United States: Another Win: ACICS Preserves Its Accreditation

Even before it succeeded in finally quashing a civil investigative demand ("CID") issued by the Consumer Financial Protection Bureau on April 21, 2017, the Accrediting Council for Independent Colleges and Schools ("ACICS") notched a second victory against a federal adversary in April 2018.


Established in 1912, upon the request of Benjamin Franklin Williams, President of Capital City Commercial College of Des Moines, Iowa, ACICS at one point accredited 245 institutions of higher education offering undergraduate and graduate diplomas and degrees in both traditional formats and through distance education throughout the United States. The Secretary of Education ("Secretary"), the head of the United States Department of Education ("DOE"), first recognized ACICS, then known as the Accrediting Commission for Business Schools, in 1956. In 1985, ACICS requested and won an expansion of its scope to include the accreditation of master's degree programs; in 2006, ACICS sought another expansion of scope so as to accredit institutions that offer programs via distance education, one soon granted by the Secretary. In sum, for over fifty years, the Secretary periodically assessed and consistently granted recognition to ACICS, thereby empowering it to provide schools with the seals of approval necessary to establishing their right to participate in federal student aid programs.

ACICS' Obama-Era Travails

The pattern changed in 2015.

In that year, ACICS fell under sudden scrutiny with the collapse of Corinthian Colleges, a for-profit institution accredited by ACICS until its final days. Naturally enough, a subcommittee of the United States Senate requested information from ACICS in November 2015. Within five months, thirteen state attorneys general requested that the DOE withdraw recognition from ACICS as a federally-recognized accreditor. Unfortunately, this negative publicity only intensified with the failure of one more chain of for-profit institutions accredited by ACICS, ITT Technical Institute. As its opponents never tired arguing, from 2013 through 2016, 52% of federal financial aid dollars received by ACICS-approved schools went to institutions that have faced some sort of state or federal investigation, including Westwood College, FastTrain College, and the Career Education Corporation's Sanford Brown chain. For these reasons, in spite of its reforms, ACICS would become a "highly visible" target in the Obama Administration's multiyear crackdown on for-profit higher education.

Impelled by these pressures, DOE staff recommended the termination of ACICS' status as a federally recognized accrediting agency in the summer of 2016. As their lengthy report concluded, ACICS' "monitoring regime appears insufficient to deter widespread misconduct regarding placement, recruiting and admissions." A week later, an 18-member panel, one appointed by the United States Congress and the DOE, known as the National Advisory Committee on Institutional Quality and Integrity ("NACIQI") endorsed this recommendation by a vote of ten-to-three. (NACIQI is charged with "provid[ing] recommendations regarding accrediting agencies that monitor the academic quality of postsecondary institutions and educational programs for federal purposes.") With NACIQI's ratification in hand, the senior department official ("SDO") charged with its review terminated "the department's recognition of ACICS as a national recognized accrediting agency" on September 22, 2016. The following December, after considering ACICS' October appeal, the Secretary upheld this expulsion.

In the ensuing months, DOE directed ACICS-accredited institutions to find a new accrediting agency by June 12, 2018. Under the terms of Provisional Program Participation Agreements, ACICS-accredited institutions were required to submit an application to a new accrediting agency by June 12, 2017, and host a site visit by the new agency by February 28, 2018. Per these contracts, DOE possessed the authority to (1) terminate federal student aid funding for new students if an institution failed to meet either deadline and (2) require a letter of credit or other financial guarantee if an institution failed to meet the second deadline or obtain an extension.

ACICS' Lasting Victory?

While these agreements were struck, in accordance with the Administrative Procedures Act, ACICS promptly appealed the Secretary's decision to the United States District Court for the District of Columbia. On March 23, 2018, this trial court granted ACICS' motion for summary judgment "with respect to . . . [its] claims that the Secretary had violated the Administrative Procedure Act by failing to consider certain evidence submitted by . . . [ACICS] in the administrative proceeding." In particular, it faulted the Secretary for his failure to consider both all available and relevant information, including 36,000 pages of evidence submitted by ACICS in response to a specific request from the Office of the Under Secretary, and the substantial evidence that ACICS provided of its placement verification and data integrity programs. As a result, the case was remanded back to the Secretary, and no final decision as to ACICS existed.

On remand, the DOE's current Secretary, Elisabeth Dee DeVos, responded with two orders. First, she initiated further review of ACICS' original petition and supporting materials. She gave the relevant SDO until July 30, 2018, to do so. Second, DeVos restored ACICS' status as a federally recognized accrediting agency effective as of December 12, 2016, the date that her predecessor terminated its recognition. Consequently, at least until the summer doldrums, ACICS and the institutions that it has previously accredited can breathe a little easier, even though the latter must now decide whether to pursue applications to other accreditors or await the DOE's final decision.

The Troutman Sanders' Consumer Financial Services Law Monitor blog offers timely updates regarding the financial services industry to inform you of recent changes in the law, upcoming regulatory deadlines and significant judicial opinions that may impact your business. To view the blog, click here

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Ethan G. Ostroff
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