BILL ANALYSIS
SB 823
Page 1
SENATE THIRD READING
SB 823 (Perata)
As Amended August 13, 2008
Majority vote
SENATE VOTE :23-15
HIGHER EDUCATION 5-2 APPROPRIATIONS 11-5
-----------------------------------------------------------------
|Ayes:|Portantino, Arambula, |Ayes:|Leno, Caballero, Davis, |
| |Beall, Galgiani, Ruskin | |DeSaulnier, Furutani, |
| | | |Huffman, Karnette, |
| | | |Krekorian, Ma, Nava, |
| | | |Solorio |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Niello, Cook |Nays:|Walters, Emmerson, La |
| | | |Malfa, Nakanishi, Sharon |
| | | |Runner |
-----------------------------------------------------------------
SUMMARY : Recasts and revises the provisions of the Private
Postsecondary and Vocational Education Reform Act of 1989
(Former Act) into the Private Postsecondary Education Act of
2008 (Act). Specifically, this bill :
1)Renames the Bureau of Private Postsecondary and Vocational
Education, within the Department of Consumer Affairs
(Department), as the Bureau of Private Postsecondary Education
(Bureau).
2)Designates the Department as the state approving agency for
veterans' institutions and programs and allows the Department
to enter into agreements with the United States Department of
Education (USDE) or other federal agencies regarding approval
and supervision of institutions offering veterans' programs.
3)Authorizes the Bureau to take specified action to cease
unlawful advertising or disconnecting the telephone services
of an institution if the Bureau believes the institution is
advertising in a telephone directory without approval to
operate from the Bureau.
4)Provides for the licensing of marriage and family therapists
SB 823
Page 2
by the Board of Behavioral Sciences for students graduating
from regionally accredited schools or from programs approved
by the Commission Accreditation for Marriage and Family
Therapy Education and meeting other outlined curriculum
standards and requirements.
5)Provides that any statutory or regulatory reference to the
Bureau for Private Postsecondary and Vocational Education
(Former Bureau) or the Council for Private Postsecondary
Education and Vocational Education shall be construed to
reference the Bureau.
6)Makes various findings and declarations regarding the
importance of private postsecondary schools, previous failures
to regulate these schools, and the importance of Bureau
oversight of schools and review of Bureau activities by the
Legislature.
7)Finds and declares that the Accrediting Commission for Senior
Colleges and Universities and the Accrediting Commission for
Community and Junior Colleges, collectively the Western
Association of Schools and Colleges (WASC), has served as a
unique and reliable authority for establishing and maintaining
standards for public and private institutions, and that there
is reason to grant WASC accredited institutions a complete
exemption from the requirements of this Act.
8)Provides for the regulation of private postsecondary
institutions by the Bureau, provides direction to the Bureau,
and provides the Bureau until January 1, 2010, to adopt and
implement regulations necessary to fully implement this Act.
9)Provides for a transition to the provisions of this Act and
vests the powers, papers, records and supplies of the Former
Bureau in the Bureau, including:
a) Any institution that had approval to operate by the
Former Bureau on June 30, 2007, shall maintain that
approval for two-years after the expiration date of that
approval;
b) Applications to renew an approval to operate pending
before the Former Bureau prior to January 1, 2006, shall be
granted approval to operate until 2009, and applications
received after January 1, 2006, shall be granted approval
SB 823
Page 3
to operate until 2010. Provides that students shall be
informed during the enrollment process that the
institution's application for reapproval has not been
reviewed;
c) Provides that this Act does not affect pending
litigation or rights under the Former Act, and provides
that all claims shall be based on the law that was in
effect when the violations or events took place;
d) Provides that any matter, except a Student Tuition
Recovery Fund (STRF) claim, submitted to the Former Bureau
prior to July 1, 2007, shall remain pending, and with
respect to deadlines, no time shall be deemed elapsed from
July 1, 2007 through December 31, 2008. Provides that
student complaints received from July 1, 2007 through
December 31, 2008, shall continue based on the law that was
in effect at the time of the violations or events;
e) Provides that any non-WASC regionally accredited school
that had an approval to operate pursuant to the Former Act
shall maintain that approval with no time being elapsed
between July 1, 2007 and December 31, 2008;
f) Provides that for any student that had a claim pending
against a covered institution no time shall have elapsed
from June 30, 2007 through December 31, 2008, for the
purposes of determining the statute of limitations;
g) Provides that Bureau regulations as they existed on June
30, 2007, shall remain in effect and that the Bureau may
amend or repeal any regulations that are inconsistent with
this Act. Provides that the Bureau may adopt emergency
regulations necessary to implement this chapter;
h) Provides that the Private Postsecondary and Vocational
Education Administration Fund is continued and renamed the
Private Postsecondary Education Administration Fund (PPEAF)
and provides that it is the intent of the Legislature that
the PPEAF be administered and fees be collected in a way
that assures the full and effective implementation of this
Act;
i) Continues the STRF and provides that processing of
claims pending before the STRF shall be in accordance with
SB 823
Page 4
this Act. Provides that a student's right to recovery from
the STRF or the PPEAF shall be based on the law that was in
effect when the student enrolled and paid a fee for the
STRF;
j) All applications, excluding STRF and certificate of
authorization applications, pending before the Former
Bureau as of July 1, 2007, shall be deemed approved;
aa) Any institution that did not have approval from or a
pending application with the Former Bureau on June 30,
2008, that began operations after July 1, 2007, may
continue to operate but requires the institution to comply
with this Act within six months of the application becoming
available. Requires that students enrolling in these
institutions be notified during the enrollment process that
the institution's application for approval was not fully
reviewed by the Bureau; and,
bb) For any claim or cause of action that arose prior to
June 30, 2007, and commenced on or before June 30, 2007,
final judgments and/or legal remedies available under the
Former Act will be continued.
10)Provides definitions for various terms used in this Act.
11)Exempts from the requirements of this Act and from the
oversight of the Bureau, but requires the Bureau to monitor
the status of these institutions for exemption qualifications:
a) Institutions offering solely vocational or recreational
educational programs;
b) Institutions offering programs sponsored by trade,
business, professional, or fraternal organizations solely
for that organization's members;
c) Institutions offering continuing education where the
institution or program is certified or sponsored by a
government agency licensing persons in a particular field,
a state-recognized professional licensing body, or a trade,
business, or professional organization;
d) Non-profit institutions owned, controlled, and operated
and maintained by a church or religious institution that
SB 823
Page 5
meets several other outlined requirements;
e) Institutions that provide solely educational programs
for total charges of $1,500 or less. Provides that the
Bureau shall monitor these programs and adjust the cost
threshold based upon the Consumer Price Index; and,
f) Institutions accredited by either the Accrediting
Commission for Senior Colleges and Universities WASC or the
Accrediting Commission for Community and Junior Colleges
and Universities WASC.
12)Partially exempts the following from the requirements of this
Act and from the oversight of the Bureau:
a) Institutions accredited by a regional accrediting agency
recognized by the USDE, except that they are covered by the
requirement to participate in STRF; and,
b) Non-profit institutions that are accredited by an agency
recognized by the USDE, have operated in California for at
least 20 years, submit to the Bureau copies of the most
recent IRS Form 990 and the Integrated Postsecondary
Education Data System Report of the USDE and the
accumulated default rate, and the institution pays fees in
accordance with this Act, except that they are required to
participate in the STRF.
13)Provides the Bureau with the following powers and duties:
a) To administer this Act and promulgate necessary
regulations; to enforce this approve institutions and
programs; to develop and maintain a Web site to provide
specified information to students; to provide specified
outreach to prospective students; to establish a regular
inspection program that meets with specified requirements;
to regularly assess the cost of meeting the Bureau's
statutory obligations, determine an appropriate fee
structure and raise fees accordingly; to review complaints
received regarding an institution; to establish a training
program, if funds are available, for institutions seeking
to comply with this Act and become eligible for federal
financial aid programs; and establish a plan to identify
unlicensed institutions and take corrective action;
SB 823
Page 6
b) Provides that the powers and duties set forth in this
Act are vested in the Director of Consumer Affairs, who may
delegate them to a Bureau chief. Provides that the Bureau
chief shall be appointed by the Governor and confirmed by
the Senate. Provides that the Bureau chief may designate
powers and responsibilities to a designee. Provides that
the Bureau shall be staffed with a sufficient number of
employees with higher education investigation and oversight
experience. Provides a process for Former Bureau employees
to obtain positions with the Bureau;
c) Requires the Bureau to consult with the Attorney General
(AG) in developing and implementing an enforcement program
to carry out this Act. Requires the Bureau to adopt a
five-year strategic plan by December 31, 2010, and update
that plan as needed;
d) Requires the Bureau to adopt a fee schedule. Provides
that institutions subject to this Act shall pay the fee.
Provides that the Bureau shall not charge more than
reasonably necessary to carry out this Act. Provides that
all fees be deposited into the PPEAF and provides that the
PPEAF shall be the means for funding Bureau activities.
Provides that the fee schedule shall be publicly available
and that the Bureau shall use an objective process to
assess the costs of performing its duties;
e) Provides that the Bureau may appoint an advisory
committee, may conduct workshops to provide applicants and
institutions information about the application process, and
may empanel visiting committees, with certain conditions,
to assist in evaluating an institution's approval to
operate; and,
f) Provides that, for all complaints against an institution
that have reached final disposition, the Bureau shall make
the nature and disposition of the complaints public, upon
request.
14)Provides for the following in regards to the Bureau granting
institutions approval to operate:
a) Requires the Bureau to promulgate regulations to
establish minimum operating standards for institutions and
specifies that the standards should address educational
SB 823
Page 7
program content, facilities and equipment, withdrawal
policies, criminal history of administrators, adequacy of
faculty, institutional financial stability, institutional
degree or diploma award processes, the handling of records
and transcripts, institutional compliance with ordinances
and laws, and that the institution ensures students receive
adequate information and disclosures;
b) Provides that an approval to operate shall only be
granted after an institution has presented sufficient
evidence to the Bureau of meeting the operating standards
outlined by the Bureau, and the Bureau has independently
verify the information provided;
c) Establishes that approvals to operate shall be for
four-year terms;
d) Provides that the Bureau shall grant an institution that
is accredited an approval to operate by means of its
accreditation, and that the terms of approval shall
coincide with the term of accreditation, and that these
institutions shall file specified reports with the Bureau
and comply with all other applicable provisions of this
Act;
e) Requires the Bureau to adopt regulations covering the
renewal of an approval to operate, and requires that a
renewal of approval coincide with the institution
demonstrating continued capacity to meet minimum standards;
and,
f) Provides that approval from any federal or state agency
to offer an educational program may be sufficient to
satisfy the requirements of the Bureau without further
review, and that the Bureau may incorporate that program
into the institution's approval to operate when the Bureau
receives approval from that federal or state agency.
15)Requires prior authorization from the Bureau for institutions
wishing to make substantive changes, such as a change in
ownership or educational objectives. Provides that the
institution's approval may be suspended or revoked for failing
to obtain prior approval. Requires the Bureau to establish a
process for reviewing requests for authorization to make
substantive changes.
SB 823
Page 8
16)Establishes the following business practices:
a) Requires an institution to establish specific written
standards for student admissions for each educational
program, provides that these standards shall be related to
the particular educational program.
b) Prohibits institutions from conducting several actions,
including operating without Bureau approval, offering to
educate without satisfying the minimum standards outlined
in this Act, using the seal of the state on a diploma,
making misleading statements, promising completion,
licensure passage, or employment, presenting or advertising
inaccurate information, using "help wanted" ads to solicit
students, compensating students for recruitment activities,
using a misleading name, making false statements on any
record required by this Act, using the term "approved"
without stating what that means, directing an individual to
violate this Act or persuading a student not to file a
complaint, among other prohibitions;
c) Prohibits an institution from requiring prospective
students to provide personal contact information before
being granted access to educational program information via
the institution's Internet Web site;
d) Provides that, for career fields that require licensure
by the state, institutions offering educational programs
must have approval to conduct that educational program;
e) Requires an institution to maintain specified records on
students enrolling in institutional programs and requires
an institution to keep a log, to the extent information is
available, containing specified placement and licensing
examination information regarding students who completed
the educational program;
f) Requires institution owners, administrators and
directors to take specified actions to ensure students
receive the education represented to them, to ensure the
institution is in compliance with this Act, and to notify
the Bureau of known violations of this Act;
g) Requires institutions that maintain an internet website
SB 823
Page 9
to post specified information on that internet website,
including specified data regarding staff and faculty if the
institution includes information about faculty on their
internet website. Requires information on the website to
be kept current and defines current as being updated by
January 1 of each year, and at least once every three
months;
h) Requires an institution that provides or suggests
lenders for private loan funding to inform a student if
they are eligible for state or federal grants or guaranteed
loans before offering private loan financing;
i) Allows institutions, when offering courses with a term
of four months or less, to require payment of all tuition
and fees on the first day of instruction; prohibits an
institution from requiring more than one term/four months
of advance payment at a time until 50% of coursework has
been completed. Requires institutions providing private
loan funding ensure that a student is not obligated for
indebtedness that exceeds the total cost of the current
term of enrollment;
j) Prohibits institutions from merging classes unless
certain requirements are met; prohibits institutions from
making unscheduled suspensions of classes after a student
has enrolled unless caused by circumstances beyond
institutional control; prohibits changes to the day or time
of a class unless certain other requirements are met;
requires an institution to meet certain approval
requirements when seeking to move the location of an
educational program; requires refunds to students under
certain circumstances if students do not consent to the
change in the educational program; and, requires
institutions to maintain background checks and tests on
specified students enrolled in medical training; and,
aa) Requires an institution to keep specified data regarding
educational programs, faculty, and students for a period of
not less than five years;
17)Requires recruiters for institutions to be employees;
requires identification from the institution; and requires
recruiters to physically possess the identification when
recruiting.
SB 823
Page 10
18)Establishes numerous requirements in regards to enrollment
and enrollment agreements and disclosures, including:
a) Requires an institution to provide students specified
disclosures and information prior to executing an agreement
obligating the student to pay money to an institution.
These disclosures include, among other items, information
relative to the educational program, financial aid and
federal and private loan information, admission policies,
and a description of the student's rights and
responsibilities under the STRF;
b) Requires an institution to provide students with a
catalogue or brochure containing specified information
including, among other items, information regarding the
educational program, including a description of the
instruction provided in the student's program of interest
and other specified information, the number of credit hours
of the program, attendance and refund policies, and the
schedule of charges. Requires an institution to provide
the catalogue to any person upon request. Provides that an
enrollment agreement shall not be enforceable unless the
student has first received the institution's brochure or
catalog. Provides a student one business day to review
enrollment and disclosure forms prior to signing an
enrollment agreement;
c) Provides that an institution shall not offer instruction
in English as a second language (ESL) without the prior
approval of the Bureau, and establishes several
prohibitions and requirements regarding ESL courses;
d) Requires that an ability to benefit student take a USDE
prescribed examination and achieve a score specified by the
USDE showing that the student may benefit from the training
offered before executing an enrollment agreement. Provides
that if the USDE does not have a list of relevant
examinations, the Bureau may publish its own list of
acceptable examinations;
e) Requires institutions offering programs in professions
that require approval from a specific authority or agency,
or licensure, to, during enrollment, disclose in writing if
the program does not have approval which qualifies
SB 823
Page 11
graduates to take the required examination;
f) Establishes requirements for institutions discussing job
placement assistance or salaries during the enrollment
process;
g) Requires the Bureau to promulgate regulations for
purposes of carrying out this section relative to
enrollment agreements and disclosures, and specifies that
the areas that the regulations should cover; and,
h) Requires an enrollment agreement to include the
following:
i) A statement with the Bureau's contact information
informing the student that they may direct questions
regarding the enrollment agreement to the Bureau;
ii) A description of the educational program;
iii) The name and specified information regarding the
educational program, and the name and address of the
institution where the classes will be held;
iv) A schedule of total charges, including a list of
non-refundable charges, and on the same page as where the
student will sign, underlined and in capital letters, the
total charges;
v) A statement that the student is responsible for
paying the STRF assessment; and,
vi) A clear statement that the agreement is legally
binding when signed and accepted and specified disclosure
language regarding a student's understanding of rights
and responsibilities, requiring the student's signature,
and provides that it is a violation of the Act for any
institution or representative of an institution to induce
a person into signing this statement if the institution
or representative has not fully and clearly explained the
student's rights, responsibilities, and the institution's
policies;
i) Requires an institution to make the following
disclosures on its website, orally, and in writing, to each
SB 823
Page 12
student before execution of the enrollment agreement:
i) A School Performance Fact Sheet that discloses
completion rates, placement rates, starting salaries, and
license examination passage rates, if applicable;
ii) The cost of attendance, including a schedule of the
total charges and a list of nonrefundable charges;
iii) Specified language informing the student that credit
transferability is at the discretion of the institution
to which the student seeks to transfer, and informing the
student of his/her responsibility to ensure that this
program meets his/her long-term educational goals;
iv) Disclosure of a buyer's right to cancel and
disclosure of the refund policy and examples of its
application, and requires a description of the procedures
a student must follow to cancel the enrollment agreement
and obtain a refund; and,
v) A statement provided by the Bureau specifying the
requirement that a student pay a state-imposed assessment
for the STRF and a statement regarding the purpose of the
STRF and requirements for filing a claim;
j) Requires an institution to clearly and conspicuously
orally disclose outlined information; provides that the
oral disclosures must be made at least one business day
prior to execution of the enrollment agreement, that at the
conclusion of the oral disclosure the institution advise
the student to read and review all materials and ask
questions if needed, and that the institution have a
uniform procedure to ensure the disclosures are made as
required, including a method to monitor compliance.
aa) Requires disclosure forms to be acknowledged by a
student's initials or signature and prohibits a student
from waiving receipt or any term;
bb) Requires an enrollment agreement to be written in a
language that is easily understood, and if English is not
the student's primary language and the student is unable to
understand the terms and conditions of the agreement, then
the student is entitled to a clear explanation of the terms
SB 823
Page 13
in his/her primary language, and provides that if
recruitment was conducted in a language other than English
then the enrollment agreement and related disclosures shall
be in that language;
cc) Provides that an enrollment agreement becomes operative
when the student attends his/her first class;
dd) Prohibits an enrollment agreement from containing a
provision that requires a student to invoke internal
institutional dispute procedures before enforcing any
contractual or other legal rights or remedies; and,
ee) Provides that an enrollment agreement is not enforceable
unless, at the time of execution, the institution held
approval to operate.
19)Requires an institution extending credit or lending money for
educational costs to a student to make specified disclosures
to that student, to place a notice in the lending documents
informing the student that they may assert against the holder
of the consumer contract all of the claims and defense that
could be asserted against the institution up to the amount
already paid under the consumer contract; provides that such a
lending note is not enforceable unless the institution held an
approval to operate at the time of execution; and provides
that institutional loans to students must comply with the
Federal Truth in Lending Act.
20)Establishes the following requirements for cancellations,
withdrawals, and refunds:
a) Provides that a student shall have the right to cancel
an enrollment agreement, entitled to a full refund within
30 days, for a program of instruction and equipment as
follows:
i) For degree granting programs, the student has the
right to cancel prior to or on the first day of
instruction;
ii) For non-degree granting programs in excess of 50
days, the student shall have the right to cancel until
midnight of the fifth business day after which the
student attended the first class of instruction subject
SB 823
Page 14
to the enrollment agreement;
iii) For non-degree granting programs of 50 or fewer
days, the student may cancel until midnight of the date
that is one business day for every 10 days of scheduled
enrollment length;
iv) For distance learning programs, the student may
cancel until midnight of the eighth business day after
the first lesson was mailed, or the third business day
after the first lesson was electronically delivered;
v) Provides a process by which a student may return
equipment within 10 days following the date of the notice
of cancellation for full refund and provides for
proportional refunds thereafter;
vi) Provides a process by which a refund is sent to a
lender or financial aid program, with notice to the
student;
vii) Provides specified exceptions to the aforementioned
for tuition paid by third-party organizations;
viii)Establishes a specific refund calculation process and
schedule for refunding the unused portion of tuition and
fees, equipment charges, and other charges if a student
does not register for the period of attendance or
withdraws at any time prior to the completion of the
course. And provides specific circumstances under which
a student shall be deemed to have withdrawn from classes.
Allows institutions to petition for special
consideration for refund processes from the Bureau if
their program does not fit into the refund process
structured in this bill; and,
ix) Requires specified actions on the part of
institutions, and their representatives involved in
financial aid, that participate in student loans,
including:
(1) Requires institutions to identify each student
who receives a student loan other than loans provided
under a governmental student financial aid program, to
the extent the information is reasonably available to
SB 823
Page 15
the institution, as specified;
(2) Requires institutions to ensure that each
student has received specified information, at
specified times, regarding the student's rights and
obligations related to loans;
(3) Requires institutions that participate in
private student loan programs and suggests these
programs to students to disclose to students any
formal or informal relationship between the
institution and the lender, as specified, prior to the
signing of the indebtedness, and requires institutions
to fully disclose to students criteria and processes
used to select any recommended or "preferred" lenders
as well as inform the student of their right to choose
a lender regardless of "preferred" lender status;
(4) Requires institutions to clearly and fully
disclose to students and their families all of the
students' options under Title IV of the Federal Higher
Education Act, including information about terms and
conditions of available loans;
(5) Prohibits institutions that participate in
private student loan programs from receiving gifts, as
specified, providing preferred lender status unless
solely based on the interests of students and their
families, giving preferred status in exchange for
benefits provided to the institution;
(6) Requires an institution to keep records to
demonstrate compliance with this section;
x) Requires an institution to provide a student with a
specified notice on cancellation, refund and other
rights. Requires the notice to be posted in a
conspicuous place at the main entrance of the
institution, in the admissions office, in each room used
for instruction, and made available to students upon
request;
xi) Requires an institution to provide a student with
two cancellation forms at the first class attended by the
student, or with the first delivered distance learning
SB 823
Page 16
course, which is required to contain a specified
statement regarding cancellation; and,
xii) Provides that a student may not waive any of the
aforementioned provisions.
21)Continues the STRF in existence, continuously appropriates
its monies and provides:
a) That the Bureau should seek to promote teach-out
opportunities in which a student is given an opportunity to
complete the program at another institution without making
further tuition payments;
b) That STRF consists of monies collected from students
($2.50 per $1000 tuition) at all institutions approved by
this act and all non-WASC regionally accredited
institutions and non-WASC accredited non-profit
institutions;
c) Allows the Bureau to levy a special assessment when the
balance in the STRF falls below one million ($1,000,000),
requires the Bureau to provide at least 90 days' notice of
an impending special assessment to each institution, and
requires the Bureau to reduce fees if STRF grows beyond $10
million;
d) Expands the STRF to allow claims to be filed under a
broad array of circumstances;
e) For payments to California residents enrolled in an
institution approved by this Act who suffered a loss as a
result of the closure of that institution, unless that
student's tuition was paid by an employer or government
program, or for a student who obtained a final judgment;
and,
f) In addition to civil remedies, the Bureau may, under
specified conditions and after meeting certain
requirements, order an institution to pay previously unpaid
STRF fees or to reimburse the Bureau for payments made from
the fund.
22)Establishes the following requirements for institutional
closures and teach-outs:
SB 823
Page 17
a) Requires an institution to notify the Bureau in writing
at least 30 days prior to closing, and requires the notice
to include a closure plan that speaks to, at least,
providing teach-outs of educational programs or
arrangements for making appropriate refunds, a plan for
providing students information on federal financial aid
programs and institutional closures if the institution is a
participant in these programs, and a plan for the
disposition of student records;
b) Provides that an institution will be in default of an
enrollment agreement if an institution closes prior to
completion of the program. If the Bureau finds that the
institution has made arrangements for the student to
complete their program at another institution for the same
cost to the student, the student's institutional charges
may be refunded on a pro rata basis; if the institution
does not make such a provision, the student is entitled to
receive a total refund of all institutional charges; and,
c) Requires an institution to provide the Bureau with
information including student records and transcripts.
23)Requires institutions to collect, maintain, and report to the
Bureau annually the information contained in the School
Performance Fact Sheet, and provides that nothing in this Act
prevents an institution from disclosing the institutions
completion, employment, salary or licensure numbers and rates
if the institution ensures that such disclosures are not
misleading and do not detract from other required disclosures,
that the criteria used to determine the numbers and rates are
disclosed, that the other disclosures required by this Act are
prominently disclosed before any other numbers or rates, and
that the institution discloses to the Bureau any other
disclosures made during the previous year and the basis for
calculating those disclosures.
24)Provides for the following in regards to compliance,
enforcement, process, and penalties:
a) Requires the Bureau to determine an institution's
compliance with this Act; requires the Bureau to conduct
investigations and inspections as a part of its compliance
program. Requires the Bureau to take action against an
SB 823
Page 18
institution for a violation of any applicable laws or
regulations;
b) Requires the Bureau to work with the AG to develop an
enforcement program that includes, among other items,
training of Bureau staff, assurance that the enforcement
process shall ensure all institutions are in compliance
with this Act, site visits that include review of records
and inspection of facilities and staff, and provides that
audits and investigations are triggered by complaints;
c) Requires the Bureau to promulgate regulations to
implement these provisions that include the probation and
suspension of approvals to operate;
d) Provides that the Bureau may allow institutions an
opportunity to remedy noncompliance, impose fines, place
the institution on probation, or suspend or revoke the
institution's approval to operate, and provides that in
determining the appropriate action the Bureau shall take
the severity of an institution's violations into account;
e) Requires an institution to submit an annual report to
the Bureau, under penalty of perjury, that includes the
number of students, the number of degrees issued, the
degree levels and diplomas offered, educational program
completion and placement rates, total charges for
attendance, a statement regarding payment into STRF, and
additional information as deemed necessary by the Bureau;
f) Requires Bureau staff who detects a minor violation of
this Act during inspection, to issue a notice to comply
before leaving the institution, and:
i) Requires the Bureau to establish a voluntary appeal
process through regulation within one year of enactment
of this bill;
ii) Provides that an institution that receives a notice
to comply shall have no more than 30 days from the date
of inspection to remedy the noncompliance, and provides
that the institution shall sign and return the notice to
comply upon achieving compliance;
iii) Requires a single notice to comply be issued
SB 823
Page 19
separately, listing all the minor violations cited during
the inspection, and provides that no notice shall be
issued if compliance is achieved immediately in the
presence of the Bureau staff. Provides that immediate
compliance may be noted in the inspection report but not
subject to further action by the Bureau;
iv) Provides that a notice to comply is the only means
the Bureau may use to cite a minor violation discovered
during an inspection and prohibits the Bureau from taking
other enforcement action against an institution for a
notice to comply if the institution complies with this
process;
v) Provides that if an institution disagrees with a
notice to comply, the institution shall send the Bureau a
written notice of disagreement, and allows the agency to
take administrative enforcement action to ensure
compliance with the requirements of the notice to comply;
and,
vi) Allows the Bureau to take administrative enforcement
action against an institution that fails to comply with a
notice within the specified time period; and,
g) Allows the Bureau to issue a citation for noncompliance
of this Act or regulations found during an investigation,
and provides that the citation may contain an order of
abatement that may require the demonstration of future
compliance, or an administrative fine not to exceed $10,000
per violation. Provides specific criteria for the Bureau
to consider when assessing the amount of administrative
fines. Provides that the citation shall be in writing and
shall contain specified information regarding the violation
and the institution's right to a hearing within 30 days.
Provides that an administrative fine is due either 30 days
from citation, or 30 days from the final judgment following
a hearing. Provides that all administrative fines are to
be deposited into the PPEAF;
h) Allows the Bureau to suspend or revoke an institution's
approval to operate for fraud or for repeated violations of
this Act that have caused harm to students. Provides that
the Bureau shall adopt regulations governing probation and
suspension of an approval to operate and that the Bureau
SB 823
Page 20
may seek reimbursement for the costs of an investigation.
Provides that an institution shall not be responsible for
paying the cost of an investigation to more than one
agency;
i) Provides that if the Bureau determines the need to make
an emergency decision to protect students, prevent
misrepresentation to the public, or prevent the loss of
public funds or monies paid by students, it may do so
pursuant to an outlined process and in accordance with
Bureau-adopted regulations;
j) Provides that the Bureau may bring an action for
equitable relief for violations of this Act, including
restitution, a temporary restraining order, the appointment
of a receiver, and a preliminary or permanent injunction
and that the action may be brought in the county in which
the defendant resides or in the county in which any
violation has occurred or may occur and provides that these
remedies supplement, and do not supplant, any other
remedies and penalties provided under law;
aa) Provides that in the case of adverse administrative
action by the Bureau, an institution may request a hearing
in accordance with law;
bb) Provides any individual who believes an institution has
violated this Act or subsequent regulations may file a
complaint with the Bureau and that the Bureau shall take
action to verify the complaint, and provides the Bureau
with authority to take appropriate administrative
enforcement action upon discovering the facts in regards to
the complaint;
cc) Provides that if the Bureau finds that an institution's
violation of this Act or subsequent regulations has caused
damage or loss to a student or group of students, the
Bureau may order the institution to pay appropriate refunds
or restitution to that student or group of students;
dd) Establishes that willfully operating an institution
without approval or willfully providing false information
to the Bureau on an application shall be considered
infractions and are public offenses;
SB 823
Page 21
ee) Allows the AG, a district attorney, or a city attorney
to make investigations as may be necessary to carry out
this Act, including investigating complaints;
ff) Requires an institution to designate and maintain an
agent for service of process within California and provide
contact information for that agent to the Bureau;
gg) Provides that the Bureau shall cite any person in
control, and that person shall be subject to a fine, not to
exceed $50,000 for operating an institution without proper
approval to operate;
hh) Provides that each institution subject to this Act shall
be deemed to have authorized the Bureau or accrediting
agency to provide the AG, or district attorney, or city
attorney, or California Student Aid Commission (CSAC)
copies of all documents and other materials concerning the
institution. Requires an accrediting agency to provide
such materials free of charge within 30 days of receiving
written notice to share documents. Prohibits an
accrediting agency from informing an institution of an
investigation by the AG, district attorney, city attorney,
or CSAC and subjects the accrediting agency to a civil
penalty of between $2,500 and $25,000 for failing to abide;
ii) Provides that if any person in control willfully
violates this Act and the violation results in the closure
of an institution, that person shall pay all students of
the closed institution full refunds or compensation for
actual damages resulting from the closure;
jj) Provides a process by which the Bureau can order, and an
institution can appeal, the required payment of all costs
associated with an investigation when such investigation
has discovered a violation of this Act; and,
aaa) Provides that nothing in this Act shall preclude the
enforcement of rights or remedies under any other
applicable statute.
25)Provides for severability of this Act, in that, if any
provisions in this Act are held as invalid, that invalidity
shall not effect other provisions, so long as those provisions
do not require the invalid provisions in order to be applied.
SB 823
Page 22
26)Requires the Bureau to provide annual progress updates to the
Legislature, in the form of oversight hearings by the
committee(s) with jurisdiction, regarding the enforcement of
this Act and subsequent regulations.
27)Requires the Legislative Analyst's Office to provide the
Legislature and the Governor, by July 1, 2013, a comprehensive
review on the extent to which the Bureau has implemented the
provisions of this Act.
28)Declares legislative intent that the Bureau of State Audits
(BSA), through a request from the Joint Legislative Audit
Committee, conduct an audit assessing, among other items, the
degree to which the Bureau can rely on the accreditation
process for assuring quality and effectiveness of educational
programs, and declares that the BSA issue a public report on
the results of that audit no later than December 31, 2011.
Declares intent that accrediting bodies and institutions and
programs provide the BSA full access to information necessary
to complete this audit.
29)Declares legislative intent that the termination of this Act
be resolved in a comprehensive measure that resolves this
issue for all boards and bureaus within the Department, and
that the sunsetting of the prior law has been to the determent
of both students and schools and should be avoided in the
future.
30)Prohibits a person, beginning January 1, 2009, from owning or
operating an institution or providing driving instruction for
motor trucks of three or more axles that are more than 6,000
pounds unless the institution has been approved by the
Department of Motor Vehicles (DMV). Requires the institution
to maintain proof of compliance with liability insurance
requirements and a satisfactory safety rating by the
California Highway Patrol. Requires the institution to
maintain the vehicles used in training in safe mechanical
condition with all maintenance records. Provides that driving
instructions must meet other specified requirements, as well
as any other terms and conditions required by the DMV.
EXISTING LAW relating to the regulation of private postsecondary
education is inoperative. Recently inoperative statute
expressed the intent of the Legislature to provide for the
SB 823
Page 23
protection and interests of students and institutions that have
matters pending under the Former Act, which became inoperative
on July 1, 2007; provided for the continuation of all matters
pending before the Former Bureau on July 1, 2007, until July 1,
2008; allowed, until July 1, 2008, limited state oversight of
private postsecondary schools by the Department. The statutes
became inoperative on July 1, 2008.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, the Department estimates that the Bureau would
require 63 positions at an annual special fund cost of $7.5
million to perform all of the functions specified in this bill.
In addition, there would be first-year information technology
costs of about $1 million.
COMMENTS :
Purpose of this bill : There are no existing laws governing
private postsecondary education in California, as the Former Act
was repealed on July 1, 2007. The stop-gap legislation that
established minimal temporary oversight of private postsecondary
institutions expired on July 1, 2008. This bill is intended to
establish a regulatory structure for private institutions with
strong and effective student protections, meaningful
institutional standards, and clearly defined responsibilities
and expectations of the Bureau. Specifically, the author
intends for this bill to establish the Bureau's authority to
regulate private postsecondary institutions and enforce the
provisions of thus Act, establish a plan for transition to the
provisions of this Act, establish approval and re-approval
requirements and processes for regulated schools, provide for
continuation of the STRF, provide for strong student protections
including requiring many specific disclosures be provided to
students, and establish reporting requirements and provide for
ongoing accountability to the Legislature.
Background on the Former Bureau and Former Act : During the late
1980s, when regulation of the private postsecondary education
industry was carried out by a division within the State
Department of Education, the state developed a reputation as the
"diploma mill capital of the world." As a result of concerns
over the integrity and value of the degrees issued by these
institutions, the Former Act and the Maxine Waters School Reform
and Student Protection Act (Waters Act) were enacted. The
regulatory framework established by the merging of the Waters
SB 823
Page 24
Act and the Former Act led to duplicative and conflicting
statutory provisions plaguing California's oversight of these
institutions with problems that continued through the sunset of
the law on January 1, 2007. A full discussion of the persistent
problems with the Former Bureau, and a discussion of the
recommendations made throughout the years for improvement of
Bureau oversight of private postsecondary education is contained
in the July 2, 2007 Assembly Higher Education Committee analysis
and in the Senate Business and Professions Committee analysis
prepared for the April 23, 2007 hearing; both analyses are based
on a prior version of this bill.
Does this bill meet shared goals for the oversight of private
postsecondary education ? Many of the deficiencies with the
Former Bureau can be directly linked to deficiencies within the
Former Act. As the Legislature sets out to establish a
successor Bureau, the Legislature should evaluate the degree to
which the successor Act corrects the statutory deficiencies
identified in the Former Act. In determining the degree to
which the regulatory design proposed in this bill responds to
the problems of the Former Bureau, there are several overriding
policy issues that the author and the Legislature should
consider:
1)Appropriate exemptions : No challenge is greater than deciding
which institutions need state oversight and which do not. The
Former Act included an array of exemptions based on
degree-granting versus non-degree-granting, and for-profit
versus non-profit. These differential exemptions and approval
methods were found to be confusing and difficult for the
Bureau to implement. Numerous reports recommended that the
exemptions be streamlined. This bill responds to these
recommendations by exempting schools that are avocational or
recreational in nature, nondegree granting institutions
sponsored by a bona fide trade, business, or professional or
fraternal organization, continuing education programs,
nonprofit religious institutions, nondegree programs costing
less than $1500, and schools accredited by WASC.
Additionally, this bill provides that non-WASC regional
accrediting agencies approved by the USDE, and non-profit
schools accredited by a national accrediting agency that also
submit additional information to the Bureau, are exempt from
all provisions of this Act except a requirement for
participation in the STRF.
SB 823
Page 25
2)Student protections : The paramount goal of any such law is the
protection of students, both to prevent abuse and to ensure
quality. This bill contains an array of requirements aimed at
protecting students, including requiring that students are
provided specific information orally, on the institution's
website, and in writing, including, among other items, an
enrollment agreement, the institution's refund policy and the
student's rights and responsibilities under the STRF, the
status of the school's approval by the Bureau, the
consequences of non-payment of student loans, the school's
bankruptcy history, a school performance fact sheet containing
specified information, and a school catalogue that contains
various information regarding school policies and programs.
Previous versions of this bill provided students with a
private right of action; this provision has been stricken from
this version of this bill.
3)Regulatory burden : Some institutions have raised concerns
that many of the requirements of this Act are too burdensome,
if not nearly impossible, to follow; for example:
a) Institutions have argued that the requirement that
certain disclosures be provided orally to students is too
vague; recent amendments to the bill attempt to clearly
define which disclosures must be provided orally and when
they must be provided.
b) Institutions have argued that the requirement to
collect, post and keep updated specific information on the
institution's website about faculty is too burdensome.
Recent amendments clarify that the information need only be
disclosed if the institution provides staffing/faculty
information on the website, and that updates need to be
made every 3-months in order to be considered current.
c) Additionally, these institutions oppose the provision in
this bill that places liability for refund payment to
students in the case of an institutional closure on any
individual who willfully violates this Act if that willful
violation results in the institution's closure; recent
amendments clarify that the provision applies to a person
"in control" of the institution. However, the amendments
do not define the term "in control".
History has proven that without rules and regulations students
SB 823
Page 26
will be mistreated, therefore, the goal of any such Act must
be to provide for strong regulation and oversight of
institutions while preventing excessive burden. This bill
attempts to improve upon the Former Act by creating a more
clear and concise law, easing the approval process, providing
clear deadlines for the adoption of regulations so that
schools know exactly the rules they will be expected to
follow, and allowing for workshops to be conducted by the
Bureau to help schools navigate the approval process and
requirements of this Act.
4)Bureau oversight and enforcement : The degree to which the
student protections outlined in this bill will result in
greater protection for students will depend largely on the
degree to which the Bureau takes action to ensure
institutional compliance with this Act. This bill attempts to
provide a clear and concise law for the Bureau to enforce,
strong authority for the Bureau to pursue unapproved schools,
requires an enforcement program be created in consultation
with the Department of Justice, and requires reporting to the
Legislature and the Governor on the progress of the Bureau's
enforcement program.
Analysis Prepared by : Laura Metune / HIGHER ED. / (916)
319-3960
FN: 0006938