Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Online training company agrees to pay $43.5 million to settle FTC charges, (Jul 30, 2024)

By Peter Reap, J.D., LL.M.

The company falsely promised to find jobs for enrollees in its programs and targeted servicemembers and their families.

Online career-training company, Career Step, LLC, has agreed to a stipulated order, subject to court approval, that requires it to pay $43.5 to resolve FTC charges that the company lured consumers, specifically servicemembers and their families, with deceptive ads that falsely touted inflated employment outcomes, job placement, and partnerships with prominent companies, the agency announced. The order provides that Career Step will pay $27.8 million in debt cancellation and $15.7 million in cash to provide redress to consumers who were harmed by its deceptive advertising (FTC v. Career Step, LLV, No. 1:24-cv-03354-MLB, FTC File No. 232 3019 (N.D. Ga.)).

According to the FTC’s complaint, filed in the federal district court in Atlanta, Career Step is a for-profit educational institution in Georgia that primarily offers online career-training and certification programs in the health care field. The company uses digital and social media, and artificial intelligence (AI) technology to target military servicemembers and their families.

The FTC contends that, since 2019, Career Step has used false or unsubstantiated representations to convince consumers to enroll in its offerings. These representations include inflated employment rates, deceptive job placement claims, misrepresentations about the typical time required to complete its courses, and a deceptive incentivized review program, all in violation of Section 5 of the FTC Act. The complaint also alleges that Career Step violated the Gramm-Leach-Bliley Act (GLB Act) by deceiving consumers to hand over their sensitive personal and sensitive financial information to sign up for the programs, and violated the Telemarketing Sales Rule (TSR) by making these misrepresentations in telemarketing calls with prospective consumers.

Since 2020, Career Step has enrolled more than 30,000 consumers into its programs. Consumers can enroll through Career Step’s website, or over the phone with the company’s sales representatives, who it holds out to consumers as “Career Advisors.”

Starting in 2022, Career Step partnered with Aktify, an “advanced AI platform” designed to “replicate human sales representatives.” Career Step provides Aktify a list of consumers who have asked Career Step to contact them by asking for more information on the course offerings. Aktify then uses conversational AI software to contact the consumers via text message in order to initiate a conversation. If a consumer schedules a call, Aktify proceeds to connect the consumer with a Career Step sales representative. If the consumer asks a question via text message, Aktify uses conversational language recognition to identify which of several Career Step pre-approved, pre-scripted messages best fits the consumer’s question, and then proceeds to route any follow-up calls to Career Step sales reps.

The FTC’s complaint says that Career Step representatives have falsely promised to find jobs for consumers. For example, Career Step representatives have claimed that the “career placement team” will step in and find consumers the “perfect job.” In reality, Career Step does not provide any job placement. Career Step’s job search assistance is limited to help with resume-drafting or emailing links to job postings generally available on the Internet.

The complaint says the company has also represented that “most learners” and “more than 80% of its graduates,” or program-completers, are employed in their field of study. Career Step’s employment outcome claims are based entirely on an optional survey sent only to consumers who have completed their program. But most participants never complete their program at all and never even receive a survey. Of the consumers that do receive a survey, most never respond. For instance, out of the 9,330 enrollees and 2,126 program-completers from a 2020 survey, only 5% of enrollees or 24% of program-completers completed the survey, representing a small pool of consumers. Career Step’s website has claimed falsely that it has partnerships with leading businesses in the healthcare industry to provide jobs for its graduates, the FTC charges.

The FTC also alleges that Career Step falsely told students that it would place them in an externship as part of its program. But the complaint notes that less than 10 percent of students in externship-required programs were ever placed in an externship. Without an externship, those consumers have been unable to complete their programs. The company has also falsely promised that students would complete their program in four months or less. Finally, Career Step conducted a deceptive incentivized review program to get consumers to post reviews of their experiences with Career Step. The company offered students a free extension for these reviews, that falsely appear to reflect the opinions and experiences of ordinary, uncompensated Career Step students.

The stipulated settlement. The settlement, which must be approved by a federal judge before it can go into effect, requires Career Step to pay $15.7 million, which the FTC will use for consumer redress. The company must also cancel approximately $27.8 million in debts owed to Career Step by current or former students who enrolled between February 2020 and February 2023.

In addition, Career Step is prohibited from deceptively advertising any educational product or service, and cannot misrepresent:

• employment, hiring, or career prospects;

• the number or percentage of consumers who obtain employment;

• whether any individual was employed, hired, or obtained a job as a result of Career Step’s educational products or services;

• partnerships with any companies or employers;

• career services;

• its externship program;

• the typical or expected duration of a program;

• the total costs or terms of the educational program or service;

• the objectivity or impartiality of any content; or

• any fact material to consumers concerning any good or service.

Career Step must also notify each third-party platform or website displaying a review written by a consumer to whom Career Step provided free services in exchange for the review about the FTC’s action against the company. The notice also must list all such reviews with enough information to allow the website or platform to easily identify them, and Career Step must inform the website or platform about the FTC order and request that the website or platform remove those reviews as soon as possible.

Levine comments. “Servicemembers and their families make sacrifices every day to protect our freedoms,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “We owe it to them to make sure that when they look to use their hard-earned benefits to further their education, they get facts and not fantasy.”

Attorneys: Olivia Adendorff (Kirkland & Ellis LLP) for Career Step, LLC. Stephanie E. Liebner, FTC.

Companies: Career Step, LLC

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