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ITT Educational Services Inc. Message Board

  • oxledge oxledge Jun 6, 2012 2:52 PM Flag

    Now what? I didn't even know this case was in the courts.

    (Reuters) - A federal appeals court asked the U.S. education department to provide more information on a rule that prevents for-profit colleges from compensating recruiters based on the number of students they enroll.

    The department has not adequately explained eliminating a safe harbor based on graduation rates and the impact on enrolling minority students from the compensation rule, the court said.

    The rules on compensation were consistent with the Higher Education Act of 1965, but those on deceptive advertising exceeded the act's limits, the court said.

    It remanded some aspects of the deceptive advertising and compensation rules back to the trial court.

    The education department was evaluating its next steps, a spokesman told Reuters.

    The department introduced a set of new rules in 2011 to prevent fraud and lower student debt rates after a scrutiny found fraudulent practices and high student debt rates at for-profit colleges.
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    I do not attempt to follow many legal cases and I am often not even aware that there are relevant cases underway in many of the stocks I follow. I thought that this incentive compensation safe harbor stuff was all a done deal. Now the courts are calling the DOE's regulations into question. Who knows how this will all get resolved and how long it will take? In any event, the education companies have already dismantled their sales forces and they will probably have to rebuild them if the DOE loses the case and incentive compensation is allowed. I never understood how any government entity could tell any company that they can not pay their employees on an incentive basis. This always struck me a far overreaching. Now if the government thinks that companies are using deceptive sales practices, the government should go after these people, as they do with drug companies all the time for misleading advertising (selling doctors on using a drug in a manner not approved by the FDA, for instance). I don't see the FDA banning the drug companies from incentive compensation for their salespeople. And the US should not do it for the education companies. What is next....banning all forms of inventive compensation for any people that work for companies that receive payment from the US government in any form, directly or indirectly. It is all a moot point now anyway. Education companies are not using incentive compensation for their staff and that's the way it is going to stay for the time being.

 
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