Colleges Sued Over Arbitration Clauses in Student Contracts

07-12-2016
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Sanford Brown College and Institute is being sued for misleading marketing tactics and consumer fraud. Two former students, Annemarie Morgan, and Tiffany Dever claim that the college lied when it told them their ultrasound technician program was ‘licensed,’ and that the school’s career center would help them find jobs upon graduation. In reality, their professors were minimally qualified, and they were slammed with thousands of dollars in loans, and no jobs. However, it is still to be determined whether or not their case will head to court due to an arbitration clause in the student contracts, which has caused public outcry, and lawmakers calling for the Department of Education to ban colleges from receiving federal financial aid funding that require arbitration clauses. Because provisions in the contracts prevent victims from forming class action lawsuits, it is hard to hold schools accountable for abuse. According to The Century Foundation, around 900,000 students were enrolled in schools that required them to sign contracts with arbitrary clauses in 2014 alone. Many for-profit colleges have faced lawsuits in recent years, including one of the United States’ largest for-profit college chains, Corinthian Colleges, which completely collapsed this past year over lawsuits accusing them of luring students in with false claims, such as inflated job placement and graduation rates. Representatives for these colleges claim that banning arbitration clauses would hurt students rather than help them, by making it harder for students who cannot afford lawyers. “Every school needs to figure out what is the best protocol to resolving disputes with students,” stated Steve Gunderson, CEO of the Association of Private Sector Colleges and Universities. “That’s going to be different with every school and every situation.” Consumer advocates argue that the arbitration agreements are a sly business tactic which limit the options victims of fraud have. When a student does try to pursue arbitration, the odds are against them, and even with strong cases, they are expected to receive very small settlements, and because arbitration proceedings are typically closed, it is tough for regulators to track abuse and take action. U.S. Senator Richard Durbin, a proponent for banning arbitration clauses feels that despite a student’s ability to afford a lawyer, everyone should be able to have a day in court if they wish. “When we have an entity- whether it is a business, or in this case, a school- that is engaging in questionable conduct, the people who are the victims on that conduct should have a day in court. That is the ordinary course of events in America.”

If you have suffered due to consumer fraud tactics, the lawyers at Hodes Milman Liebeck are there for you in your time of need. Contact us today online at hmlm.com or call 866-730-1976 for a complimentary case evaluation.

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