Sec. 305. Enhanced civil penalties, State enforcement, and private right of action
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Part G of title IV ( 20 U.S.C. 1088 et seq.) is amended by inserting after section 489 the following: In this section: The term misrepresentation means any false, erroneous, or misleading statement an eligible institution of higher education, a third party servicer that contracts with such institution, or a third party contractor makes directly or indirectly to a student, prospective student, or any member of the public, or to an accrediting agency or association, State approval agency, or the Secretary.
A misrepresentation includes— the making of a statement that has the likelihood or tendency to deceive; or the omission of any material facts necessary in order to make any statements made, in light of the circumstances under which they were made, not false, deceptive, unfair, erroneous, or misleading. The term officer of an institution of higher education including at any nonprofit, for-profit, or public institution of higher education, includes the president, chief executive officer, and chief financial officer of an institution of higher education as well as all officers charged with overseeing a principal business unit, division, or function, such as sales, administration, or finance.
The term prospective student means any individual who has contacted an institution of higher education for the purpose of requesting information about enrolling at the institution of higher education or who has been contacted directly or indirectly by the institution of higher education or a third party contractor through advertising about enrolling at the institution. The term State approval agency means any State agency that determines whether an institution of higher education is legally authorized within such State to provide a program of education beyond secondary education.
The term substantial misrepresentation means any misrepresentation on which the person to whom it was made could reasonably be expected to rely, or has reasonably relied, to that person’s detriment. Upon determination, after reasonable notice and opportunity for a hearing, that an eligible institution, a third party servicer that contracts with such institution, or a third party contractor has violated or failed to carry out any provision of this title, any regulation prescribed under this title, or any applicable special arrangement, agreement, or limitation, the Secretary may limit, suspend, or terminate the participation of that institution in any program under this title, or the eligibility of that third party contractor or third party servicer to contract with any 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. Upon determination, after reasonable notice and opportunity for a hearing, that an eligible institution, a third party servicer that contracts with such institution, or a third party contractor has engaged in substantial misrepresentation, including a misrepresentation relating to the nature of an educational program, financial charges, the space availability in a program of the institution for which a student is considering enrollment, admission requirements, the transferability of credits, whether one of that institution's programs meets necessary State standards to obtain certification or sit for licensing examinations, the passage rates of students in obtaining certifications or sitting for licensing examinations, or the employability or earnings of graduates, the Secretary may suspend, limit, or terminate the eligibility status for any or all programs under this title of any otherwise eligible institution, or of any third party contractor or third party servicer to contract with any institution, in accordance with procedures specified in paragraph (1), until the Secretary finds that such practices have been corrected.
The Secretary shall impose a civil penalty upon an eligible institution, a third party servicer that contracts with such institution, or a third party contractor, upon making a determination, after reasonable notice and opportunity for a hearing, that an eligible institution, a third party servicer that contracts with such institution, or a third party contractor has— violated or failed to carry out any provision of this title or any regulation prescribed under this title; or engaged in a substantial misrepresentation, including a substantial misrepresentation described in subsection (b)(3).
A civil penalty imposed for a violation or failure described under paragraph (1)(A) shall not exceed $100,000 (subject to such adjustments for inflation as may be prescribed in regulation) for each such violation. A civil penalty imposed for a violation described under paragraph (1)(B) shall be in an amount not to exceed the greater of— $100,000 (subject to such adjustments for inflation as may be prescribed in regulation) for each such violation; or in the case of an institution, 1.0 percent of the amount of funds the institution received through this title in the most recent award year prior to the determination for each such violation; and in the case of a third party servicer that contracts with such institution or a third party contractor, the amount of the contract with the institution.
For the purpose of determining the amount of civil penalties under this subsection, 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. The Secretary may take an emergency action against an institution, a third party servicer that contracts with such institution, or a third party contractor, 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, third party servicer that contracts with such institution, or third party contractor (by registered mail, return receipt requested), withhold funds from the institution or its students, or from the third party servicer that contracts with such institution or third party contractor, and withdraw the institution’s authority to obligate funds under this title, or the authority of the third party servicer that contracts with such institution or third party contractor to act on behalf of an institution under any program under this title, if the Secretary— receives information, determined by the Secretary to be reliable, that the institution, or third party servicer that contracts with such institution, or third party contractor 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
(b)for limitation, suspension, or termination, except that an emergency action shall not exceed 30 days unless the limitation, suspension, or termination proceedings are initiated by the Secretary against the individual or organization within that period of time, and except that the Secretary shall provide the individual or organization an opportunity to show cause, if it so requests, that the emergency action is unwarranted. If an individual who, or entity that, exercises substantial control, as determined by the Secretary in accordance with the definition of substantial control in subpart 3 of part H, over one or more institutions participating in any program under this title, or, for purposes of this section over one or more organizations that contract with an institution to administer any aspect of the institution’s student assistance program under this title, is determined to have committed one or more violations of the requirements of any program under this title, or has been suspended or debarred in accordance with the regulations of the Secretary, the Secretary may use such determination, suspension, or debarment as the basis for imposing an emergency action on, or limiting, suspending, or terminating, in a single proceeding, the participation of any or all institutions under the substantial control of that individual or entity. For each fiscal year, an amount equal to 100 percent of the amounts recovered or collected under this section shall be deposited into the Student Relief Fund established under subsection (g). The Secretary shall regularly publish, on the website of the Department, a detailed accounting of the funds in the Student Relief Fund, including the amount of funds that were collected and deposited into the Student Relief Fund under paragraph (1), and how those funds were used, pursuant to subsection (g)(1). 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 that is 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). Funds obtained by or transferred to the Fund shall not be construed to be Government funds, appropriated monies, or Federal education assistance funds, as defined in section 102(b)(2)(B) (as added by section 101 of the Preventing Risky Operations from Threatening the Education and Career Trajectories of Students Act of 2019 ). 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 subsection without fiscal year limitation. A violation described in subparagraph
(B)shall be a cause of action enforceable by a State, through the attorney general (or the equivalent thereof) of such 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
(3)for such violation, including a civil penalty under subsection (c), or any remedies otherwise available under law. A violation described in this subparagraph is: A substantial misrepresentation. A violation of section 487(a)(20). A violation of the default manipulation regulations promulgated by the Secretary under section 435(m)(3). A violation of the program integrity regulations promulgated by the Secretary under this Act, including regulations promulgated in section 102, section 455, and part H. In accordance with section 455(h), any act or omission of the institution, third party servicer that contracts with such institution, or third party contractor, related to the making of the loan for enrollment at the institution or the provision of educational services for which the loan was provided that would give rise to a cause of action against the institution under applicable State law. Except as provided in subparagraph (B), before initiating any action in a court or other administrative or regulatory proceeding against any institution of higher education, third party servicer that contracts with such institution, or third party contractor, as authorized by paragraph (1), a State attorney general or the equivalent thereof shall timely provide to the Secretary a copy of the complete complaint to be filed and written notice describing such action or proceeding. If prior notice is not practicable under subparagraph (A), the State attorney general or equivalent thereof shall provide to the Secretary a copy of the complete complaint and the notice described in subparagraph
(A)immediately upon instituting the action or proceeding. The notification required under this paragraph 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. 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. Except as provided in clause (ii), 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; public notification regarding the violation, including the costs of notification; or limits on the activities or functions of involved persons, institutions, third party servicers that contract with institutions, or third party contractors. 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 or withdrawal of the authority of the third party servicer or third party contractor to act on behalf of an institution or contract with an institution. A violation described in subparagraph
(B)shall be subject to a private right of action enforceable by a student or former student of an institution of higher education, on behalf of such individual or such individual and a class, in an appropriate district court of the United States or any other court of competent jurisdiction that also has jurisdiction over the defendant. The student or former student may seek any relief provided under subsection (h)(3)(B) for such violation, or any remedies otherwise available to the individual under law and equity. A violation described in this subparagraph is: A substantial misrepresentation. A violation of section 487(a)(20). A violation of the default manipulation regulations promulgated by the Secretary under section 435(m)(3). A violation of the program integrity regulations promulgated by the Secretary under this Act, including regulations promulgated in section 102, section 455, and part H. Any institution of higher education, third party servicer that contracts with such institution, or third party contractor, that commits a substantial misrepresentation may be held liable to a student or former student of that institution in an amount equal to the sum of— any actual damage sustained by such individual as a result of each substantial misrepresentation; any additional damages as the court may allow; and in the case of any successful action to enforce the foregoing liability, the costs of the action, together with a reasonable attorney’s fee as determined by the court. On a finding by the court that the institution of higher education, third party servicer that contracts with such institution, or third party contractor, has committed a violation described in paragraph (1)(B) with actual or constructive knowledge or reckless disregard for such violation, the court may assess punitive damages not to exceed threefold the sum of actual damages sustained by the plaintiff or class, including court costs and a reasonable attorney’s fee. In determining the amount of liability in any action under clause (i), the court shall consider, among other relevant factors— in any individual action under this subsection, the frequency and persistence of noncompliance by the institution of higher education, third party servicer that contracts with such institution, or third party contractor and the nature of such noncompliance; or in any class action under this subsection, in addition to the factors listed in clause (i), the financial resources of the institution of higher education, third party servicer that contracts with such institution, or third party contractor and the number of persons adversely affected. An action to enforce any liability created by this subsection may be brought in any appropriate United States district court without regard to the amount in controversy, or in any other court of competent jurisdiction. . Section 487(c), as amended by section 102(b), is further amended— in paragraph (1), by striking subparagraphs
(G)through (J); by striking paragraphs
(2)and (3); and by redesignating paragraphs
(4)through (7), as paragraphs
(2)through (5), respectively.
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Sec. 305
Enhanced civil penalties, State enforcement, and private right of action
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