Senators Call on ITT Tech to Halt Use of Mandatory Arbitration Clauses
Durbin, Brown, Franken & Blumenthal urge for-profit college to follow lead of DeVry and the University of Phoenix who have abandoned the unfair practice
[WASHINGTON, D.C.] – U.S. Senators Dick Durbin (D-IL), Sherrod Brown (D-OH), Al Franken (D-MN) and Richard Blumenthal (D-CT) today called on ITT Educational Services, Inc. (ITT Tech) to follow the lead of the University of Phoenix and DeVry and halt the use of mandatory arbitration clauses in college enrollment agreements.
In a letter to the CEO, the Senators wrote, “ITT Tech, under your leadership, has long been an advocate in the for-profit college industry for the continued use of mandatory arbitration clauses. In light of the actions by University of Phoenix and DeVry, the spotlight is now on ITT Tech and the burden is now on you to explain to your students why ITT Tech continues to deny them their day in court when your fellow institutions have chosen a different path.”
The four Senators were also joined by U.S. Senator Elizabeth Warren (D-MA) in calling on the Secretary of Education to ban the use of mandatory arbitration in college enrollment agreements. In a letter, the Senators wrote: “Given the broad opposition amongst student, consumer, veteran, and legal advocates to mandatory arbitration, and now positive action by two of the major players in the for-profit college industry, the way is clear for the Department to act decisively to end the practice once and for all. We urge you to do what’s best for students: ban the use of mandatory arbitration in student enrollment agreements by all institutions of higher education.”
Mandatory arbitration clauses are common in for-profit college enrollment contracts but are almost never used by not-for-profit schools. These clauses reduce transparency and accountability for for-profit colleges and force students who have been victimized by fraudulent or abusive conduct into secret arbitration proceedings where the deck is stacked against the student. An investigation by the Senate Committee on Health, Education, Labor, and Pensions found that of the twenty-seven enrollment agreements produced to the committee by for-profit education companies, twenty-one contained a clause that required students to go through a process of mandatory binding arbitration. Not only does forced arbitration hurt individual students who cannot obtain meaningful recourse directly from wrongdoers, but it also prompts those students to seek relief from the Department of Education through taxpayer dollars.
Text of today’s letters is below.
May 27, 2016
Kevin M. Modany
Chief Executive Officer
ITT Educational Services, Inc.
13000 North Meridian Street
Carmel, IN 46032
Dear Mr. Modany:
We write to urge ITT Educational Services, Inc. (ITT Tech) to follow the lead of the University of Phoenix and DeVry and halt the practice of requiring your students to sign mandatory arbitration clauses.
In the last month, the Apollo Education Group (owner of the University of Phoenix) and the DeVry Education Group have both made clear commitments to end the use of mandatory arbitration and other restrictions on students’ access to court in their enrollment agreements. These actions represent a growing consensus in the for-profit college industry that mandatory arbitration is not in the best interests of students. However, ITT Tech, under your leadership, has long been an advocate in the for-profit college industry for the continued use of mandatory arbitration clauses. In light of the actions by University of Phoenix and DeVry, the spotlight is now on ITT Tech and the burden is now on you to explain to your students why ITT Tech continues to deny them their day in court when your fellow institutions have chosen a different path.
In 2015, you sought to justify ITT Tech’s use of mandatory arbitration clauses by claiming that “the use of arbitration clauses is a common practice throughout much of higher education.” This justification was misleading at the time, since mandatory arbitration is rarely, if ever, used by legitimate non-profit public and private institutions of higher education and has only been common in the for-profit higher education industry. Now, this justification rings even more hollow, as two of the largest for-profit education companies have made commitments to end the use of mandatory arbitration clauses and other restrictions on students’ access to court. Far from being a common practice in higher education, the use of mandatory arbitration is on the way out.
It is particularly ironic that ITT Tech has imposed mandatory arbitration clauses on its students when ITT Tech has insisted on its own “day in court” to respond to investigations and allegations of wrongdoing by state and federal regulators. Your students deserve an explanation as to why you believe ITT Tech deserves the right to resolve disputes in court while ITT Tech students do not.
We ask that you respond within 30 days to inform us whether ITT Tech will change its student enrollment agreements to end the use of mandatory arbitration clauses and other restrictions on students’ access to the court system. We look forward to your response.
Sincerely,
May 27, 2016
The Honorable John B. King, Jr.
Secretary
Department of Education
400 Maryland Avenue, SW
Washington, DC 20202
Dear Secretary King:
Since we last wrote you on the topic of mandatory arbitration in student enrollment agreements, two major developments have cleared the way for the Department to ban this practice through your upcoming rule on borrower defense for all institutions that receive Title IV funds.
In the last month, the Apollo Education Group (owner of University of Phoenix) and the DeVry Education Group have both taken steps to end the use of mandatory arbitration in their student enrollment agreements. In a public statement on May 19, Apollo announced that “effective July 1, 2016, University of Phoenix and Western International University, two of its U.S.-based universities, will eliminate the use of mandatory arbitration clauses in its students’ enrollment agreements.” While we are still waiting to see the new enrollment agreement language to confirm that the fine print matches this clear public commitment and to ensure that there are no other new restrictions on students’ access to court, the announcement is a clear sign of the growing consensus that mandatory arbitration clauses in enrollment agreements are not in the best interest of students.
Also in May, DeVry officials confirmed that they had ended the use of mandatory arbitration in their enrollment agreements. The enrollment agreement language provided to us by DeVry does not include mandatory arbitration clauses or any other restrictions on students’ access to court such as bans on jury trials, class action bans, or venue restrictions.
Given the broad opposition amongst student, consumer, veteran, and legal advocates to mandatory arbitration, and now positive action by two of the major players in the for-profit college industry, the way is clear for the Department to act decisively to end the practice once and for all. We urge you to do what’s best for students: ban the use of mandatory arbitration in student enrollment agreements by all institutions of higher education.
Thank you.
Sincerely,
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