§3696 Prohibition on Certain Advertising, Sales, and Enrollment Practices

Summary

Approved schools and their owners must not make big false or misleading claims to students, the public, accrediting bodies, state agencies, or the VA. The rule covers lies about the school or program (for example, accreditation, transfer of credits, licensing or certification prospects, completion rules, facilities, equipment, teacher qualifications, endorsements, prerequisites, or whether a degree is approved by the state), money matters (for example, scholarships, program cost, refunds, loans, or whether a student can refuse a particular type of aid), and job prospects (for example, placement services, relationships with employers, job market claims, or requirements like driver’s licenses or background checks that could stop a student from getting the job). A “misleading statement” can be written, spoken, visual, or implied and includes forced or required student testimonials. A “substantial misrepresentation” is a misleading statement someone could reasonably rely on to their harm. Schools also may not pay commissions, bonuses, or other incentive pay tied to getting students enrolled or to obtaining financial aid for students, except when recruiting foreign students who live in other countries and cannot get Federal student aid. Schools must keep complete records of all advertising, sales, and enrollment materials used in the past two years and let the State approving agency or the Secretary inspect them. The VA will work with the Federal Trade Commission to investigate cases when appropriate; the FTC may investigate and send its findings to the VA, and the Under Secretary for Benefits must act on such referrals within 60 days. If the VA learns of a final federal judgment or other credible evidence that a school made substantial misrepresentations, the VA will warn the school within 30 days, give the school 60 days to respond, require a third-party audit of recruitment and advertising, and may refer the matter to the Under Secretary for Benefits. The Under Secretary makes preliminary findings and final decisions under a set process, must review evidence (including third-party audit reports and state risk surveys), and cannot delegate the final decision. If a final finding shows a violation, the VA can publish a caution on the GI Bill tool, stop new enrollments, or revoke approval of programs. For the first violation the VA must weigh factors like deterrence, hiring an approved auditor for at least three years, removing recruiter pressure (no quotas or incentives), stronger governance, and a favorable state risk survey. A repeat violation within five years will lead to suspension or revocation until reinstated; a third violation within three years of the second leads to revocation. Actions must be taken within 180 days after notice. Schools may seek a limited review by the Secretary of certain final determinations; the Secretary must report to Congress within 30 days of a final decision. Reinstatement after suspension or revocation requires an application, waiting 540 days, a third-party audit, prevention procedures, meeting the listed factors, and VA approval. Approved third-party auditor and risk-based survey are defined terms used in these rules.