BILL NUMBER: AB 201 CHAPTERED
BILL TEXT
CHAPTER 621
FILED WITH SECRETARY OF STATE OCTOBER 9, 2001
APPROVED BY GOVERNOR OCTOBER 8, 2001
PASSED THE ASSEMBLY SEPTEMBER 13, 2001
PASSED THE SENATE SEPTEMBER 10, 2001
AMENDED IN SENATE SEPTEMBER 6, 2001
AMENDED IN SENATE AUGUST 31, 2001
AMENDED IN SENATE AUGUST 28, 2001
AMENDED IN SENATE AUGUST 20, 2001
AMENDED IN SENATE JULY 19, 2001
AMENDED IN ASSEMBLY MAY 14, 2001
INTRODUCED BY Assembly Member Wright
FEBRUARY 9, 2001
An act to amend Sections 94806, 94808, 94810, 94825, 94840, 94877,
94944, 94945, 94960, and 94985 of, and to add Section 94995.3 to,
the Education Code, relating to private postsecondary education, and
making an appropriation therefor.
LEGISLATIVE COUNSEL'S DIGEST
AB 201, Wright. Private postsecondary education: Bureau for
Private Postsecondary and Vocational Education.
(1) The existing Private Postsecondary and Vocational Education
Reform Act of 1989 generally sets minimum standards of instructional
quality, ethical and business practices, health and safety, and
fiscal responsibility for private postsecondary and vocational
educational institutions, as defined. The act establishes the Bureau
for Private Postsecondary and Vocational Education, which, among
other things, is required to review and investigate all institutions,
programs, and courses of instruction approved under the act.
The existing act sets forth standards applicable to every audit,
review, statement, or financial report that the act requires to be
prepared or filed.
This bill would require that any audit or financial report
required to be prepared under the act contain a statement signed by
the individual who has prepared the report stating that the
institution has paid or has not paid to the bureau all amounts owed
to the Student Tuition Recovery Fund under a prescribed provision of
the act. The bill would provide that, if the institution is a
corporation that is publicly traded on a national stock exchange, the
submission of the corporation's annual report shall be deemed to
comply with this requirement. The bill would also require an
institution that has not paid all amounts owed to the bureau under
this provision to report to the bureau within 30 days on its plan to
become current in these payments.
(2) The act requires each institution approved to operate under
its provisions to annually report prescribed data to the bureau and
to provide prescribed information to its students.
This bill would add to the data required to be included in that
annual report a statement indicating that the institution is current
on its payments to the Student Tuition Recovery Fund. The bill would
also require institutions to provide to their students prescribed
data relating to the purposes, operation, and eligibility
requirements of the Student Tuition Recovery Fund.
(3) Under a portion of the act that is known as the Maxine Waters
School Reform and Student Protection Act of 1989, an institution that
violates those provisions in connection with an agreement for a
course of instruction is required to refund all consideration paid by
or on behalf of the student. Other prescribed provisions of the
Private Postsecondary and Vocational Education Reform Act of 1989
also authorize the bringing of civil actions against institutions
that are alleged to violate these provisions.
This bill would require a student who brings an action or asserts
any claim in an existing action for recovery on behalf of a class of
persons, or on behalf of the general public, under prescribed
provisions of law, to notify the bureau of the existence of the
lawsuit, the court in which the action is pending, the case number of
the action, and the date of the filing of the action or of the
assertion of the claim, within 30 days of the filing of the action or
of the first assertion of the claim, whichever is later. The bill
would also require the student to notify the court that he or she has
notified the bureau pursuant to this provision, and would prohibit
judgment from being entered pursuant to this provision until the
student has thus complied.
(4) Existing provisions of the act establish the Student Tuition
Recovery Fund, and continuously appropriate the money in the fund to
the bureau for the purposes of the act.
This bill would require the bureau to send to each student who
applies for payment from the fund a written notice specifying the
rights of a student under these provisions. The bill would require
that, once the bureau has determined that a student claim is eligible
for payment and intends to use the fund, in whole or in part, to
satisfy the eligible claim, the bureau document its negotiations with
the relevant lender, holder or guarantee agency, the United States
Department of Education, or the applicable state agency, as
prescribed.
The bill would make an appropriation by authorizing a new purpose
for expenditures from the fund.
(5) Existing law requires the bureau to assess, for the purposes
of the Student Tuition Recovery Fund as prescribed, each institution
that collects any moneys in advance of rendering services.
This bill would exempt from this assessment an institution that
receives all of its students' total charges, as defined, from
3rd-party payers, as defined. The bill would revise, as prescribed,
the formula for calculating the amount of this assessment.
(6) Existing law requires the bureau to investigate complaints
from any person claiming damage as a result of any act or practice by
a postsecondary or vocational educational institution or its agent,
or both, that is a violation of the act.
This bill would require the bureau to adopt regulations that
specify its procedures for complaint handling and complaint
disclosure. The bill would specify procedures and timelines for the
processing of these complaints and responses received pursuant
thereto. The bill would authorize a person who claims that an
institution is operating in violation of specified provisions of the
act to bring an action, in small claims court or a court of competent
jurisdiction, for the recovery of actual or statutory damages, or
both, in accordance with specified procedures. The bill would
authorize courts to order fines and other prescribed remedies against
institutions found to violate these provisions of the act.
(7) The bill would require the bureau to submit an annual report
on the collection and expenditure of moneys collected as special
assessments under the bill, as prescribed.
Appropriation: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 94806 of the Education Code is amended to read:
94806. (a) This section applies to every audit, review, and
statement prepared by an independent accountant and to every
financial report required to be prepared or filed by this chapter.
(b) Institutional audits and reviews of financial data, including
the preparation of financial statements, shall comply with all of the
following:
(1) An institution that collected seven hundred fifty thousand
dollars ($750,000) or more in total student charges in its preceding
fiscal year shall file financial reports prepared in accordance with
generally accepted accounting principles established by the American
Institute of Certified Public Accountants, and audited or reviewed by
an independent certified public accountant who is not an employee,
officer, or corporate director or member of the governing board of
the institution.
(2) An institution that collected less than seven hundred fifty
thousand dollars ($750,000) in total student charges in its preceding
fiscal year shall file financial reports prepared in accordance with
generally accepted accounting principles established by the American
Institute of Certified Public Accountants. These financial reports
may be prepared by an individual with sufficient training to adhere
to the required accounting principles.
(3) Financial reports prepared on an annual basis shall include a
balance sheet, statement of operations, statement of cash-flow, and
statement of retained earnings or capital. Nonprofit institutions
shall provide this information in the manner required under generally
accepted accounting principles for nonprofit organizations.
(4) The financial report shall establish whether the institution
complies with subdivision (a) of Section 94804 or subdivision (a) of
Section 94855, if applicable, and whether any of the circumstances
described in subdivision (b) of Section 94804 or subdivision (b) of
Section 94855, if applicable, exist.
(5) If an audit that is performed to determine compliance with any
federal or state student financial aid program reveals any failure
to comply with the requirements of the program, and the noncompliance
creates any liability or potential liability for the institution,
the financial report shall reflect the liability or potential
liability.
(6) Work papers for the financial statements shall be retained for
five years from the date of the reports, and shall be made available
to the bureau upon request after completion of the report.
(c) Any audits shall be conducted in accordance with generally
accepted auditing standards, and shall include the matters described
in subdivision (d).
(d) If an audit is conducted, the accountant shall obtain an
understanding of the institution's internal financial control
structure, assess any risks, and report any material deficiencies in
the internal controls.
(e) Any audit or financial report shall contain a statement signed
by the individual who has prepared the report stating that the
institution has paid or has not paid to the bureau all amounts owed
under Section 94945. If the institution is a corporation that is
publicly traded on a national stock exchange, the submission of the
corporation's annual report shall be deemed to comply with this
section. The bureau shall be deemed an intended beneficiary of that
statement in any audit or financial report. An institution that has
not paid all amounts owed to the bureau under Section 94945 shall
report to the bureau within 30 days on its plan to become current in
these payments. This subdivision shall not be construed to require
the institution to prepare a separate audit or report on the Student
Tuition Recovery Fund.
SEC. 2. Section 94808 of the Education Code is amended to read:
94808. (a) Each institution approved to operate under this
chapter shall be required to report to the bureau, by July 1 of each
year, or another date designated by the bureau, the following
information for educational programs offered in the prior fiscal
year:
(1) The total number of students enrolled, by level of degree or
type of diploma program.
(2) The number of degrees and diplomas awarded, by level of
degree.
(3) The degree levels offered.
(4) Program completion rates.
(5) The schedule of tuition and fees required for each term,
program, course of instruction, or degree offered.
(6) Financial information demonstrating compliance with
subdivisions (b) and (c) of Section 94804 and subdivisions (b) and
(c) of Section 94855, if applicable.
(7) Institutions having a probationary or conditional status shall
submit an annual report reviewing their progress in meeting the
standards required for approval status.
(8) A statement indicating whether the institution is or is not
current on its payments to the Student Tuition Recovery Fund.
(9) Any additional information that the council may prescribe.
(b) Colleges and universities operating under paragraph (6) of
subdivision (b) of Section 94739 shall comply with the reporting
requirements of paragraphs (1), (2), (3), and (5) of subdivision (a).
(c) Program completion rates and placement data shall be reported
in accordance with the standards and criteria prescribed by the
bureau pursuant to paragraphs (1) to (4), inclusive, of subdivision
(a) of Section 94816 and Section 94859, if applicable. Based on the
review of information submitted to fulfill the requirements of this
section, the bureau may initiate a compliance review and may place
the institution on probation pursuant to subdivision (h) of Section
94901 and subdivision (i) of Section 94915, and may require evidence
of financial stability and responsibility pursuant to Sections 94804
and 94855, if applicable.
SEC. 3. Section 94810 of the Education Code is amended to read:
94810. (a) Any written contract or agreement for educational
services with an institution shall include all of the following:
(1) On the first page of the agreement or contract, in 12-point
boldface print or larger, the following statement:
"Any questions or problems concerning this school which have not
been satisfactorily answered or resolved by the school should be
directed to the Bureau for Private Postsecondary and Vocational
Education, (address), Sacramento, California 95814."
(2) In underlined capital letters on the same page of the contract
or agreement in which the student's signature is required, the total
amount that the student is obligated to pay for the course of
instruction and all other services and facilities furnished or made
available to the student by the school, including any charges made by
the school for tuition, room and board, books, materials, supplies,
shop and studio fees, and any other fees and expenses that the
student will incur upon enrollment.
(3) A list of any charges and deposits that are nonrefundable
clearly identified as nonrefundable charges.
(4) The name and address of the school and the addresses where
instruction will be provided.
(5) The name and description of the program of instruction,
including the total number of credits, classes, hours, or lessons
required to complete the program of instruction.
(6) A clear and conspicuous statement that the agreement or
contract is a legally binding instrument when signed by the student
and accepted by the school.
(7) A clear and conspicuous caption, "BUYER'S RIGHT TO CANCEL"
under which it is explained that the student has the right to cancel
the enrollment agreement and obtain a refund, the form and means of
notice that the student should use in the event that he or she elects
to cancel the enrollment agreement, and the title and address of the
school official to whom the notice should be sent or delivered.
(8) A clear statement of the refund policy written in plain
English.
(9) The signature of the student under the following statement
that is presented in 12-point boldface or larger print: "My
signature below certifies that I have read, understood, and agreed to
my rights and responsibilities, and that the institution's
cancellation and refund policies have been clearly explained to me."
(10) If the student is not a resident of California or is the
recipient of third-party payor tuition and course costs, such as
workforce investment vouchers or rehabilitation funding, a clear
statement that the student is not eligible for protection under and
recovery from the Student Tuition Recovery Fund.
(11) A statement that the student is responsible for paying the
state assessment amount for the Student Tuition Recovery Fund.
(b) All contracts and enrollment agreements signed by the student
shall be written in language that is capable of being easily
understood. If English is not the primary language spoken by the
student, the student shall have the right to obtain a clear
explanation of the terms and conditions of the agreement and all
cancellation and refund policies in his or her primary language.
SEC. 4. Section 94825 of the Education Code is amended to read:
94825. (a) The institution shall publish a current schedule of
all student charges, a statement of the purpose for those charges,
and a statement of the cancellation and refund policies with examples
of the application of the policies, and shall provide the schedule
to all current and prospective students prior to enrollment. The
schedule shall clearly indicate and differentiate all mandatory and
optional student charges. The institution shall include a clear
statement written in English describing the procedures that a student
is required to follow to cancel the contract or agreement and obtain
a refund. If the institution solicited the student or negotiated
the agreement in a language other than English, the notice to the
student shall be in that same language. The schedule shall specify
the total costs of attendance which shall include, but not
necessarily be limited to, tuition, fees, assessments for the Student
Tuition Recovery Fund, equipment costs, housing, transportation,
books, necessary supplies, materials, shop and studio fees, and any
other fees and expenses that the student will incur upon enrollment.
The schedule shall clearly identify all charges and deposits that
are nonrefundable.
(b) The schedule shall also contain both of the following:
(1) A statement, to be provided by the bureau, specifying that it
is a state requirement that a resident California student who pays
his or her own tuition, either directly or through a loan, is
required to pay a state-imposed fee for the Student Tuition Recovery
Fund.
(2) A statement, to be provided by the bureau, describing the
purposes, operation, and eligibility requirements of the Student
Tuition Recovery Fund.
SEC. 5. Section 94840 of the Education Code is amended to read:
94840. At least 90 days prior to the expiration of an approval to
operate, the institution shall complete and file with the bureau an
application form for renewal of its approval to operate. The renewal
application need only contain a description of any changes made by
the institution since the time its last application was reviewed by
the council. Fees for processing the renewal application shall be
based on the number and types of changes it contains. The renewal
application may be reviewed and acted upon as provided in Sections
94802, 94804, and 94835, and Section 94900 or 94915, whichever is
applicable.
SEC. 6. Section 94877 of the Education Code is amended to read:
94877. (a) If an institution violates this article or Section
94832 or commits an act as set forth in Section 94830 in connection
with an agreement for a course of instruction, that agreement shall
be unenforceable, and the institution shall refund all consideration
paid by or on behalf of the student.
(b) Notwithstanding any provision in an agreement, a student may
bring an action for a violation of this article or Section 94832 or
an institution's failure to perform its legal obligations and, upon
prevailing, shall be entitled to the recovery of damages, equitable
relief, any other relief authorized by this article, and reasonable
attorney's fees and costs.
(c) If a court finds that a violation was willfully committed or
that the institution failed to refund all consideration as required
by subdivision (a) on the student's written demand, the court, in
addition to the relief awarded under subdivision (b), shall award a
civil penalty of up to two times the amount of the damages sustained
by the student.
(d) The remedies provided in this article supplement, but do not
supplant, the remedies provided under other provisions of law.
(e) An action brought under this section shall be commenced within
three years of the discovery of the facts constituting grounds for
commencing the action.
(f) Any provision in any agreement that purports to require a
student to invoke any grievance dispute procedure established by the
institution or any other procedure before bringing an action to
enforce any right or remedy is void and unenforceable.
(g) A student may assign his or her causes of action for a
violation of this article to the bureau, or to any state or federal
agency that guaranteed or reinsured a loan for the student or
provided any grant or other financial aid.
(h) This section applies to any action pending under former
Chapter 7 (commencing with Section 94700) on January 1, 1990.
(i) If a student commences an action or asserts any claim in an
existing action for recovery on behalf of a class of persons, or on
behalf of the general public, under Section 17200 of the Business and
Professions Code, the student shall notify the bureau of the
existence of the lawsuit, the court in which the action is pending,
the case number of the action, and the date of the filing of the
action or of the assertion of the claim. The student shall notify
the bureau as required by this subdivision within 30 days of the
filing of the action or of the first assertion of the claim,
whichever is later. The student shall also notify the court that he
or she has notified the bureau pursuant to this subdivision.
Notwithstanding any other provision of law, no judgment may be
entered pursuant to this section until the student has notified the
bureau of the suit and notified the court that the bureau has been
notified. This subdivision only applies to a new action filed or to
a new claim asserted on or after January 1, 2002.
SEC. 7. Section 94944 of the Education Code is amended to read:
94944. (a) The Student Tuition Recovery Fund is continued in
existence. All assessments collected pursuant Section 94945 shall be
credited to this fund, along with any interest on the money, for the
administration of this article. Notwithstanding Section 13340 of
the Government Code, the money in the fund is continuously
appropriated to the bureau without regard to fiscal years for the
purposes of this chapter. The fund shall consist of a
degree-granting postsecondary educational institution account, a
vocational educational institution account, and an account for
institutions approved under any provision of this chapter that charge
each enrolled student a total charge, as defined in subdivision (k)
of Section 94852, of less than one thousand dollars ($1,000), for the
purpose of relieving or mitigating pecuniary losses suffered by any
California resident who is a student of an approved institution and
who meets either of the following conditions:
(1) (A) The student was enrolled in an institution, prepaid
tuition, and suffered loss as a result of any of the following:
(i) The closure of the institution.
(ii) The institution's failure to pay refunds or charges on behalf
of a student to a third party for license fees or any other
purposes, or to provide equipment or materials for which a charge was
collected within 180 days before the closure of the institution.
(iii) The institution's failure to pay or reimburse loan proceeds
under a federally guaranteed student loan program as required by law
or to pay or reimburse proceeds received by the institution prior to
closure in excess of tuition and other costs.
(iv) The institution's breach or anticipatory breach of the
agreement for the course of instruction.
(v) A decline in the quality or value of the course of instruction
within the 30-day period before the closure of the institution or,
if the decline began before that period, the period of decline
determined by the bureau.
(vi) The commission of a fraud by the institution during the
solicitation or enrollment of, or during the program participation
of, the student.
(B) For the purposes of this section, "closure" includes closure
of a branch or satellite campus, the termination of either the
correspondence or residence portion of a home study or correspondence
course, and the termination of a course of instruction for some or
all of the students enrolled in the course before the time these
students were originally scheduled to complete it, or before a
student who has been continuously enrolled in a course of instruction
has been permitted to complete all the educational services and
classes that comprise the course.
(2) The student obtained a judgment against the institution for
any violation of this chapter, and the student certifies that the
judgment cannot be collected after diligent collection efforts. A
court judgment obtained under this paragraph shall be paid in
accordance with paragraph (1) of subdivision (f), unless the judgment
indicates that a lesser amount is due.
(b) Payments from the fund to any student shall be made from the
appropriate account within the fund, as determined by the type of
institution into which the student has paid his or her fees, and
shall be subject to any regulations and conditions prescribed by the
bureau.
(c) (1) (A) The institution shall provide to the bureau, at the
time of the institution's closure, the names and addresses of persons
who were students of an institution within 60 days prior to its
closure, and shall notify these students, within 30 days of the
institution's closure, of their rights under the fund and how to
apply for payment. If the institution fails to comply with this
subdivision, the bureau shall attempt to obtain the names and
addresses of these students and shall notify them, within 90 days of
the institution's closure, of their rights under the fund and how to
apply for payment. This notice shall include the explanation and the
claim form described in subparagraph (B).
(B) The bureau shall develop a form in English and Spanish fully
explaining a student's rights, which shall be used by the institution
or the bureau to comply with the requirements of subparagraph (A).
The form shall include, or be accompanied by, a claim application and
an explanation of how to complete the application.
(2) (A) If an institution fails to comply with paragraph (1), the
bureau shall order the institution, or any person responsible for the
failure to provide notice as required by paragraph (1), to reimburse
the bureau for all reasonable costs and expenses incurred in
notifying students as required in paragraph (1). In addition, the
bureau may impose a penalty of up to five thousand dollars ($5,000)
against the institution and any person found responsible for the
failure to provide notice. The amount of the penalty shall be based
on the degree of culpability and the ability to pay. Any order may
impose joint and several liability. Before any order is made
pursuant to this paragraph, the bureau shall provide written notice
to the institution and any person from whom the bureau seeks recovery
of the bureau's claim and of the right to request a hearing within
30 days of the service of the notice.
(B) If a hearing is not requested within 30 days of service of the
notice, the bureau may order payment in the amount of the claim. If
a hearing is requested, Chapter 5 (commencing with Section 11500) of
Part 1 of Division 3 of Title 2 of the Government Code shall apply,
and the bureau shall have all of the powers therein prescribed.
Within 30 days after the effective date of the issuance of an order,
the bureau may enforce the order in the same manner as if it were a
money judgment pursuant to Title 9 (commencing with Section 680.010)
of Part 2 of the Code of Civil Procedure. All penalties and
reimbursements paid pursuant to this section shall be deposited in
the Private Postsecondary and Vocational Education Administration
Fund established pursuant to Section 94932 or any successor fund.
(d) (1) Students entitled to payment as provided in paragraph (1)
of subdivision (a) shall file with the bureau a verified application
indicating each of the following:
(A) The student's name, address, telephone number, and social
security number.
(B) If any portion of the tuition was paid from the proceeds of a
loan, the name of the lender, and any state or federal agency that
guaranteed or reinsured the loan.
(C) The amount of the paid tuition, the amount and description of
the student's loss, and the amount of the student's claim.
(D) The date the student started and ceased attending the
institution.
(E) A description of the reasons the student ceased attending the
institution.
(F) If the student ceased attending because of a breach or
anticipatory breach or because of the decline in the quality or value
of the course of instruction as described in clause (v) of
subparagraph (A) of paragraph (1) of subdivision (a), a statement
describing in detail the nature of the loss incurred. The
application shall be filed within one year from the date of the
notice, as described in paragraph (1) of subdivision (c). If no
notice is received by the student from the bureau soon after the
school closes, the application shall be filed within four years of
the institution's closure, or within two years of the student's or
former student's receipt of an explanation of his or her rights and a
claim form, whichever of those claim periods expires later. The
two-year claim period shall begin on the day the student or former
student receives from the bureau both an explanation regarding how to
file a claim and a claim application, as provided in subparagraph
(B) of paragraph (1) of subdivision (c), or on the day the second of
the two documents is received, if they are received on different
dates. If the claimant's primary language is Spanish, the notice and
explanation shall be sent in Spanish.
(G) Nothing in this subdivision shall preclude the filing of a
single, unified application that aggregates the claims of similarly
situated students.
(2) (A) Students entitled to payment as provided in paragraph (2)
of subdivision (a) shall file with the bureau a verified application
indicating the student's name, address, telephone number, and social
security number, the amount of the judgment obtained against the
institution, a statement that the judgment cannot be collected, and a
description of the efforts attempted to enforce the judgment. The
application shall be accompanied by a copy of the judgment and any
other documents indicating the student's efforts made to enforce the
judgment.
(B) The application shall be filed within two years after the date
upon which the judgment became final.
(3) The bureau may require additional information designed to
facilitate payment to entitled students. The bureau shall waive the
requirement that a student provide all of the information required by
this subdivision if the bureau has the information or the
information is not reasonably necessary for the resolution of a
student's claim.
(4) Nothing in this subdivision shall be construed to preclude the
filing of a single, unified application that aggregates the claims
of similarly situated students.
(e) Within 60 days of the bureau's receipt of a completed
application for payment, the bureau shall pay the claim from the
Student Tuition Recovery Fund or deny the claim. The bureau, for
good cause, may extend the time period for up to an additional 90
days to investigate the accuracy of the claim.
(f) (1) If the bureau pays the claim, the amount of the payment
shall be (A) the greater of either (i) the total guaranteed student
loan debt incurred by the student in connection with attending the
institution, or (ii) the total of the student's tuition and the cost
of equipment and materials related to the course of instruction, less
(B) the amount of any refund, reimbursement, indemnification,
restitution, compensatory damages, settlement, debt forgiveness,
discharge, cancellation, or compromise, or any other benefit received
by, or on behalf of, the student before the bureau's payment of the
claim in connection with the student loan debt or cost of tuition,
equipment, and materials. The payment also shall include the amount
the institution collected and failed to pay to third parties on
behalf of the student for license fees or any other purpose.
However, if the claim is based solely on the circumstances described
in subparagraph (B) or (C) of paragraph (1) of subdivision (a), the
amount of the payment shall be the amount of the loss suffered by the
student. In addition to the amount determined under this paragraph,
the amount of the payment shall include all interest and collection
costs on all student loan debt incurred by the student in connection
with attending the institution.
(2) The bureau may reduce the total amount specified in paragraph
(1) by the value of the benefit, if any, of the education obtained by
the student before the closure of the institution. If the bureau
makes any reduction pursuant to this paragraph, the bureau shall
notify the claimant in writing at the time the claim is paid of the
basis of its decision and provide a brief explanation of the reasons
upon which the bureau relied in computing the amount of the
reduction.
(3) No reduction shall be made to the amount specified in
paragraph (1) if (A) the student did not receive adequate instruction
to obtain the training, skills, or experience, or employment to
which the instruction was represented to lead, (B) credit for the
instruction obtained by the student is not generally transferable to
other institutions approved by the bureau, or (C) the institution or
one of its representatives fraudulently misrepresented to students
the likely starting salary or job availability, or both, after
training.
(4) The amount of the payment determined under this subdivision is
not dependent on the amount of the refund to which the student would
have been entitled after a voluntary withdrawal.
(5) Upon payment of
the claim, all of the student's rights against the institution shall
be deemed assigned to the bureau to the extent of the amount of the
payment.
(g) (1) The bureau shall negotiate with a lender, holder,
guarantee agency, or the United States Department of Education for
the full compromise or writeoff of student loan obligations to
relieve students of loss and thereby reduce the amount of student
claims.
(2) The bureau, with the student's permission, may pay a student's
claim directly to the lender, holder, guarantee agency, or the
United States Department of Education under a federally guaranteed
student loan program only if the payment of the claim fully satisfies
all of the student's loan obligations related to attendance at the
institution for which the claim was filed.
(3) Notwithstanding subdivision (e), the bureau may delay the
payment of a claim pending the resolution of the bureau's attempt to
obtain a compromise or writeoff of the claimant's student loan
obligation. However, the bureau shall immediately pay the claim if
any adverse action that is not stayed is taken against the claimant,
including the commencement of a civil or administrative action, tax
offset, the enforcement of a judgment, or the denial of any
government benefit.
(4) The bureau shall make every reasonable effort to obtain a loan
discharge for an eligible student in lieu of reimbursing that
student in whole or in part from the fund pursuant to federal student
loan laws and regulations.
(5) Whenever the bureau receives from a student a completed
application for payment from the Student Tuition Recovery Fund, the
bureau shall, as soon as is practicable, cause to be delivered to
that student a written notice specifying, in plain English, the
rights of a student under this section.
(h) (1) If the bureau denies the claim, or reduces the amount of
the claim pursuant to paragraph (2) of subdivision (f), the bureau
shall notify the student of the denial or reduction and of the
student's right to request a hearing within 60 days or any longer
period permitted by the bureau. If a hearing is not requested within
60 days or any additional period reasonably requested by the
student, the bureau's decision shall be final. If a hearing is
requested, Chapter 5 (commencing with Section 11500) of Part 1 of
Division 3 of Title 2 of the Government Code shall apply.
(2) It is the intent of the Legislature that, when a student is
enrolled in an institution that closes prior to the completion of the
student's program, the student shall have the option for a teach-out
at another institution approved by the bureau. The bureau shall
seek to promote teach-out opportunities wherever possible and shall
inform the student of his or her rights, including payment from the
fund, transfer opportunities, and available teach-out opportunities,
if any.
(i) This section applies to all claims filed or pending under
former Chapter 7 (commencing with Section 94700) after January 1,
1990.
(j) Once the bureau has determined that a student claim is
eligible for payment under this section and intends to use the
Student Tuition Recovery Fund, in whole or in part, to satisfy the
eligible claim, the bureau shall document its negotiations with the
relevant lender, holder or guarantee agency, the United States
Department of Education, or the applicable state agency. The bureau
shall prepare a written summary of the parties and results of the
negotiations, including the amounts offered and accepted, the
discounts requested and granted, and any other information that is
available to any party that files a request for this information with
the bureau.
SEC. 8. Section 94945 of the Education Code is amended to read:
94945. (a) The bureau shall assess each institution, except for
an institution that receives all of its students' total charges, as
defined in subdivision (k) of Section 94852, from third-party payers.
A third-party payer, for the purposes of this section, means an
employer, government program, or other payer that pays a student's
total charges directly to the institution when no separate agreement
for the repayment of that payment exists between the third-party
payer and the student. A student who receives third-party payer
benefits for his or her institutional charges is not eligible for
benefits from the Student Tuition Recovery Fund.
(1) The amount assessed each institution shall be calculated only
for those students who are California residents and who are eligible
to be reimbursed from the fund. It shall be based on the actual
amount charged each of these students for total tuition cost,
regardless of the portion that is prepaid. The amount of the
assessment on an institution shall be determined in accordance with
paragraph (2) and (3). Each institution shall collect the amount
assessed by the bureau in the form of a Student Tuition Recovery Fund
fee from its new students, and remit these fees to the bureau during
the quarter immediately following the quarter in which the fees were
collected from the students. An institution may not charge a fee of
any kind for the collection of the Student Tuition Recovery Fund
fee. An institution may refuse to enroll a student who has not paid,
or made provisions to pay, the appropriate Student Tuition Recovery
Fund fee.
(2) The amount collected from a new student by an institution
shall be calculated on the basis of the course tuition paid over the
current calendar year. For purposes of annualized payment, a new
student enrolled in a course of instruction that is longer than one
calendar year in duration shall pay fees for the Student Tuition
Recovery Fund based on the amount of tuition collected during the
current calendar year.
(3) The assessment made pursuant to this section shall be made in
accordance with both of the following:
(A) Each new student shall pay a Student Tuition Recovery Fund
assessment for the period of January 1, 2002, to December 31, 2002,
inclusive, at the rate of three dollars ($3) per thousand dollars of
tuition paid, rounded to the nearest thousand dollars.
(B) Commencing January 1, 2003, Student Tuition Recovery Fund fees
shall be collected from new students at the rate of two dollars and
fifty cents ($2.50) per thousand dollars of tuition paid, rounded to
the nearest thousand dollars.
(4) The bureau may levy additional reasonable special assessments
on an institution under this section only if these assessments are
required to ensure that sufficient funds are available to satisfy the
anticipated costs of paying student claims pursuant to Section
94944.
(5) (A) The bureau may not levy a special assessment unless the
balance in any account in the Student Tuition Recovery Fund falls
below two hundred fifty thousand dollars ($250,000), as certified by
the Secretary of the State and Consumer Services Agency.
(B) A special assessment is a surcharge, collected by each
institution from newly enrolled students, of up to 100 percent of
that institution's regular assessment for four consecutive quarters.
The affected student shall pay the surcharge simultaneously with his
or her regular quarterly payment to the Student Tuition Recovery
Fund.
(C) The bureau shall provide at least 90 days' notice of an
impending special assessment to each affected institution. This
notice shall also be posted on the bureau's Internet Web site.
(D) The bureau may apply any special assessment payments that it
receives from an institution as a credit toward that institution's
current or future obligations to the Student Tuition Recovery Fund.
(6) The assessments shall be paid into the Student Tuition
Recovery Fund and credited to the appropriate account in the fund,
and the deposits shall be allocated, except as otherwise provided for
in this chapter, solely for the payment of valid claims to students.
Unless additional reasonable assessments are required, no
assessments for the degree-granting postsecondary educational
institution account shall be levied during any fiscal year if, as of
June 30 of the prior fiscal year, the balance in that account of the
fund exceeds one million five hundred thousand dollars ($1,500,000).
Unless additional reasonable assessments are required, no
assessments for the vocational educational institution account shall
be levied during any fiscal year if, as of June 30 of the prior
fiscal year, the balance in that account exceeds four million five
hundred thousand dollars ($4,500,000). However, regardless of the
balance in the fund, assessments shall be made on any newly approved
institution. Notwithstanding Section 13340 of the Government Code,
the moneys so deposited in the fund are continuously appropriated to
the bureau for the purpose of paying claims to students pursuant to
Section 94944.
(b) The bureau may deduct from the fund the reasonable costs of
administration of the tuition recovery program authorized by Section
94944 and this section. The maximum amount of administrative costs
that may be deducted from the fund, in a fiscal year, shall not
exceed one hundred thousand dollars ($100,000) from the
degree-granting postsecondary educational institution account and
three hundred thousand dollars ($300,000) from the vocational
educational institution account, plus the interest earned on money in
the fund that is credited to the fund. Prior to the bureau's
expenditure of any amount in excess of one hundred thousand dollars
($100,000) from the fund for administration of the tuition recovery
program, the bureau shall develop a plan itemizing that expenditure.
The plan shall be subject to the approval of the Department of
Finance. Institutions, except for schools of cosmetology licensed
pursuant to Article 8 (commencing with Section 7362) of Chapter 10 of
Division 3 of the Business and Professions Code and institutions
that offer vocational or job training programs, that meet the student
tuition indemnification requirements of a California state agency,
that secure a policy of surety or insurance from an admitted insurer
protecting their students against loss of paid tuition, or that
demonstrate to the bureau that an acceptable alternative method of
protecting their students against loss of prepaid tuition has been
established, shall be exempted from this section.
(c) Reasonable costs in addition to those permitted under
subdivision (b) may be deducted from the fund for any of the
following purposes:
(1) To make and maintain copies of student records from
institutions that close.
(2) To reimburse the bureau or a third party serving as the
custodian of records.
(d) In the event of a closure by any approved institution under
this chapter, any assessments that have been made against those
institutions, but have not been paid into the fund, shall be
recovered. Any payments from the fund made to students on behalf of
any institution shall be recovered from that institution.
(e) In addition to civil remedies, the bureau may order an
institution to pay previously unpaid assessments or to reimburse the
bureau for any payments made from the fund in connection with the
institution. Before any order is made pursuant to this section, the
bureau shall provide written notice to the institution and notice of
the institution's right to request a hearing within 30 days of the
service of the notice. If a hearing is not requested within 30 days
of the service of the notice, the bureau may order payment. If a
hearing is requested, Chapter 5 (commencing with Section 11500) of
Part 1 of Division 3 of Title 2 of the Government Code shall apply,
and the bureau shall have all powers prescribed in that chapter.
Within 30 days after the effective date of the issuance of the order,
the bureau may enforce the order in the same manner as if it were a
money judgment pursuant to Title 9 (commencing with Section 680.010)
of Part 2 of the Code of Civil Procedure.
(f) In addition to any other action that the bureau may take under
this chapter, the bureau may suspend or revoke an institution's
approval to operate because of the institution's failure to pay
assessments when due or failure to pay reimbursement for any payments
made from the fund within 30 days of the bureau's demand for
payment.
(g) The moneys deposited in the fund shall be exempt from
execution and shall not be the subject of litigation or liability on
the part of creditors of those institutions or students.
SEC. 9. Section 94960 of the Education Code is amended to read:
94960. (a) Any person claiming damage or loss as a result of any
act or practice by a postsecondary or vocational educational
institution or its agent, or both, that is a violation of this
chapter or of the regulations adopted pursuant to this chapter, may
file with the bureau a verified complaint against that institution or
its agent, or both.
The complaint shall set forth the alleged violation, and shall
contain any other information as may be required by the bureau.
(b) (1) Pursuant to regulations that specify its procedures
regarding complaint handling and disclosure, the bureau shall
investigate any complaint, and document its findings and its
determination of the appropriate course of action and disposition of
the complaint.
(2) The bureau shall adopt regulations that specify its procedures
for complaint handling and complaint disclosure. The bureau shall
make every reasonable attempt to ensure that the first public hearing
on its proposed regulations is convened prior to June 30, 2002. The
requirements of this subdivision shall not preclude the bureau from
fulfilling its complaint handling responsibilities pending adoption
of the regulations.
(3) The regulations adopted pursuant to paragraph (2) shall
include, but not necessarily be limited to, both of the following:
(A) A procedure for handling the original student complaints by
mail that affords the institution that is the subject of the
complaint an opportunity to respond.
(B) Additional options, including teleconferencing and an
administrative law hearing and a complaint resolution hearing
conducted by the bureau program administrator or his or her designee.
Participation in this hearing shall not prevent any party to the
complaint from exercising any other means of redress available under
the law.
(4) Nothing in this section shall be construed to prevent a
complainant, institution, or the bureau from using additional appeals
that are available under state law.
(c) If, upon all the evidence at a hearing, the bureau finds that
an institution or its agent, or both, have engaged in, or are
engaging in, any act or practice that violates this chapter or the
regulations adopted pursuant to this chapter, the bureau shall report
that evidence to the Attorney General. The bureau, based on its own
investigation or the evidence adduced at a hearing, or both, also
may commence an action to revoke an institution's approval to operate
or an agent's permit.
(d) Complaints received by the bureau pertaining to institutions
accredited by the Western Association of Schools and Colleges shall
be forwarded to the association. Actions by the bureau relating to
complaints against these institutions shall be limited to the
transmittal of this information.
(e) A person entitled to bring an action for the recovery of
damages or other relief shall not be required to file a complaint
pursuant to this section, or to pursue or exhaust any administrative
process or remedy before bringing the action.
SEC. 10. Section 94985 of the Education Code is amended to read:
94985. (a) Any institution that willfully violates any provision
of Section 94800, 94810, 94814, or 94816, Sections 94820 to 94826,
inclusive, Section 94829, 94831, or 94832 may not enforce any
contract or agreement arising from the transaction in which the
violation occurred, and any willful violation is a ground for
revoking an approval to operate in this state or for denying a
renewal application.
(b) Any person who claims that an institution is operating in
violation of subdivision (a) of Section 94831, subdivision (a) of
Section 94900, or Section 94915, or an institution is operating a
branch or satellite campus in violation of subdivision (a) of Section
94857, may bring an action, in a court of competent jurisdiction,
for the recovery of actual and or statutory damages as well as an
equity proceeding to restrain and enjoin those violations, or both.
(1) At least 35 days prior to the commencement of an action
pursuant to this subdivision, the plaintiff shall do all of the
following:
(A) Notify the institution alleged to have violated subdivision
(a) of Section 94831, subdivision (a) of Section 94900, Section
94915, or subdivision (a) of Section 94857, of the particular alleged
violations.
(B) Demand that the institution apply for the bureau's approval to
operate as required by subdivision (a) of Section 94831, subdivision
(a) of Section 94900, Section 94915, or subdivision (a) of Section
94857, whichever is applicable.
(C) The notice shall be in writing, and shall be sent by regular
mail and certified or registered mail, return receipt requested, to
the location of the institution that is allegedly operating in
violation of subdivision (a) of Section 94831, subdivision (a) of
Section 94900, Section 94915, or subdivision (a) of Section 94857,
whichever is applicable.
(D) The institution shall have 30 working days, from receipt of
the notice, to file an application for approval to operate with the
bureau.
(E) No action pursuant to this subdivision may be filed if the
institution, within 30 working days after receipt of the notice,
applies for the bureau's approval to operate as required by
subdivision (a) of Section 94831, subdivision (a) of Section 94900,
Section 94915, or subdivision (a) of Section 94857, whichever is
applicable.
(F) If, within 35 days after receipt of the notice, the bureau has
not received an application from the institution, the bureau shall
mail the plaintiff a certification that the institution has not
applied or been approved to operate pursuant to subdivision (a) of
Section 94831, subdivision (a) of Section 94900, Section 94915, or
subdivision (a) of Section 94857, whichever is applicable.
(G) The plaintiff shall also notify the bureau by mail and by
certified or registered mail, return receipt requested, that he or
she intends to bring an action pursuant to this section against the
institution. Upon receipt of this notice, the bureau shall
immediately investigate the institution's compliance with subdivision
(a) of Section 94831, subdivision (a) of Section 94900, Section
94915, or subdivision (a) of Section 94857, whichever is applicable,
and, if the bureau determines that the institution has violated the
applicable section, the bureau shall immediately order the
institution to cease and desist operations. For each day that the
institution continues to operate in violation of the bureau's cease
and desist order, the institution shall be fined one thousand dollars
($1,000).
(2) If the court finds that the institution has violated
subdivision (a) of Section 94831, subdivision (a) of Section 94900,
Section 94915, or subdivision (a) of Section 94857, all of the
following shall occur:
(A) The court shall order the institution to cease all operations
and to comply with all procedures set forth in this code pertaining
to the closure of institutions.
(B) The court shall order the institution to pay all students who
enrolled while the school was in violation of subdivision (a) of
Section 94831, subdivision (a) of Section 94900, Section 94915, or
subdivision (a) of Section 94857 a refund of all tuition and fees
paid to the institution and a statutory penalty of one thousand
dollars ($1,000).
(C) The court shall order the institution to pay the prevailing
party's attorneys' fees and costs.
(D) The court shall order the institution to pay to the bureau all
fines incurred pursuant to subparagraph (E) of paragraph (1).
(E) Any instrument of indebtedness, enrollment agreement, or
contract for educational services is unenforceable pursuant to
Section 94838. The court shall order the institution to mail a
notice to all students who were enrolled while the school was in
violation of subdivision (a) of Section 94831, subdivision (a) of
Section 94900, Section 94915, or subdivision (a) of Section 94857,
stating that instruments of indebtedness, enrollment agreements, and
contracts for educational services are not enforceable. If the
institution fails to provide adequate proof to the court and to the
bureau that it has mailed this notice within 30 days of the court's
order, the bureau shall mail the notice to the students and the court
shall order the institution to pay the bureau's costs of generating
and mailing the notices, in no case less than five thousand dollars
($5,000).
(3) Any violation of subdivision (a) of Section 94831, subdivision
(a) of Section 94900, Section 94915, and subdivision (a) of Section
94857 shall constitute an unfair business practice within the meaning
of Section 17200 of the Business and Professions Code.
(4) A certification, issued by the bureau, that the institution
has not applied for approval to operate and has not been approved to
operate as required by subdivision (a) of Section 94831, subdivision
(a) of Section 94900, Section 94915, or subdivision (a) of Section
94857, whichever is applicable, shall establish a conclusive
presumption that the institution has violated this subdivision.
(5) All fines and other monetary amounts that an institution is
ordered to pay pursuant to this subdivision may be collected from the
institution itself and from the individuals who own the institution,
whether or not the institution is organized as a corporation.
(6) Notwithstanding any provision of the contract or agreement, a
student may bring an action for a violation of this article or for an
institution's failure to perform its legal obligations and, upon
prevailing thereon, is entitled to the recovery of damages, equitable
relief, or any other relief authorized by this article, and
reasonable attorney's fees and costs.
(d) If a court finds that a violation was willfully committed or
that the institution failed to refund all consideration as required
by subdivision (b) on the student's written demand, the court, in
addition to the relief authorized under subdivision (b), shall award
a civil penalty of up to two times the amount of the damages
sustained by the student.
(e) The remedies provided in this article supplement, but do not
supplant, the remedies provided under any other provision of law.
(f) An action brought under this section shall be commenced within
three years of the discovery of the facts constituting grounds for
commencing the action.
(g) Any provision in any agreement that purports to require a
student to invoke any grievance dispute procedure established by the
institution before enforcing any right or remedy is void and
unenforceable.
(h) A student may assign his or her cause of action for a
violation of this article to the bureau, or to any state or federal
agency that guaranteed or reinsured a loan for the student or that
provided any grant or other financial aid.
(i) This section applies to any action pending on the effective
date of this section.
(j) This section supplements, but does not supplant, the authority
granted the Division of Labor Standards Enforcement under Chapter 4
(commencing with Section 79) of Division 1 of the Labor Code to the
extent that placement activities of trade schools are subject to
regulation by the division under the Labor Code.
(k) If a student commences an action or asserts any claim in an
existing action for recovery on behalf of a class of persons, or on
behalf of the general public, under Section 17200 of the Business and
Professions Code, the student shall notify the bureau of the
existence of the lawsuit, the court in which the action is pending,
the case number of the action, and the date of the filing of the
action or of the assertion of the claim. The student shall notify
the bureau as required by this subdivision within 30 days of the
filing of the action or of the first assertion of the claim,
whichever is later. The student shall also notify the court that he
or she has notified the bureau pursuant to this subdivision.
Notwithstanding any other provision of law, no judgment may be
entered pursuant to this section until the student has notified the
bureau of the suit and notified the court that the bureau has been
notified. This subdivision only applies to a new action filed or to
a new claim asserted on or after January 1, 2002.
SEC. 11. Section 94995.3 is added to the Education Code, to read:
94995.3. The Bureau for Private Postsecondary and Vocational
Education shall submit an annual report on the collection and
expenditure of moneys collected as special assessments pursuant to
the act adding this section. The bureau shall submit copies of this
report to the chairpersons of the Assembly Committee on Higher
Education, the Senate Committee on Education, the Senate Committee on
Business and Professions, the Assembly Committee on Budget, and the
Senate Committee on Budget and Fiscal Review. The report required by
this section may be incorporated in the bureau's annual report to
the Legislature.