FTC slaps Grand Canyon University with lawsuit for alleged deceptive ads, illegal telemarketing

Lawsuit follows $37M fine from Dept. of Education

The Phoenix, Arizona-based Grand Canyon University (GCU), is being sued by the Federal Trade Commission for allegedly engaging in illegal telemarketing and deceiving students about its nonprofit status and doctoral program.
The Phoenix, Arizona-based Grand Canyon University (GCU), is being sued by the Federal Trade Commission for allegedly engaging in illegal telemarketing and deceiving students about its nonprofit status and doctoral program. | Grand Canyon University

The Federal Trade Commission (FTC) slapped Grand Canyon University (GCU) with a lawsuit last week alleging the school deceived students and engaged in illegal telemarketing practices, though the school is refuting the claims and maintains that the federal government is singling them out.

The FTC announced in a press release last Wednesday that it filed a complaint in federal court against GCU, its marketer Grand Canyon Education, Inc. (GCE) and its President and CEO Brian Mueller for allegedly deceiving students about the costs of its doctoral program and its nonprofit status.

The complaint also claims that GCE violated the FTC Act and the Telemarketing Sales Rule by illegally contacting people who specifically asked not to be called.

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"Grand Canyon deceived students by holding itself out as a non-profit institution and misrepresenting the costs and number of courses required to earn doctoral degrees," Samuel Levine, director of the FTC’s Bureau of Consumer Protection, said in a statement. "We will continue to aggressively pursue those who seek to take advantage of students."

The FTC's lawsuit came months after the Department of Education on Oct. 31 levied the largest fine in its history against GCU, which boasts approximately 120,000 students and is the largest Christian university in the U.S.

The department alleged that the school misrepresented the cost of its doctoral programs on its website by advertising that they cost $40,000 to $49,000 when less than 2% of graduates completed their course of study within that price range. Required "continuation courses" often tacked an additional $10,000 to $12,000 onto the final cost, the department said at the time.

GCU President Brian Mueller remained defiant in light of the federal government's latest action against the school, which he characterized as "the height of absurdity" and part of an ongoing attempt to unfairly target his institution, according to a statement provided to The Christian Post.

GCU was founded in 1949 as a nonprofit by the Southern Baptist Convention, but became a for-profit institution in 2004 amid financial struggles. The school subsequently sought to revert to its nonprofit status, a move that Mueller noted was approved by the IRS, Higher Learning Commission, State of Arizona, Arizona Private Postsecondary Board and NCAA Athletics.

"That transaction was blessed by the IRS, State of Arizona and our accrediting body (Higher Learning Commission) so of course we identified ourselves as a nonprofit because we were and are," Mueller said.

Mueller noted that only after 18 months did the Department of Education reject their status for the purposes of Title IV funding in 2018, after which the school stopped identifying as one.

The department "demanded at that time that, moving forward, GCU not identify itself as a nonprofit institution based on unsupported speculation that students would confuse GCU’s legal nonprofit status with the department’s so-called ‘Title IV for-profit status,'" Mueller said.

"We disagreed with that opinion, but cooperated as a good faith gesture," Mueller added.

"For the FTC to say now, five years later, that identifying ourselves as a nonprofit institution during that 18-month window was somehow ‘deceptive advertising’ is meritless and the height of absurdity," he said.

The Department of Education rejected the nonprofit status in 2018 because it claimed GCU had not sufficiently separated from its publicly traded former owner, Grand Canyon Education, Inc., which still provides services to GCU and where Mueller still serves as CEO, according to Forbes. GCU subsequently sued over the decision in 2021.

Mueller also pushed back against the allegation of "abusive" telemarketing practices, claiming that "GCE does not make cold calls to prospective students on behalf of GCU."

"It only reaches out to those who have inquired about GCU’s programs or otherwise expressed interest in attending the university," he continued, noting that such practices are common among institutions of higher education and that GCE employs a telemarketing compliance firm to ensure compliance with relevant laws.

Mueller believes that "GCU is being singled out in a blatant example of selective enforcement by this federal agency."

He offered the fact that the FTC is echoing allegations from the Department of Education about its doctoral program and nonprofit status "makes it clear that the two agencies are coordinating efforts and suggests that the FTC’s real goal is to further burden GCU by forcing it to defend against duplicative lawsuits."

"Sadly, there are no checks and balances in place to prevent this type of blatant and unwarranted government overreach," he added.

Mueller told CP during an interview in November that GCU is "the most transparent institution in the country," and pushed back against any claim that the school deceived its prospective doctoral students.

During a press conference in November announcing GCU's appeal of the $37.7 million fine, Mueller presented a preliminary internal GCU study examining disclosures of doctoral programs at 100 other universities and a 2022 report by the U.S. Government Accountability Office (GAO) examining broader financial disclosures in higher education.

The GAO report found that 91% of the colleges reviewed "do not include or understate the net price in their aid offers," 41% of which do not provide a net price in their offer to students.

“The point of sharing these studies is not to disparage other universities,” Mueller said at the time. “Rather, it highlights the selective enforcement from the department in singling out GCU. We maintain that not only is there nothing misleading about GCU’s disclosures but that we provide higher levels of transparency than are observed in higher education. In short, we are taking a leadership role in this issue.”

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