The Consumer Financial Protection Bureau lacks the authority to investigate how accredit ors approve for-profit colleges, according to a ruling Thursday by a federal district judge.
The CFPB had asked the court to force the Accrediting Council for Independent Colleges and Schools to answer its questions about how the accreditor approved several controversial for-profit college chains - including Corinthian Colleges campuses that operated under the Everest brand name, FastTrain College, ITT Technical Institute and Westwood College.
The demand for information from ACICS was part of the CFPB's investigation into what it described as possible illegal activities "in connection with accrediting for-profit colleges." But U.S. District Judge Richard J. Leon of the U.S. District Court for the District of Columbia rejected the CFPB's lawsuit. It marks the first time a court has said the CFPB has no jurisdiction and overreached its statutory authority.
Five accreditors and the Council for Higher Education Accreditation, which advocates for accreditation on behalf of colleges, told the judge that the CFPB’s investigation threatened the integrity of the accreditation process. Accreditors particularly expressed concerns that the CFPB had sought from ACICS the names of individuals who were involved in reviewing and approving individual campuses. The decision favoring ACICS comes as the accreditor is trying to survive amid ongoing criticism that it is too lax in approving for-profit colleges. Twelve state attorneys general and a coalition of higher education, consumer and labor groups have called on the U.S. Department of Education to deny federal recognition of ACICS. The Education Department will have to make a decision later this year but such an action would essentially shut down the accreditor and could jeopardize federal funding for hundreds of for-profit colleges. In his ruling, Judge Leon wrote, "Although it is understandable that new agencies like the CFPB will struggle to establish the exact parameters of their authority, they must be especially prudent before choosing to plow headlong into fields not clearly ceded to them by Congress. Thus, having concluded that the CFPB lacks authority to investigate the process for accrediting for-profit schools, I am compelled to deny its petition to enforce civil investigative demand."
In March, thousands of students who were defrauded by now-shuttered Corinthian Colleges learned they could receive billions in debt forgiveness from the federal government, after an announcement from the Education Department. Corinthian Colleges, which once operated more than 120 schools with more than 110,000 students across North America under the Everest, Wyotech and Heald brands, filed for bankruptcy in May 2015 in the largest failure of a college chain in U.S. history.