Charges Include Making False Representations and Violating Debt Collection Laws
Department of Consumer Affairs (DCA) Commissioner Lorelei Salas today announced a lawsuit against Berkeley College – one of the largest for-profit colleges in New York State with approximately 4,000 students – alleging violations of the NYC Consumer Protection Law and local debt collection rules. DCA’s lawsuit, filed in New York County Supreme Court, alleges numerous violations and wide-ranging consumer harm, and seeks to end Berkeley’s unlawful practices and restore any illegal profits back to consumers. DCA encourages any consumer who believes they may have experienced any wrongdoing by Berkeley to contact the agency by calling 311, or by filing a complaint at nyc.gov/dca.
“For-profit colleges are businesses, and like most businesses, their top priority is generating profits,” said DCA Commissioner Lorelei Salas. “Our investigation into Berkeley College reveals that their recruiters appear to say whatever they think a prospective student wants to hear, especially when it comes to academic programs, employment, transfer credits, and federal student loans – regardless of the truth – to convince them to enroll. These aggressive recruiting tactics are designed to prey on the hopes and dreams of consumers seeking improved career prospects and greater financial security to better care for themselves and their families.”
DCA’s lawsuit – which follows a nearly two-year investigation, including a lengthy battle over subpoenas that DCA issued to Berkeley, was filed after dozens of interviews with current, prospective, and former students; undercover operations; extensive research; and review of thousands of pages of documentation from Berkeley – reveals that Berkeley engages in aggressive recruiting and debt collection tactics. Berkeley lures consumers – many of whom are people of color and first-generation college students with low incomes – to one-on-one sales pitches where they deceive them about potential financial obligations and say misrepresentations about other higher education institutions.
The lawsuit alleges, among other things, that Berkeley’s deception includes:
- Misleading students about financial aid, including federal financial aid.
Berkeley recruiters pretend to advocate on behalf of prospective students, promising to help them and their families understand their financial options. DCA’s investigation found that these recruiters often misrepresent the facts about a potential students’ rights and obligations regarding financial aid, including how federal student loans work.
For example, one student was told by a recruiter that she qualified for a Berkeley scholarship that would cover practically all of her part-time tuition. She eagerly signed the paperwork Berkeley gave her. It wasn’t until a year later, when she checked with the financial aid office to make sure her scholarship would renew for the next year, that she discovered she had already borrowed $13,197 in federal loans. Her “scholarship” had only amounted to $1,130 per term – while part-time tuition and fees totaled $4,475 per term. She learned that the forms Berkeley had her sign were actually federal student loan paperwork. After multiple attempts to resolve her dispute, she withdrew from Berkeley and has not returned to college.
- Tricking students into taking out loans directly from Berkeley.
In addition to tricking students into taking out federal student loans, school representatives also bind students to Institutional Loans – loans directly from Berkeley – that are deceptively referred to as “payment plans.” Berkeley representatives block students from paying tuition any other way – even refusing to let students pay tuition balances up front, instead steering them into a payment plan.
- Deceiving students about institutional grants.
While Berkeley vigorously promotes its grants (which do not need to be repaid) to lure new students, they fail to disclose that the institutional grants require students to borrow the maximum amount of loans available to the student through the federal government before Berkeley will award such a grant.
- Deceiving students about transfer credits, majors, and careers.
Recruiters are dishonest about employment prospects and transfer credits, sometimes going so far as to guarantee post-graduation employment. One recruiter told an undercover DCA inspector that “96 percent of our students graduate and are employed once they graduate,” when in reality Berkeley’s graduation rate is only 29 percent. Students have also been deceived about the transferability of credits, sometimes resulting in increased enrollment periods.
- Violating local debt collection laws by concealing its identity from former students when collecting debt, including debt that is not owed.
The City’s debt collection rules prohibit Berkeley from using any name other than its own to collect debt – and yet when Berkeley sends invoices to student who are believed to owe money, it does not identify itself as “Berkeley” but rather as “BES, Inc.” Furthermore, DCA’s investigation found that Berkeley pursues its graduates, seeking payments for debts not owed. In one case, Berkeley refused to release a graduate’s diploma to him because he allegedly owed the school over $3,000 – even though he was previously told that he graduated owing nothing.
“Students attend college to pursue their education – not to get ripped off,” said City Council Speaker Corey Johnson. “If any student feels they have been wronged by Berkeley, I urge them to contact their local Council Member and file a complaint with the Department of Consumer Affairs. Berkeley College should and will be held accountable, and I commend DCA Commissioner Lorelei Salas for taking action and filing this lawsuit against Berkeley.”
“For-profit colleges are primarily concerned with their bottom line, not the welfare of their students,” said Council Member Rafael Espinal. “At a time when student debt is soaring, it is unacceptable that schools like Berkeley are preying on people – many of them from low-income backgrounds – seeking to better their lives. Meanwhile, U.S. Education Secretary Betsy DeVos and the Trump administration are working overtime to roll back regulations on for-profit colleges. That’s why vigorous enforcement at the local level against bad actors has never been more important. I applaud DCA’s actions, and look forward to deepening our efforts to hold for-profit colleges accountable.”
Enforcement is one prong of DCA’s efforts to help New Yorkers struggling with student loan debt, which also includes education and advocacy. In December 2017, DCA’s Office of Financial Empowerment (OFE) and the Federal Reserve Bank of New York released Student Loan Borrowing Across NYC Neighborhoods, the first neighborhood-level examination of student loan outcomes. The report found that although New Yorkers’ delinquency and default rates are slightly lower than the national average, certain NYC neighborhoods are experiencing significantly higher rates of delinquency and default despite the fact that their residents have low average loan balances. These higher levels of student debt delinquency and default also tend to be among older borrowers and those in lower- income neighborhoods. The report was developed to provide policymakers and community leaders with the information needed for effective, targeted interventions to ease the burden for New Yorkers struggling with student debt. DCA also released tips to help New Yorkers understand their rights and responsibilities with student loans and tips for those who are struggling with their student loan payments. DCA plans to release a second report soon that will focus on enrollment patterns that drive student loan default.
“Too many students enrolled at for-profit colleges in New York State end up stuck in low-wage jobs and saddled with debt — if they are even able to obtain a degree,” Jonathan Bowles, Executive Director, Center for an Urban Future. “At a time when a college credential is more important than ever for a shot at economic opportunity, New York needs to ensure that students have access to a quality education that delivers on its promises.”
“Berkeley’s deceptive practices reflect an undeniable pattern: when colleges prioritize profits, students get hurt. Our research shows that of over 120,000 student complaints of unlawful activity by colleges, 98 percent were directed against for-profit colleges like Berkeley,” said Yan Cao, fellow at The Century Foundation, a progressive think tank. “With President Trump and Secretary DeVos ending federal investigations into for-profit college abuses, investigations like DCA’s are more critical than ever. We commend DCA for looking behind the slick marketing of Berkeley College and uncovering the truth: that deceptive advertising, hidden costs, and unauthorized student loan debts were all part of its business model.”
“The charges against Berkeley College mirror the issues we hear about from attendees of for-profit schools,” said Senior Staff Attorney Evan Denerstein of Mobilization for Justice.“Misrepresentations by for-profit schools about grants and scholarships, graduation and employment rates, and quality of education, all induce students into accumulating crippling amounts of debt for little or nothing in return.”
“Predatory schools like Berkeley profit from students’ attempts to better their lives—and leave students saddled with crushing student loan debt,” said Jane Greengold Stevens, Co-Director, Special Litigation Unit, New York Legal Assistance Group. “We commend the New York City Department of Consumer Affairs for taking action to stop these illegal practices, which no New Yorker should have to face.”
The matter was handled by Staff Counsel Glenna Goldis, under the supervision of Associate General Counsel Nicole Arrindell, of the General Counsel Division, which is led by General Counsel Tamala Boyd and Deputy General Counsel Michael Tiger.
The NYC Department of Consumer Affairs (DCA) protects and enhances the daily economic lives of New Yorkers to create thriving communities. DCA licenses more than 81,000 businesses in more than 50 industries and enforces key consumer protection, licensing, and workplace laws that apply to countless more. By supporting businesses through equitable enforcement and access to resources and, by helping to resolve complaints, DCA protects the marketplace from predatory practices and strives to create a culture of compliance. Through its community outreach and the work of its offices of Financial Empowerment and Labor Policy & Standards, DCA empowers consumers and working families by providing the tools and resources they need to be educated consumers and to achieve financial health and work-life balance. DCA also conducts research and advocates for public policy that furthers its work to support New York City’s communities.
DCA offers the following tips to help plan and protect students when applying to schools:
- Research. Research multiple schools before deciding which one is right for you. Ask for information on student loan debt, total costs, and whether the credits you get will transfer to other schools. Be sure to research the school’s credentials, especially if the career you are seeking requires a license, such as a nursing assistant or teacher.
- Ask for the school’s tuition cancellation policy in writing. The policy should describe how you can get a refund if you need to cancel or withdraw.
- Never sign anything you don’t understand. If a school pressures you to sign a contract or agreement on the spot, walk away. You have the right to bring home important documents so you can read them more carefully with people you trust.
- Complete the Free Application for Federal Student Aid (FAFSA). The FAFSA is the first step in the financial aid process and is the application students use to apply for federal grants and federal student loans. In New York State, it is also a requirement for receiving a grant from the New York State Tuition Assistance Program (TAP). Many types of financial aid are distributed on a first-come, first-served basis, so it’s to your advantage to file as early as possible. Check with colleges and file in time to meet the earliest deadline. You must complete the FAFSA form every school year. Visit studentaid.ed.gov for information about FAFSA.
- Be wary of taking on significant amounts of debt. Some schools charge tens of thousands of dollars per semester. Often, the “financial aid package” that is available isn’t free money, but rather loans you must pay back with interest. Make sure you understand the terms, consider the projected salary associated with your education, and whether you will be able to make the projected payments. New Yorkers can also book a free and confidential appointment with a professional financial counselor at one of the City’s Financial Empowerment Centers by calling 311, visiting nyc.gov/dca, or texting TalkMoney to 42033 (message and data rates may apply; check with your service provider).
- Do research before borrowing money. If you need to borrow money for school, always consider federal assistance programs, state assistance programs, scholarships and opportunity programs that offer assistance with books and fees before private lenders.
- Avoid schools that “guarantee employment” after you graduate. A school cannot guarantee that you’ll get a job when you graduate. Many times, the schools that make these types of promises don’t actually place you in a job.