Lawsuit Also Names Credit Union That Financed Consumers’ Purchases And Collection Agency That Attempted to Collect On Loans; Court Issues Temporary Injunction Requiring Company To Make Significant Changes To Its Business Practices

Schneiderman: False And Deceptive Business Practices Are Illegal; We Will Pursue Those Who Cheat New Yorkers

ALBANY— Attorney General Eric T. Schneiderman recently announced that his office has filed a lawsuit in Albany County Supreme Court and has obtained a temporary restraining order against The College Network and its owner, Gary Eyler. The suit charges that the company and Eyler induced prospective nursing students to pay thousands of dollars for ineffective study guides through false and deceptive business practices. The suit alleges that The College Network, headquartered in Indiana, preyed on as many as 2,000 New York consumers who sought to obtain associate degrees in nursing. The papers charge that, through advertising and high pressure sales tactics, The College Network created the false impression that it was offering online nursing degrees and that it was affiliated with Excelsior College, an accredited institution based in Albany that offers such degrees.

“Businesses operating in New York must conduct business fairly, and that means not using false and deceptive advertising to take advantage of consumers. As we allege, hard-working New Yorkers – many of them single moms and immigrants – were duped into buying expensive, inadequate study materials and access to ‘academic advisors’ who were falsely touted as experts,” said Attorney General Schneiderman. “Businesses that take advantage of people seeking to better their lives and communities deserve especially tough attention from law enforcement, and we will continue working to crack down on this kind of abuse in the education sector.”

According to court papers, The College Network targeted licensed practical nurses and paramedics with online ads that created the false impression that The College Network was affiliated with Excelsior College and offered associate degrees in nursing that consumers could earn “in just 18 months.” After consumers responded to the online advertisements, The College Network dispatched sales representatives, referred to as “program advisors,” to consumers’ homes. The advisors reinforced the false impression that The College Network was affiliated with Excelsior College and engaged in high-pressure sales pitches to induce consumers to sign up for The College Network’s “program.” However, the program consisted of little more than a series of study guides that many consumers found difficult to understand and that, contrary to the company’s representations, did not prepare them for the required exams they needed pass in order to get course credit.

The papers include affidavits from three dozen consumers from Buffalo, the Hudson Valley, Long Island, New York City, Rochester and Syracuse, among other places, who state that they were duped by the company.

The College Network also promised consumers “24/7” access to “academic advisors” who were touted as experts in the subject matters covered in the guides and who could assist consumers who were having trouble understanding the material. Many consumers complained that these so-called advisors had no substantive expertise in the subject matter and were unable to help consumers who asked for assistance.

The papers allege that The College Network charged consumers approximately $500 for each study guide and required consumers to purchase upfront guides for every course they would need to earn their degree from Excelsior College. In many cases, the total cost of the network’s program exceeded $10,000, which forced most consumers to accept the financing offered by The College Network. In many cases, The College Network did not disclose that the loans were being provided by a credit union, not The College Network.

The suit also names Tennessee-based Southeast Financial Credit Union (“Southeast”), which partnered with The College Network to provide financing to consumers to purchase The College Network’s so-called “program,” and American Credit Exchange, a collection agency operated by Eyler that attempted to collect from consumers who defaulted on their loans.

Other deceptive practices alleged in the court papers include program advisors convincing consumers to finance third-party test administration fees by creating the false impression that The College Network would readily provide consumers with a check to sit for an exam. These fees added as much as $3,000 or more to the total amount of the loan. According to the suit, when consumers contacted The College Network to obtain a check so that they could register for an exam, many learned for the first time that The College Network would not send them a check until they scored as high as 90% on online quizzes and practice exams. Many consumers were unable to achieve the required score and those who managed to qualify then often had to wait months for their checks.

The court papers allege that consumers only discovered The College Network had misled them after the five-day cancellation period in their contracts had expired. When consumers subsequently sought to cancel their contracts, they were falsely told by The College Network, Southeast and American Credit Exchange that the debts were valid and that they were obligated to continue making payments, the papers state.

In addition to engaging in fraudulent and deceptive business practices under New York law, the lawsuit alleges that The College Network violated New York law by failing to provide the required notices of cancellation and by failing to provide refunds to consumers who did not use their study guides and cancelled their contracts.

The lawsuit seeks a permanent injunction barring The College Network from advertising or selling its nursing “programs” in New York, prohibiting Southeast and American Credit Exchange from attempting to collect on the debts stemming from The College Network’s fraudulent conduct, rescission of consumers’ contracts, restitution for consumers who were harmed by The College Network’s fraudulent conduct, and penalties and costs.

As part of the lawsuit, the Supreme Court granted with the consent of The College Network, a temporary restraining order requiring The College Network to make a number of changes to its business practices, including clearly and conspicuously disclosing on all contract documents that it is not affiliated with Excelsior College and is not a degree granting program. The College Network has also agreed not to include third-party testing fees in any contract or financing agreement and to provide New York consumers with their test fee checks within seven days of request. Southeast Financial agreed not to sell or transfer any promissory notes obtained by consumers to pay for goods and services related to The College Network’s nursing “programs.”

Consumers who have a complaint against The College Network are urged to file a complaint online or call 1-800-771-7755.

This investigation is being handled by Assistant Attorneys General Amy Schallop and Emily L. Auletta, Deputy Bureau Chief Laura J. Levine and Bureau Chief Jane M. Azia, all of the Consumer Frauds and Protection Bureau and Executive Deputy Attorney General Karla G. Sanchez.