In recent years, the media has increasingly focused on the concept of students as “consumers.” For example, a March 2014 New York Times article observed that higher education is today “less a rite of passage in which institutions serve in loco parentis, and more of a commercial transaction between school and student.”

Several factors have contributed to this idea that college students should be considered and treated as consumers. For one, the economy has led some to question the value of a college education. Nondischargeable student loan debt obligations now exceed $1.2 trillion and continue to make it hard for Millennials to buy homes, start businesses, and invest for retirement.

Tips for avoiding liability

Students considering litigation against colleges and universities have powerful legal tools at their disposal: state consumer protection laws. These laws were designed to empower states and consumers to bring claims against companies that act unfairly or deceptively. Although the requirements of these laws vary from state to state, most allow consumers that prevail in litigation to recover not only compensatory damages but also reasonable attorneys’ fees and double or treble damages. The availability of such remedies makes it easier for consumers to find legal representation and encourages them to bring their claims to court.

Below we discuss our top tips for avoiding liability under state consumer protection laws.

#1: Be a part of shaping the conversation about higher education

We do not recommend that colleges and universities dispute the principle that students should receive good value for their tuition dollars. Nevertheless, schools should not allow the debate about the value of higher education to be dominated by outside critics. It is up to each school to articulate its educational mission, emphasize the inherent value of a college education, and better define the educational nature of its relationship with students.

#2: Make sure you are making the required disclosures and that these disclosures are accurate

The first step is to understand what needs to be disclosed. The Federal Student Aid Office publishes a useful chart outlining “consumer information disclosures” that institutions are required to make. These requirements are more far-reaching than you might expect. They encompass not only clearly consumer-related issues such as financial aid policies and refund policies, but also issues involving the availability of services to students with disabilities, credit transfer policies, penalties for drug-related offenses, vaccination policies, and voter registration.

Institutions should ensure that their disclosures are made completely and accurately. Read the requirements carefully to make sure you understand what needs to be disclosed. Then make sure all the necessary people at your institution are consulted. Once the information is collected, make sure it is validated.

Schools also need to ensure that the final disclosure is made in the proper form, via the proper medium, and that it is made to the proper group of persons (e.g., all prospective students, current students, the general public). Schools should implement a system to ensure that their disclosures are consistent and do not contradict other representations made by the university (for example, in marketing materials). Coordinate with all departments and divisions of your institution to make sure consistent numbers are presented across the board.

#3: Learn your state’s consumer protection law

In order to assess your risk of liability, you must learn the details of your state’s consumer protection law.

  • First, figure out what conduct is prohibited. While all states prohibit deceptive or unfair conduct, consider whether your state prohibits “deceptive” or “unfair” conduct in broad terms, or whether it defines these terms as limited to certain conduct or transactions.
  • Second, look at what entities and actions are covered by the statute. State statues commonly apply to entities in “trade or commerce,” but this term can vary in application. Some states define the term to mean almost any kind of consumer transaction. Other states define it more narrowly, restricting the statute’s application to a limited list of business relationships. Importantly, many courts have deemed conduct that relates to a school’s core educational mission, involving purely educational activity, as outside the scope of “trade or commerce.”
  • Third, learn whether consumers can bring direct actions and whether there are any procedural requirements they need to comply with before filing. A few states do not allow for claims directly brought by consumers and in those states that do allow such suits, there is ample variation in the remedies available to individual consumers.
  • Fourth, consider what remedies are available. Compensatory damages, the amount of money it would take to make the harmed consumer whole, are only the floor in most states. Many states allow a plaintiff who prevails in a consumer protection lawsuit to also recover an award of reasonable attorneys’ fees, and those fees can add up quickly in complex litigation.
  • Fifth, assess whether your state allows class actions. Some states allow a group of consumers who have been harmed in similar ways to join together in a class action to seek broad relief against the alleged violator.
  • Finally, examine whether and how state authorities can enforce your state’s laws. Some consumer protection statutes allow the attorney general or other agency to issue regulations prohibiting specific practices as unfair and deceptive. They may also file enforcement actions in court seeking an injunction (essentially an order directing the defendant to behave in a certain way), restitution, or civil penalties. Depending on the state, civil penalties can range from $1,000 to $40,000—and because those penalties are assessed per violation, a defendant’s total liability can add up quickly.

Watch for Part II in the next post.

Reprinted from “Consumer Liability 101: 6 Areas to Watch, Part I,” Recruitment & Retention, 28.7 (2014): 1, 5. © Magna Publications. All rights reserved.