Sec. 490. Civil penalties
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/bill/113/s/2954/is/section-490A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
Part G of title IV is further amended by inserting after section 489 the following: In this section: The term substantial misrepresentation or other serious violation means any of the following: A substantial misrepresentation regarding— the nature of the educational program of an institution of higher education; the financial charges of the institution; the space availability in a program of the institution for which a student is considering enrollment; the admission requirements of the institution; the transferability of credits from the institution; whether a program of the institution meets the necessary standards to qualify students to sit for licensing examinations, or obtain certification required as a precondition for employment, in the State in which the students reside; the passage rates of students at the institution in obtaining certification requirements; the passage rates of students who sit for licensing examinations; or the employability of the graduates of the institution.
Failure of an institution subject to the requirements of section 487(a)(32) to comply with such section. A knowing and willful misuse of Federal student aid from any source. A violation of section 487(a)(20). A violation of the default manipulation regulations promulgated by the Secretary under section 435(m)(3). Failure to comply with the program review process described in section 498A, including any disclosure requirement described in paragraph (2)(C) or
(5)of section 498A(b). A violation of the program integrity regulations promulgated by the Secretary under this Act. A violation of this Act that the Secretary has determined, by regulation, to be a serious violation for purposes of this section. The term officer of an institution of higher education includes the president, chief executive officer, and chief financial officer of an institution of higher education or their equivalents. The Secretary may impose a civil penalty upon an eligible institution upon making a determination, after reasonable notice and opportunity for a hearing, that an eligible institution has engaged in a substantial misrepresentation or other serious violation. A civil penalty imposed for a violation under subparagraph
(A)shall be not less than $100,000 or— in the case of a first violation, an amount equal to the product of $1,000,000 multiplied by the institution’s student default risk, whichever is larger; in the case of a second violation, an amount equal to the product of $2,000,000 multiplied by the institution’s student default risk, whichever is larger; and in the case of a third or subsequent violation, an amount equal to the product of $3,000,000 multiplied by the institution’s student default risk, whichever is larger. For the purpose of determining the number of violations for subparagraph (B), any violation by a particular institution will accrue against all identification codes used by the Office of Postsecondary Education to designate campuses and institutions affiliated with the institution, and within the period of participation for the institution, as defined in section 668.13(b) of title 34, Code of Federal Regulations, or any successor regulation. Upon determination, after reasonable notice and opportunity for a hearing, that an eligible institution has engaged in a violation of any other provision of this title, including the failure to carry out any provision of this title, that is not a significant misrepresentation or other serious violation, the Secretary may impose a civil penalty upon such institution of not more than $100,000 (subject to such adjustments for inflation as may be prescribed in regulation) for each such violation. Upon determination, after reasonable notice and an opportunity for a hearing on the record, that an officer of an institution of higher education that participates in a program under this title has knowingly and willfully, or with gross negligence, violated a provision of this title, the Secretary may sanction the officer. Such sanctions may include the following: Prohibiting the institution of higher education that has employed the officer of an institution of higher education and that participates in a program under this title, or any other institution of higher education that participates in a program under this title, from employing the officer, except that any such prohibition under this subsection shall not be for a period of more than 5 years from the date of the determination of the violation. Assessing a civil penalty against an officer of an institution of higher education who has knowingly and willfully, or with gross negligence, violated a provision of this title, except that any such civil penalty under this subsection shall not be greater than the amount of the officer’s compensation for each year for which the violations are determined to have occurred. For purposes of this subparagraph, an officer's compensation shall include proceeds of any sales of stock and any incentive-based compensation (including stock options awarded as compensation) based on information required to be reported to the Secretary or any other Federal agency during the period in which the violations are determined to have occurred. Upon determination, after reasonable notice and opportunity for a hearing, that an eligible institution has engaged in a violation of any provision of this title (including the failure to carry out any provision of this title or any regulation prescribed under such provision) or a violation of any applicable special arrangement, agreement, or limitation, the Secretary may limit, suspend, or terminate the participation in any program under this title of an eligible institution, subject to the requirements of paragraph (2). No period of suspension under this section shall exceed 60 days unless the institution and the Secretary agree to an extension or unless limitation or termination proceedings are initiated by the Secretary within that period of time. The Secretary may take an emergency action against an institution, under which the Secretary shall, effective on the date on which a notice and statement of the basis of the action is mailed to the institution (by registered mail, return receipt requested), withhold funds from the institution or its students and withdraw the institution's authority to obligate funds under any program under this title, if the Secretary— receives information, determined by the Secretary to be reliable, that the institution is violating any provision of this title, any regulation prescribed under this title, or any applicable special arrangement, agreement, or limitation; determines that immediate action is necessary to prevent misuse of Federal funds; and determines that the likelihood of loss outweighs the importance of the procedures prescribed in subsection
(e)for limitation, suspension, or termination. An emergency action described in paragraph
(1)shall not exceed 30 days unless limitation, suspension, or termination proceedings are initiated by the Secretary against the institution within that period of time. The Secretary shall provide an institution that is the subject of an emergency action under this subsection an opportunity to show cause, if the institution so requests, that the emergency action is unwarranted and should be lifted. Notwithstanding any other provision of this title, an institution of higher education that has been sanctioned by the Secretary under this section or any other provision of this title may not have such sanctions lifted until the Secretary has conducted a subsequent program review under section 498A and has found the institution to be in compliance with this title. For purposes of this section, acts and omissions relating to a single course of conduct shall be treated as a single violation. Any civil penalty under this section may be compromised by the Secretary. In determining the amount of such penalty, or the amount agreed upon in compromise, the Secretary shall consider— the appropriateness of the penalty to the size of the institution of higher education subject to the determination; and the gravity of the violation, failure, or misrepresentation. The amount of any penalty under this section may be deducted from any sums owing by the United States to the institution charged. Amounts collected under this section shall be transferred to the Secretary, who shall determine the distribution of collected amounts, in accordance with paragraphs
(2)and (3). For each fiscal year, an amount equal to not more than 50 percent of the amounts recovered or collected under this section— shall be available to the Secretary to carry out program reviews under section 498A and other efforts by the Secretary related to program integrity under part H; and may be credited, if applicable, for that purpose by the Secretary to any appropriations and funds that are available to the Secretary for obligation at the time of collection. Amounts made available under subparagraph
(A)shall be used to supplement and not supplant any other amounts available to the Secretary for the purpose described in such subparagraph. Any amounts collected under this section that are made available under paragraph
(2)shall remain available until expended. For each fiscal year, an amount equal to not less than 50 percent of the amounts recovered or collected under this section shall be deposited into the Student Relief Fund established under subsection (k). The Secretary shall regularly publish, on the website of the Department, a detailed description that includes— the amount of funds that were distributed for the purposes described in paragraph
(2)and the amount used for the Student Relief Fund under paragraph (3); and how funds were distributed among the purposes described in paragraph (2)(A)(i). The Secretary shall establish a Student Relief Fund (referred to in this subsection as the Fund ) that shall be used, subject to the availability of funds, to provide financial relief to any student enrolled in an institution of higher education that— has failed to comply with an eligibility requirement under section 101 or 102 or an obligation incurred under the terms of the program participation agreement under section 487; or has been sanctioned under subsection
(b)or (c). The Secretary, in consultation with Director of the Bureau of Consumer Financial Protection— shall determine the manner of relief to be provided under paragraph (1), which may include tuition reimbursement or full or partial loan forgiveness; and may issue regulations regarding how the amounts in the Fund will be distributed among students eligible for the funds. Funds obtained by or transferred to the Fund shall not be construed to be Government funds or appropriated monies. Notwithstanding any other provision of law, amounts in the Fund shall not be subject to apportionment for purposes of chapter 15 of title 31, United States Code, or under any other authority. Sums deposited in the Fund shall remain in the Fund and be available for expenditure under this chapter without fiscal year limitation. The Secretary of Education may request the Secretary of the Treasury to invest the portion of the Fund that is not, in the discretion of the Secretary of Education, required to meet the current needs of the Fund. Investments shall be made by the Secretary of the Treasury in obligations of the United States or obligations that are guaranteed as to principal and interest by the United States, with maturities suitable to the needs of the Fund as determined by the Secretary on the record. The interest on, and the proceeds from the sale or redemption of, any obligations held in the Fund shall be credited to the Fund. The Secretary shall prescribe regulations to implement the requirements of this section within 1 year after the date of enactment of the Higher Education Affordability Act . In addition to funds derived from financial penalties assessed pursuant to subsection (j), there are authorized to be appropriated such sums as may be necessary to carry out this subsection for fiscal year 2015 and each of the five succeeding fiscal years. Any violation of subsection (b), including the regulations promulgated under such subsection, shall be a cause of action enforceable by the State, through the attorney general (or the equivalent thereof) of the State, in any district court of the United States in that State or in a State court that is located in that State and that has jurisdiction over the defendant. The State may seek any relief provided under paragraph (4)(B) for such violation, or any remedies otherwise provided under law. Before initiating any action in a court or other administrative or regulatory proceeding against any institution of higher education as authorized by paragraph
(1)to enforce any provision of this subsection, including any regulation promulgated by the Secretary under this subsection, a State attorney general shall timely provide a copy of the complete complaint to be filed and written notice describing such action or proceeding to the Secretary, except as provided in subparagraph (B). If prior notice is not practicable, the State attorney general shall provide a copy of the complete complaint and the notice to the Secretary immediately upon instituting the action or proceeding. The notification required under this subparagraph shall, at a minimum, describe— the identity of the parties; the alleged facts underlying the proceeding; and whether there may be a need to coordinate the prosecution of the proceeding so as not to interfere with any action, including any rulemaking, undertaken by the Secretary or another Federal agency. The Secretary shall prescribe regulations to implement the requirements of this subsection and periodically provide guidance in order to further coordinate actions with the State attorneys general. Nothing in this subsection shall be construed as altering, limiting, or affecting the authority of a State attorney general or any other regulatory or enforcement agency or authority to bring an action or other regulatory proceeding arising solely under the law in effect in that State. Relief under this subsection may include, without limitation— rescission or reformation of contracts; refund of moneys or return of real property; restitution; disgorgement or compensation for unjust enrichment; payment of damages or other monetary relief pursuant to the requirements of paragraph (2); public notification regarding the violation, including the costs of notification; and limits on the activities or functions of the person. Relief under this subsection shall not include the ability to suspend or terminate the eligibility status of an institution of higher education for programs under this title. .