The Federal Trade Commission (FTC) filed a lawsuit on December 27th, 2023 against Grand Canyon University (GCU), accusing the for-profit Christian university of using deceptive advertising and illegal telemarketing practices to recruit students. This marks the first time the FTC has sued a university.
Background
GCU was founded in 1949 as a nonprofit private Christian university in Phoenix, Arizona. In 2004, facing financial difficulties, GCU sold itself to a for-profit entity called Grand Canyon Education to stay operational.
As a for-profit institution, GCU relies heavily on student enrollment and recruitment for revenue. The university enrolls over 100,000 students, making it one of the largest Christian universities in the United States.
GCU advertises itself as a nonprofit institution focused on affordable, private Christian education. However, the FTC alleges that GCU uses deceptive marketing and illegal telemarketing tactics to recruit students and bring in revenue.
FTC Allegations
According to the FTC’s complaint, since 2018 GCU has been:
- Falsely advertising itself as a nonprofit institution
- Using lead generators and telemarketers to recruit students in an “illegal telemarketing scheme”
- Deceiving consumers about the total costs of enrollment
- Engaging in “deceptive and abusive acts” to persuade students to enroll
Specifically, the FTC alleges GCU:
- Portrays itself as a nonprofit focused on education, not profit, when it is actually a for-profit entity
- Uses lead generators promising fake “scholarships” to gather consumer data and persuade them to enroll at GCU
- Uses illegal telemarketing practices with hundreds of sales representatives pushing enrollment
- Deceived enrolled students about the true costs and “additional products” not disclosed during recruitment
“GCU promised students a private Christian education; instead, it deceived consumers into taking on enormous debt to pay for enrollment at their for-profit school,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection.
Impact and Reaction
As a publicly traded for-profit corporation, this lawsuit poses a major threat to Grand Canyon Education’s stock price and revenue model. Share prices plunged over 15% the day the lawsuit was filed.
GCU plans to vigorously contest the FTC’s allegations. In a press release, the university called the complaint an “overreach and overstep by a government agency without regard to facts.”
GCU argues it has always been transparent about students’ total costs. The university accuses the FTC of attempting to treat a religious institution differently than public universities.
This sets up a legal battle between the FTC and largest Christian university in the United States. The outcome could impact for-profit education institutions across the country.
| Share Price Change | Amount | Percentage |
|---|---|---|
| Prior Close | $117.77 | – |
| Open | $99.53 | -15.46% |
| Day Low | $94.32 | -19.93% |
What’s Next
The FTC lawsuit requests that GCU pay fines, return funds to misled consumers, and change its marketing and enrollment practices. However, GCU has signaled it plans to fight the case in court.
Legal experts expect a prolonged legal fight due to the complex for-profit education issues highlighted in this lawsuit. The legal arguments will likely focus on:
- Whether GCU misrepresents itself as a nonprofit institution
- If GCU’s marketing practices qualify as deceptive or abusive
- Whether GCU’s telemarketing and lead generation tactics violate consumer protection laws
“This case could take years to resolve with appeals potentially reaching the Supreme Court,” said education law specialist Linda Zhang. “It highlights the regulatory uncertainty surrounding the booming for-profit education industry.”
The outcome of the case could establish new rules, restrictions, and standards for for-profit schools regarding advertising claims, recruiter conduct, cost disclosures, and what constitutes predatory enrollment tactics.
However, GCU students need not be overly concerned. Credits should remain valid and current students can still enroll in classes as the case proceeds.
“This lawsuit deals with GCU’s marketing practices, not academic credentials or course validity,” Zhang explains. “It should not greatly impact current students, faculty, or campus operations.”
Over 100,000 students chose GCU last year making it America’s largest Christian university. The FTC hopes this lawsuit forces the rapidly growing for-profit school to be more transparent about enrollment costs and reel in aggressive telemarketing practices. However, GCU feels it is being unfairly targeted and will counter the FTC’s “overreach.” Expect a drawn out legal process that could ultimately refine regulations for the booming for-profit education industry.
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