and Training Council; Colorado Aero Tech; American Association of 
Cosmetology Schools; and one individual consumer.
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    On April 23, 1997, the Commission announced its decision to retain 
the Guides and sought supplemental comment on some proposed 
modifications (62 FR 19703). The Commission recognized that there is 
some overlap between its Guides and regulations of the Department of 
Education. Because the Department of Education administers student loan 
and grant money for vocational training, it plays the primary role in 
addressing abuses in this industry. There is a concurrent role for the 
Commission, however, in monitoring and addressing deceptive promotional 
practices.\2\ State licensing agencies also regulate vocational 
training. Increasingly, however, vocational schools are owned by 
national or regional chains; thus, a federal enforcement presence 
remains important.
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    \2\ For example, the Department of Education uses its 
investigative and enforcement resources primarily to address 
practices occurring after a student has signed up for training, 
rather than advertising and promotional practices that take place 
during recruitment of students.

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[[Page 42571]]

    In its second Federal Register notice, the Commission also sought 
comment on various proposed amendments to the Guides. In particular, 
the Commission proposed adding to the Guides a provision addressing 
misrepresentations about a school's placement success following 
training. While the 1972 Guides addressed claims about placement 
assistance and the availability of employment during training, they did 
not address false or deceptive claims about employment prospects after 
graduation or the success that a school's graduates have realized in 
obtaining employment related to the training. The Commission believes 
that such claims are important to prospective students of vocational 
training and are likely to become even more important in the future.
    At the same time, in order to streamline the Guides, the Commission 
announced a preliminary decision to delete certain provisions that were 
not specific to vocational schools and merely duplicated other general 
provisions of law, as well as a section suggesting various affirmative 
disclosures prior to the signing of a contract.

II. Amendments to the Guides

    The Committee received comments from 39 parties, representing eight 
government agencies and one association of state regulators, five 
industry trade associations, an accrediting commission for cosmetology 
schools, 21 vocational schools in eight states, one consumer 
organization, and one individual consumer.\3\ The proposed addition to 
the Guides was generally supported by the government agencies and 
consumer representatives and generally opposed by the vocational 
schools and industry trade associations. Oppositions to the proposal 
seems to be based upon a misperception that this statement in the 
Guides would somehow increase burdens on schools already subject to 
regulations of the Department of Education and state agencies.\4\ The 
amendment does not create new requirements, however. As explained in 
the Background section, above, the Guides merely clarify the 
Commission's interpretation of its existing laws.
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    \3\ The comments are listed here with the number assigned to the 
comment by the Office of the Secretary: (1) Career College 
Association; (2) Texas Higher Education Coordinating Board, 
Community and Technical Colleges Division; (3) Silicon Valley 
College; (4) Microcomputer Technology Institutes; (5) Alta Colleges, 
Inc.; (6) National Accrediting Commission of Cosmetology Arts & 
Sciences; (7) Mr. Clifton L. Stewart; (8) Eton Technical Institute; 
(9) Pittsburgh Beauty Academy; (10) Seattle Massage School; (11) 
Divers Institute of Technology; (12) Pittsburgh Beauty Academy of 
Charleroi; (13) International Air Academy; (14) Pittsburgh Beauty 
Academy of New Kensington; (15) Private Career School Association of 
New Jersey; (17) Apex Technical School; (18) Pennsylvania 
Association of Private School Administrators; (19) American 
Association of Cosmetology Schools; (20) Florida Association of 
Postsecondary Schools and Colleges (21) Gene Juarez Academy of 
Beauty; (22) and (26) National Association of State Administrators 
and Supervisors of Private Schools (also attaching comments by the 
Wisconsin Educational Approval Board, Florida Department of 
Education, Idaho Department of Education, Washington Workforce 
Training and Education Coordinating Board, Tennessee Higher 
Education Commission, and Georgia Nonpublic Postsecondary Education 
Commission); (23) The Chubb Institute (North Burnswick, N.J.); (24) 
and (25) The Chubb Institute (Parsippany, N.J.); (27) National 
Consumer Law Center; (28) Yorktowne Business Institute; (29) Laurel 
Business Institute; (30) Montgomery County (MD) Department of 
Housing and Community Affairs, Division of Consumer Affairs; (31) 
Central Pennsylvania School of Massage; (32) Corinthian Colleges, 
Inc.; (33) South Hills Business School; (34) Harris School of 
Business; and (35) Technical Career Institute. These comments, as 
well as the comments filed in response to the earlier notice, are on 
the public record and available for inspection during business hours 
at the Federal Trade Commission, Room 130, Sixth St. and 
Pennsylvania Ave., NW, Washington, DC 20580.
    \4\ Some comments apparently believed that if the proposed 
language were adopted, they would be required to report employment 
information to the Commission. The Guides do not impose any 
reporting requirements, however.
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    Like other Guides adopted by the Commission, the Vocational Schools 
Guides provide businesses with information regarding the application of 
Section 5(a)(1) of the FTC Act, 15 U.S.C. 45(a)(1), to a particular 
industry or a specific type of marketing. Section 59a)(1) declares 
unlawful ``unfair or deceptive acts or practices in or affecting 
commerce.'' The Commission has set forth its interpretation of its 
Section 5 authority in its Deception Policy Statement,\5\ its Policy 
Statement Regarding Advertising Substantiating Doctrine,\6\ and its 
Unfairness Policy Statement.\7\ The Commission will find an 
advertisement deceptive if it contains a representation or omission of 
fact that is likely to mislead consumers acting reasonably under the 
circumstances, and that representation or omission is material to the 
decision to purchase. In addition, objective claims about a product or 
service imply that they are supported by valid evidence. It is 
deceptive, therefore, to make a claim unless, at the time is made, the 
marketer possess and relies upon a reasonably basis substantiating the 
claim. The Commission will find an advertisement or practice unfair if 
it causes, or is likely to cause, substantial consumer injury that is 
not reasonably avoidable by consumers and is not outweigh 
countervailing benefits to consumers or competition.
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    \5\ Letter from the Commission to the Honorable John D. Dingell, 
Chairman, Committee on Energy and Commerce, U.S. House of 
Representatives (Oct. 14, 1983); reprinted in Cliffdale Associates, 
Inc., 103 F.T.C. 110, appendix (1984).
    \6\ 49 FR 30999 (1984); reprinted in Thompson Medical Co., 104 
F.T.C. 648, appendix (1984).
    \7\ Letter from the Commission to Senators Wendell Ford and John 
Danforth (Dec. 17, 1980); reprinted in International Harvester Co., 
104 F.T.C. 949, 1070 (1984).
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    Consumers considering enrolling in a vocational school are likely 
to rely upon claims with regard to employment prospects upon completion 
of training and the success of a schools' graduates in securing 
employment relevant to the training. Generally, the prospective student 
will not be in a position to verify the accuracy of the claim prior to 
enrollment and must rely upon the representations of the school. As 
stated in the comment of the National Consumer Law Center:

    The essence of a vocational school sales presentation is the 
availability of employment following graduation. Misrepresentations 
of these jobs prospects are certainly material is not only the 
student's decision to invest a sizable amount of money in the 
schooling, but also considerable amount of the student's time.\8\
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    \8\ Comment 27 at page 1.

    For example, a claim that a school has a ``90% job placement'' rate 
could be highly persuasive to an individual seeking training. If in 
fact the placement success is significantly lower than 90%, the claim 
would also be deceptive. Similarly, a claim could be deceptive if 
significant information is omitted. For example, a claim that ``90% of 
graduates find jobs'' could be deceptive if only a small percentage of 
those who enroll in the program are able to complete it and graduate. 
The claim also could be deceptive if a significant number of graduates 
cannot obtain the kind of employment for which the purportedly were 
trained, but have to accept other lower level positions at a lower 
salary.
    As noted in a number of industry comments, Department of Education 
regulations also address employment claims by vocational schools. For 
example, regulations setting out standards for participation in federal 
student financial assistance programs state that school that advertise 
job placement rates will make available to prospective students, at or 
before the time of enrollment:

    (i) The most recent available data concerning employment 
statistics, graduation statistics, and any other information 
necessary to substantiate the truthfulness of the advertisements; 
and
    (ii) Relevant State licensing requirements of the State in which 
the institution is located for any job for which an educational

[[Page 42572]]

program offered by the institution is designed to prepare those 
prospective students.\9\

    \9\ 34 CFR 668.14(b)(10).
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In addition, the Department of Education ``may initiate a proceeding * 
* * against an otherwise eligible [for participation in the federal 
student financial assistance programs] institution for any substantial 
misrepresentation * * * regarding the nature of its educational 
program, its financial charges or the employability of its graduates.'' 
\10\ Specific examples of such misrepresentations include (but are not 
limited to) ``false, erroneous of misleading statements--

    \10\ 34 CFR 668.71(a).
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    (a) That the institution is connected with any organization or 
is an employment agency or other agency providing authorized 
training leading directly to employment;
    (b) That the institution maintains a placement service for 
graduates or will otherwise secure or assist its graduates to obtain 
employment unless it provides the student with a clear and accurate 
description of the extent and nature of this service or assistance; 
or
    (c) Concerning government job market statistics in relation to 
the potential placement of its graduates.'' \11\

    \11\ 34 CFR 668.74.
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Parts (a) and (b) above are also addressed by the FTC Guides, for 
example in Secs. 254.2(b)(2), 254.4(a)(7), and 254.7(a). The Guides 
have not, however, until the revisions announced herein, specifically 
addressed deceptive claims regarding employability after graduation or 
the success a school's graduates have realized in obtaining employment 
relevant to the training. In addition, the proposed language has been 
modified to include misrepresentations about salaries that can be 
expect upon completion of the training. The addition to the Guides of 
Sec. 254.4(d) merely complements Department of Education oversight of 
these schools, as it also provides industry-specific guidance with 
regard to the broad proscription of Section 5 of the FTC Act.
    Sections 254.8, 254.9, and 254.10 have been removed from the Guides 
to streamline them, eliminate repetition, and eliminate general 
principles articulated elsewhere in the CFR. Many of the areas 
addressed in Sec. 254.8 are already covered by the Commission's Guides 
Against Deceptive Pricing, 16 CFR 233, and Guide Concerning Use of the 
Word ``Free'' and Similar Representations, 16 CFR 251. In addition, 
section 254.7 of the Vocational Schools Guides, describing deceptive 
sales practices, has been revised to include a provision noting that 
prior to enrollment students should be informed of the total costs of 
the program and the school's refund policy for students who drop out 
before completion.
    Section 254.9 addressed debt collection and credit practices. These 
have been largely superseded by other laws. Debt collection agencies 
attempting to collect on behalf of an industry member are covered by 
the Fair Debt Collection Practices Act, 15 U.S.C. 1692. Moreover, under 
the Commission's Rule on Preservation of Consumer Claims and Defenses 
(``Holder-in-Due-Course'' Rule), 16 CFR 433, the right of a consumer to 
assert seller misrepresentations in defending against a collection 
action is preserved even if the credit contract is assigned to a third 
party.
    Section 254.10 set forth various affirmative disclosures that 
should be made prior to enrollment and signing of a contract. Most of 
the areas addressed by these disclosures are now covered elsewhere in 
the Guides. Section 254.7(c) advises disclosure of all requirements for 
successful completion of the program and the circumstances that would 
constitute grounds for terminating the student's enrollment prior to 
completion (formerly addressed by Sec. 254.10(a)). Disclosure of total 
costs (formerly addressed in Sec. 254.10(b)) is now covered by 
Sec. 254.7(b). Misrepresentations regarding the school's facilities and 
equipment (formerly addressed by Sec. 254.10(c)) is covered by 
Sec. 254.4(a). Misrepresentations concerning placement assistance 
offered to graduates (formerly addressed by Sec. 254.10(d)) is covered 
by Sec. 254.4(a)(7).
    Section 254.0 has been added to explain the scope and application 
of the Guides. Various editorial changes have been made to eliminate 
redundancies, consolidate provisions, and make the Guides clearer and 
easier to read. Finally, the title of the Guides has been changed to 
reflect the fact that ``distance education'' is now the term used for 
the sale of programs of study--whether offered by correspondence, 
computer, or some other means--where work is completed by the student 
at home (or some other location of his or her own choosing) rather than 
in a school facility.

List of Subjects in 16 CFR Part 254

    Advertising, Trade practices.

    For the reasons set forth above, the Commission amends 16 CFR Part 
254 as follows:
    1. The title of Part 254 is amended to read as follows:

PART 254--GUIDES FOR PRIVATE VOCATIONAL AND DISTANCE EDUCATION 
SCHOOLS

    2. The authority citation for part 254 continues to read as 
follows:

    Authority: 38 Stat. 717, as amended; 15 U.S.C. 41-58.

    3. Section 254.0 is added to read as follows:


Sec. 254.0  Scope and application.

    (a) The Guides in this part apply to persons, firms, corporations, 
or organizations engaged in the operation of privately owned schools 
that offer resident or distance courses, training, or instruction 
purporting to prepare or qualify individuals for employment in any 
occupation or trade, or in work requiring mechanical, technical, 
artistic, business, or clerical skills, or that is for the purpose of 
enabling a person to improve his appearance, social aptitude, 
personality, or other attributes. These Guides do not apply to resident 
primary or secondary schools or institutions of higher education 
offering at least a 2-year program of accredited college level studies 
generally acceptable for credit toward a bachelor's degree.
    (b) These Guides represent administrative interpretations of laws 
administered by the Federal Trade Commission for the guidance of the 
public in conducting its affairs in conformity with legal requirements. 
These Guides specifically address the application of section 5 of the 
FTC Act (15 U.S.C. 45) to the advertising, promotion, marketing, and 
sale of courses or programs of instruction offered by private 
vocational or distance education schools. The Guides provide the basis 
for voluntary compliance with the law by members of the industry. 
Practices inconsistent with these Guides may result in corrective 
action by the Commission under section 5 if, after investigation, the 
Commission has reason to believe that the practices fall within the 
scope of conduct declared unlawful by the statute.
    4. Section 254.1 is revised to read as follows:


Sec. 254.1  Definitions.

    (a) Accredited. A school or course has been evaluated and found to 
meet established criteria by an accrediting agency or association 
recognized for such purposes by the U.S. Department of Education.
    (b) Approved. A school or course has been recognized by a State or 
Federal agency as meeting educational standards or other related 
qualifications as prescribed by that agency for the school or course to 
which the term is

[[Page 42573]]

applied. The term is not and should not be used interchangeably with 
``accredited.'' The term ``approved'' is not justified by the mere 
grant of a corporate charter to operate or license to do business as a 
school and should not be used unless the represented ``approval'' has 
been affirmatively required or authorized by State or Federal law.
    (c) Industry member. Industry members are the persons, firms, 
corporations, or organizations covered by these Guides, as explained in 
Sec. 254.0(a).
    5. Section 254.2 is revised to read as follows:


Sec. 254.2  Deceptive trade or business names.

    (a) It is deceptive for an industry member to use any trade or 
business name, label, insignia, or designation which misleads or 
deceives prospective students as to the nature of the school, its 
accreditation, programs of instruction, methods of teaching, or any 
other material fact.
    (b) It is deceptive for an industry member to misrepresent, 
directly or indirectly, by the use of a trade or business name or in 
any other manner that:
    (1) It is a part of or connected with a branch, bureau, or agency 
of the U.S. Government, or of any State, or civil service commission;
    (2) It is an employment agency or an employment agent or authorized 
training facility for any industry or business or otherwise deceptively 
conceal the fact that it is a school.
    (c) If an industry member conducts its instruction by 
correspondence, or other form of distance education, it is deceptive to 
fail to clearly and conspicuously disclose that fact in all promotional 
materials.
    6. Section 254.3 is revised to read as follows:


Sec. 254.3  Misrepresentation of extent or nature of accreditation or 
approval.

    (a) It is deceptive for an industry member to misrepresent, 
directly or indirectly, the extent or nature of any approval by a State 
agency or accreditation by an accrediting agency or association. For 
example, an industry member should not:
    (1) Represent, without qualification, that its school is accredited 
unless all programs of instruction have been accredited by an 
accrediting agency recognized by the U.S. Department of Education. If 
an accredited school offers courses or programs of instruction that are 
not accredited, all advertisements or promotional materials pertaining 
to those courses or programs, and making reference to the accreditation 
of the school, should clearly and conspicuously disclose that those 
particular courses or programs are not accredited.
    (2) Represent that its school or a course is approved, unless the 
nature, extent, and purpose of that approval are disclosed.
    (3) Misrepresent that students successfully completing a course or 
program of instruction can transfer the credit to an accredited 
institution of higher education.
    (b) It is deceptive for an industry member to misrepresent that a 
course of instruction has been approved by a particular industry, or 
that successful completion of the course qualifies the student for 
admission to a labor union or similar organization or for receiving a 
State or Federal license to perform certain functions.
    (c) It is deceptive for an industry member to misrepresent that its 
courses are recommended by vocational counselors, high schools, 
colleges, educational organizations, employment agencies, or members of 
a particular industry, or that it has been the subject of unsolicited 
testimonials or endorsements from former students. It is deceptive for 
an industry member to use testimonials or endorsements that do not 
accurately reflect current practices of the school or current 
conditions or employment opportunities in the industry or occupation 
for which students are being trained.

    Note to paragraph (c): The Commission's Guides Concerning Use of 
Endorsements and Testimonials in Advertising (part 255 of this 
chapter) provide further guidance in this area.

    7. Section 254.4 is revised to read as follows:


Sec. 254.4  Misrepresentation of facilities, services, qualifications 
of staff, status, and employment prospects for students after training.

    (a) It is deceptive for an industry member to misrepresent, 
directly or indirectly, in advertising, promotional materials, or in 
any other manner, the size, location, services, facilities, or 
equipment of its school or the number of educational qualifications of 
its faculty and other personnel. For example, an industry member should 
not:
    (1) Misrepresent the qualifications, credentials, experience, or 
educational background of its instructors, sales representatives, or 
other employees.
    (2) Misrepresent, through statements or pictures, the nature of 
efficacy of its courses, training devices, methods, or equipment.
    (3) Misrepresent the availability of employment while the student 
is undergoing instruction or the role of the school in providing or 
arranging for such employment.
    (4) Misrepresent the availability or nature of any financial 
assistance available to students. If the cost of training is financed 
in whole or in part by loans, students should be informed that loans 
must be repaid whether or not they are successful in completing the 
program and obtaining employment.
    (5) Misrepresent the nature of any relationship between the school 
or its personnel and any government agency or that students of the 
school will receive preferred consideration for employment with any 
government agency.
    (6) Misrepresent that certain individuals or classes of individuals 
are members of its faculty or advisory board; have prepared 
instructional materials; or are otherwise affiliated with the school.
    (7) Misrepresent the nature and extent of any personal instruction, 
guidance, assistance, or other service, including placement assistance, 
it will provide students either during or after completion of a course.
    (b) It is deceptive for an industry member to misrepresent that it 
is a nonprofit organization or to misrepresent affiliation or 
connection with any public institution or private religious or 
charitable organization.
    (c) It is deceptive for an industry member to misrepresent that a 
course has been recently revised or instructional equipment is up-to-
date, or misrepresent its ability to keep a program current and up-to-
date.
    (d) It is deceptive for an industry member, in promoting any course 
of training in its advertising, promotional materials, or in any other 
manner, to misrepresent, directly or by implication, whether through 
the use of text, images, endorsements, or by other means, the 
availability of employment after graduation from a course of training, 
the success that the member's graduates have realized in obtaining such 
employment, or the salary that the member's graduates will receive in 
such employment.

    Note to paragraph (d): The Commission's Guides Concerning Use of 
Endorsements and Testimonials in Advertising (part 255 of this 
chapter) provide further guidance in this area.

    8. Section 254.5 is revised to read as follows:

[[Page 42574]]

Sec. 254.5  Misrepresentations of enrollment qualifications or 
limitations.

    (a) It is deceptive for an industry member to misrepresent the 
nature or extent of any prerequisites or qualifications for enrollment 
in a course or program of instruction.
    (b) It is deceptive for an industry member to misrepresent that the 
lack of a high school education or prior training or experience is not 
an impediment to successful completion of a course or obtaining 
employment in the field for which the course provides training.
    9. Section 254.6 is revised to read as follows:


Sec. 254.6  Deceptive use of diplomas, degrees, or certificates.

    (a) It is deceptive for an industry member to issue a degree, 
diploma, certificate of completion, or any similar document, that 
misrepresents, directly or indirectly, the subject matter, substance, 
or content of the course of study or any other material fact concerning 
the course for which it was awarded or the accomplishments of the 
student to whom it was awarded.
    (b) It is deceptive for an industry member to offer or confer an 
academic, professional, or occupational degree, if the award of such 
degree has not been authorized by the appropriate State educational 
agency or approved by a nationally recognized accrediting agency, 
unless it clearly and conspicuously discloses, in all advertising and 
promotional materials that contain a reference to such degree, that its 
award has not been authorized or approved by such an agency.
    (c) It is deceptive for an industry member to offer or confer a 
high school diploma unless the program of instruction to which it 
pertains is substantially equivalent to that offered by a resident 
secondary school, and unless the student is informed, by a clear and 
conspicuous disclosure in writing prior to enrollment, that the 
industry member cannot guarantee or otherwise control the recognition 
that will be accorded the diploma by institutions of higher education, 
other schools, or prospective employers, and that such recognition is a 
matter solely within the discretion of those entities.
    10. Section 254.7 is revised to read as follows:


Sec. 254.7  Deceptive sales practices.

    (a) It is deceptive for an industry member to use advertisements or 
promotional materials that misrepresent, directly or by implication, 
that employment is being offered or that a talent hunt or contest is 
being conducted. For example, captions such as, ``Men/women wanted to 
train for * * *,'' ``Help Wanted,'' ``Employment,'' ``Business 
Opportunities,'' and words or terms of similar import, may falsely 
convey that employment is being offered and therefore should be 
avoided.
    (b) It is deceptive for an industry member to fail to disclose to a 
prospective student, prior to enrollment, the total cost of the program 
and the school's refund policy if the student does not complete the 
program.
    (c) It is deceptive for an industry member to fail to disclose to a 
prospective student, prior to enrollment, all requirements for 
successfully completing the course of program and the circumstances 
that would constitute grounds for terminating the student's enrollment 
prior to completion of the program.
    11. Section 254.8 is removed.
    12. Section 254.9 is removed.
    13. Section 254.10 is removed.

    By direction of the Commission, Commissioner Swindle dissenting.
Donald S. Clark,
Secretary.

DISSENTING STATEMENT OF COMMISSIONER ORSON SWINDLE in Regulatory 
Reform-Vocational School Guides, File No. P964220

    The Commission today has issued revised Guides for Private 
Vocational and Distance Schools (``Guides'') to address certain 
claims that private vocational schools make to their students and 
prospective students. I have voted against the Guides for two 
reasons. One reason is that the Guides are not likely to promote 
voluntary compliance because they do not resolve any demonstrated 
uncertainly among private vocational schools over what claims are 
likely to be considered deceptive. The other reason is that any need 
for Commission action would be largely eliminated if other 
government regulations and private oversight schemes were more 
actively enforced.
    The Commission has a number of weapons in its arsenal to prevent 
unfair or deceptive acts and practices, each designed to be used for 
a specific purpose. Guides are issued when the Commission believes 
that guidance as to legal requirements ``would be beneficial in the 
public interest and would serve to bring about more widespread and 
equitable observance of laws administered by the Commission.'' 
Commission Rule of Practice 1.6. The purpose of such guidance is to 
``provide the basis for voluntary and simultaneous abandonment of 
unlawful practices by members of industry.'' Commission Rule of 
Practice 1.5.
    The Commission has successfully used guides and policy 
statements to provide industry with standards that eliminate or 
substantially reduce uncertainty over what the Commission is likely 
to consider deceptive. See, e.g., Guides for the Use of 
Environmental Marketing Claims, 16 C.F.R. Part 260; Federal Trade 
Commission Enforcement Policy Statement on Food Advertising (May 
1994). However, there is no reason to believe here that private 
vocational schools are uncertain over what claims the Commission is 
likely to consider deceptive. Indeed, the public comments we 
received from schools did not reveal any such uncertainty that needs 
to be resolved by the Commission to promote voluntary compliance.\1\
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    \1\ The comments received from private vocational schools 
overwhelmingly complained that reissuing the Guides would be 
confusing, frustrating, and burdensome in light of existing 
regulatory and oversight schemes--not an auspicious beginning for 
fostering voluntary industry compliance.
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    Perhaps a better way of combatting misrepresentations would be 
for the government agencies and private bodies that directly 
regulate this industry to more vigorously enforce their own 
prohibitions. The Department of Education (``DOE'') can bar a 
private vocational school from receiving federal financial 
assistance if it makes misrepresentations in violation of DOE 
regulations. 34 C.F.R. Part 668. DOE's regulatory requirements 
provide a particularly powerful incentive for most private 
vocational schools not to make misrepresentations, given the 
critical importance to most of them of continuing to participate in 
federal financial assistance programs. State licensing boards and 
private accrediting bodies also can revoke the license or 
accreditation of a private vocational school that make 
misrepresentations.
    Some private vocational schools may make misrepresentations 
notwithstanding these layers of regulation and oversight. When this 
occurs, DOE, state licensing boards, and private accreditation 
bodies should use their authority and their standards to address 
these misrepresentations in the first instance. Although Commission 
law enforcement action may also be needed to address such 
misrepresentations in discrete circumstances, I do not believe this 
possibility justifies our issuance of the Guides.
    I dissent.

[FR Doc. 98-21296 Filed 8-7-98; 8:45am]
BILLING CODE 6750-01-M