Letter to Ted Mitchell, Under Secretary of the U.S. Department of Education, and David Hawn, President and CEO of the Education Credit Management Corporation - Title IV Funds

Letter

Dear Under Secretary Mitchell and Mr. Hawn:

I would first like to commend you both on the sale of the majority of Corinthian schools to the Education Credit Management Company's (ECMC) newly formed subsidiary, Zenith Education Group. Specifically, I would thank you for agreeing not to include mandatory arbitration clauses in future enrollment agreements at the sold schools. While I join student advocates in celebrating that prohibition, as I mentioned in my January 12 letter to Under Secretary Mitchell, I am still concerned that students at these schools will remain unable to adequately protect themselves against future abuse.

Therefore, I write again to request that the Department of Education withhold final approval of Zenith's eligibility to receive Title IV funds unless their parent company, the Education Credit Management Company (ECMC), agrees to exclude from future enrollment agreements any limitation on the ability of a student to pursue a claim against an institution in court. Specifically, I ask that enrollment agreements at schools recently acquired from Corinthian Colleges, Inc. exclude class action or mass action waivers, or waivers of students' Seventh Amendment right to jury trials. On February 4, ECMC President and CEO David Hawn was quoted by Politico as saying that an individual right to take legal action is sufficient to protect future students from abuse. However, this statement ignores the reality that prohibiting students from taking action as a class will effectively deny them access to courts and to much-needed relief.

Class actions serve as a backstop for enforcement of the Civil Rights Act, Americans with Disabilities Act, Age Discrimination in Employment Act, Family and Medical Leave Act, and other landmark laws. They are usually the only effective remedy against wide-scale fraud or wrongful practices harming multiple individual consumers by recognizing that individuals alone often do not have the time or resources to identify, investigate, or prove the existence of such fraudulent practices.

However, since the 2011 Supreme Court decision in AT&T v. Concepcion, corporations in all sectors began to erode consumers' ability to seek redress by gradually including mandatory arbitration clauses and class action waivers in their standard-form contracts. Consequently, judges across the nation have been forced to dismiss class claims alleging civil rights, employment law, and consumer protection violations.

In the wake of the decision, advocates warned of the harm that these provisions will have on consumer rights. The New York Times criticized the decision as a "dev­astating blow to consumer rights" and a major setback for individuals who lack the resources to challenge big companies. Therefore, in response, Congress has banned the use of arbitration clauses in consumer credit contracts involving service members or their families, as well as in residential mortgage loans and automobile franchise agreements. I believe all consumers should receive these same protections, including and especially our students.

There are situations in which a private right of action will not be enough for those harmed to successfully seek redress. Claims involving small amounts, or disputes requiring plaintiffs to prepare costly analyses or reports, as in antitrust actions, will often involve up-front costs greater than or far exceeding potential relief.

For ECMC students in particular, the inclusion of class action waivers and similar restrictions in future enrollment agreements hints strongly that the abuses they experienced under Corinthian's management will continue. Many of them were misled into enrolling by manipulated job placement data and the misrepresented validity of uncertified academic programs. In fact, according to the California Attorney General's lawsuit, many Corinthian students were targeted for enrollment precisely because their income was at or near the poverty line. These students, often the heads of single-parent households, are unlikely to have the time, or resources to procure access to legal counsel and pursue their claims individually. If ECMC proceeds with the inclusion of these waivers, students' inability to consolidate their claims or to otherwise share the costs of legal action with others similarly harmed will insulate the schools bought by ECMC from all liability. I find this simply unacceptable in light of these schools' troubled history.

We cannot rely solely on oversight agencies to identify every single instance of abuse, especially when it involves $150 billion of student aid the federal government disburses each year to schools such as those acquired by ECMC.

Thank you for your consideration and response to my request. I look forward to continuing this conversation and working with you to provide students with the information and support they need. If you have any questions about this matter, please contact me or Eduardo Soto at (202) 225-2201.

Sincerely,

Maxine Waters
Member of Congress

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