Illinois adopted a first-of-its-kind law regulating entities that advise consumers about college or career searches, financial aid, or scholarships, or that assist with planning, preparing or submitting applications on behalf of a consumer. While nonprofit postsecondary education providers are exempt from this new law, for-profit institutions are covered by it, as are any entities that provide educational planning services for a fee (even if in connection with not-for-profit education).
What Happened
On August 23, 2021, Governor Pritzker of Illinois signed into law the Educational Planning Services Consumer Protection Act (the “Act”). The Act, which goes into full effect on January 1, 2022, includes a lengthy list of prohibitions and requirements for nonexempt providers of educational planning services (Providers). Such covered Providers are broadly defined to include entities providing advice regarding college and career searches as well as planning, preparing or submitting applications for admission, financial aid or scholarships in exchange for “any fee or compensation.”
Under the Act, Providers that charge fees must use a written customer contract describing clearly and conspicuously the services being provided and the fee for each service, with a verbatim disclosure stating that educational planning services “of this type” are available free of charge from the Illinois Student Assistance Commission and may also be available from other public or not-for-profit entities. Prior to signing a contract with a Provider, consumers must also sign a Consumer Notice and Rights Form that includes this disclosure, a right-to-cancel disclosure and a disclosure that suggests that dissatisfied consumers should contact the Illinois Attorney General’s Office. If this form is provided electronically, it must contain a live link to the Illinois Student Assistance Commission’s website, where educational planning services are offered free of charge. The right-to-cancel disclosure must notify the consumer that the contract can be canceled at any time until each service has been fully performed and that the consumer is not required to pay for any services that the consumer did not receive. The contract must also disclose how it can be canceled.
The Act prohibits upfront fees of any kind and requires refunds within five days of cancellation for any services not performed at the time of cancellation. Providers will be prohibited from discussing results or outcomes unless Providers can substantiate the claims.
Violations of the Act will constitute unlawful practices under Illinois’ Consumer Fraud and Deceptive Business Practices Act, and a consumer who suffers harm because of a violation may bring a private civil action with potential remedies including but not limited to punitive damages and attorneys’ fees. Contracts in violation of the Act will be considered null and void and of no legal effect.
Why It Matters
The requirement under the Act to disclose that the Provider’s services can be obtained for free belies the possibility that the Provider could supply additional benefits not available from a nonpublic or for-profit source. While in some instances consumers may be able to obtain similar information for free, many for-profit advisory services gather and present data that can be more helpful and individualized for college students than can be obtained from a library or raw statistical data without context.
The Act’s applicability to Providers that provide guidance for “any fee or compensation” (emphasis added) arguably applies to free online college advisory services that, for example, include sponsored content or place advertisements on their websites, perhaps requiring them to disclose to students that they are entitled to a refund for their free services.
Finally, the lack of an exemption from the Act for for-profit providers means that many for-profit education providers will be obligated to supply disclosures ill-suited to the specific circumstances in which they will be providing guidance—indeed, such institutions likely won’t be charging a separate fee for such services and the disclosures would be affirmatively misleading with respect to the student’s right to a “refund” of such fees.
The Illinois Student Assistance Commission, which is not a traditional financial services regulator, has been tasked with adopting regulations to clarify these requirements.