AN
ACT Relating to liability and licensure of private vocational schools; and
amending RCW 28C.10.050, 28C.10.084, and 28C.10.110.
BE IT
ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
Sec.
1. RCW
28C.10.050 and 1990 c 188 s 7 are each amended to read as follows:
(1)
The agency shall adopt by rule minimum standards for entities operating
private vocational schools. The minimum standards shall include, but not be
limited to, requirements for each school to:
(a)
Disclose to the agency information about its ownership and financial position
and to demonstrate that it has sufficient financial resources to fulfill its
commitments to students. Financial disclosures provided to the agency shall
not be subject to public disclosure under chapter 42.17 RCW;
(b)
Follow a uniform state-wide cancellation and refund policy as specified by the
agency;
(c)
Disclose through use of a school catalog, brochure, or other written material,
necessary information to students so that students may make informed enrollment
decisions. The agency shall specify what information is required;
(d)
Use an enrollment contract or agreement that includes: (i) The cancellation
and refund policy, (ii) a brief statement that the school is licensed under
this chapter and that inquiries may be made to the agency, and (iii) other
necessary information as determined by the agency;
(e)
Describe accurately and completely in writing to students before their
enrollment prerequisites and requirements for (i) completing successfully the
programs of study in which they are interested and (ii) qualifying for the
fields of employment for which their education is designed;
(f)
Comply with the requirements of RCW 28C.10.084;
(g)
Assess the basic skills and relevant aptitudes of each potential student to
determine that a potential student has the basic skills and relevant aptitudes
necessary to complete and benefit from the program in which the student plans
to enroll. Guidelines for such assessments shall be developed by the agency,
in consultation with the schools. The method of assessment shall be reported
to the agency. Assessment records shall be maintained in the student's file;
(h)
Discuss with each potential student the potential student's obligations in
signing any enrollment contract and/or incurring any debt for educational
purposes. The discussion shall include the inadvisability of acquiring an
excessive educational debt burden that will be difficult to repay given
employment opportunities and average starting salaries in the potential
student's chosen occupation.
(2)
Any enrollment contract shall have an attachment in a format provided by the
agency. The attachment shall be signed by both the school and the student.
The attachment shall stipulate that the school has complied with subsection
(1)(h) of this section and that the student understands and accepts his or her
responsibilities in signing any enrollment contract or debt application. The
attachment shall also stipulate that the enrollment contract shall not be
binding for at least five days, excluding Sundays and holidays, following
signature of the enrollment contract by both parties.
(3)
The agency shall deny, revoke, or suspend the license of any school that does
not meet or maintain the minimum standards.
Sec.
2. RCW
28C.10.084 and 1999 c 321 s 3 are each amended to read as follows:
(1)
The agency shall establish, maintain, and administer a tuition recovery trust
fund. All funds collected for the tuition recovery trust fund are payable to
the state for the benefit and protection of any student or enrollee of a
private vocational school licensed under this chapter, or, in the case of a
minor, his or her parents or guardian, for purposes including but not limited
to the settlement of claims related to school closures under subsection (10) of
this section and the settlement of claims under RCW 28C.10.120. The fund shall
be liable for settlement of claims and costs of administration but shall not be
liable to pay out or recover penalties assessed under RCW 28C.10.130 or
28C.10.140. No liability accrues to the state of Washington from claims made
against the fund.
(2)
By June 30, 1998, a minimum operating balance of one million dollars shall be
achieved in the fund and maintained thereafter. If disbursements reduce the
operating balance below two hundred thousand dollars at any time before June
30, 1998, or below one million dollars thereafter, each participating ((entity))
owner shall be assessed a pro rata share of the deficiency created,
based upon the incremental scale created under subsection (6) of this section for
each private vocational school. The agency shall adopt schedules of times
and amounts for effecting payments of assessment.
(3)
In order for a private vocational school to be and remain licensed under
this chapter each ((entity)) owner shall, in addition to other
requirements under this chapter, make cash deposits on behalf of the school
into a tuition recovery trust fund as a means to assure payment of claims
brought under this chapter.
(4)
The amount of liability that can be satisfied by this fund on behalf of each ((individual
entity)) private vocational school licensed under this chapter shall
be ((established by the agency, based on an incremental scale that
recognizes the average)) the amount of unearned prepaid tuition in
possession of the ((entity. However, the minimum amount of liability for
any entity shall not be less than five thousand dollars. The upper limit of
liability is reestablished after any disbursements are made to settle an
individual claim or class of claims)) owner.
(5)
The fund's liability with respect to each participating ((entity)) private
vocational school commences on the date of ((its)) the
initial deposit into the fund made on its behalf and ceases one year
from the date ((it)) the school is no longer licensed under this
chapter.
(6)
The agency shall adopt by rule a matrix for calculating the deposits into the
fund ((required of each entity)) on behalf of each vocational school.
Proration shall be determined by factoring the ((entity's)) school's
share of liability in proportion to the aggregated liability of all
participants under the fund by grouping such prorations under the incremental
scale created by subsection (4) of this section. Expressed as a percentage of
the total liability, that figure determines the amount to be contributed when
factored into a fund containing one million dollars. The total amount of its
prorated share, minus the amount paid for initial capitalization, shall be
payable in up to twenty increments over a ten-year period, commencing with the
sixth month after the ((entity makes its)) initial capitalization
deposit has been made on behalf of the school. Additionally, the agency
shall require deposits for initial capitalization, under which the amount each
((entity)) owner deposits is proportionate to ((its)) the
school's share of two hundred thousand dollars, employing the matrix
developed under this subsection. ((The amount thus established shall be
deposited by each applicant for initial licensing before the issuance of such
license.))
(7)
No vested right or interests in deposited funds is created or implied for the
depositor, either at any time during the operation of the fund or at any such
future time that the fund may be dissolved. All funds deposited are payable to
the state for the purposes described under this section. The agency shall
maintain the fund, serve appropriate notices to affected ((entities)) owners
when scheduled deposits are due, collect deposits, and make disbursements to
settle claims against the fund. When the aggregated deposits total five
million dollars and the history of disbursements justifies such modifications,
the agency may at its own option reduce the schedule of deposits whether as to
time, amount, or both and the agency may also entertain proposals from among
the licensees with regard to disbursing surplus funds for such purposes as
vocational scholarships.
(8)
Based on annual financial data supplied by the ((entity)) owner,
the agency shall determine whether the increment assigned to that ((entity))
private vocational school on the incremental scale established under
subsection (6) of this section has changed. If an increase or decrease in
gross annual tuition income has occurred, a corresponding change in ((its))
the school's incremental position and contribution schedule shall be
made before the date of ((its)) the owner's next scheduled
deposit into the fund. Such adjustments shall only be calculated and applied
annually.
(9)
((No deposits made into the fund by an entity are transferable.)) If
the majority ownership interest in ((an entity)) a private vocational
school is conveyed through sale or other means into different ownership,
all contributions made to the date of transfer ((accrue to)) remain
in the fund. The new owner ((commences contributions under provisions
applying to a new applicant, except that if ownership of an entity is
transferred to an immediate family member,)) shall continue to make
contributions to the fund until the original ten-year cycle is completed. All
tuition recovery trust fund contributions shall remain with the ((entity))
private vocational school transferred, and no additional cash deposits
may be required beyond the original ten-year contribution cycle.
(10)
To settle claims adjudicated under RCW 28C.10.120 and claims resulting when a
private vocational school ceases to provide educational services, the agency
may make disbursements from the fund. Students enrolled under a training
contract executed between a school and a public or private agency or business
are not eligible to make a claim against the fund. In addition to the
processes described for making reimbursements related to claims under RCW
28C.10.120, the following procedures are established to deal with
reimbursements related to school closures:
(a)
The agency shall attempt to notify all potential claimants. The unavailability
of records and other circumstances surrounding a school closure may make it
impossible or unreasonable for the agency to ascertain the names and
whereabouts of each potential claimant but the agency shall make reasonable
inquiries to secure that information from all likely sources. The agency shall
then proceed to settle the claims on the basis of information in its
possession. The agency is not responsible or liable for claims or for handling
claims that may subsequently appear or be discovered.
(b)
Thirty days after identified potential claimants have been notified, if a
claimant refuses or neglects to file a claim verification as requested in such
notice, the agency shall be relieved of further duty or action on behalf of the
claimant under this chapter.
(c)
After verification and review, the agency may disburse funds from the tuition
recovery trust fund to settle or compromise the claims. However, the liability
of the fund for claims against the closed ((entity)) school shall
not exceed the ((maximum amount of liability assigned to that entity under
subsection (6) of this section)) amount of unearned prepaid tuition in
the possession of the owner.
(d)
In the instance of claims against a closed school, the agency shall seek to
recover such disbursed funds from the assets of the defaulted ((entity))
owner, including but not limited to asserting claims as a creditor in
bankruptcy proceedings.
(11)
When funds are disbursed to settle claims against a ((current licensee))
licensed private vocational school, the agency shall make demand upon
the ((licensee)) owner for recovery. The agency shall adopt
schedules of times and amounts for effecting recoveries. An ((entity's))
owner's failure to perform subjects ((its)) the school's
license to suspension or revocation under RCW 28C.10.050 in addition to any
other available remedies.
(12) For purposes of this section, "owner" includes,
but is not limited to, a person, company, firm, society, association,
partnership, corporation, or trust having a controlling ownership interest in a
private vocational school.
Sec.
3. RCW
28C.10.110 and 1990 c 188 s 9 are each amended to read as follows:
It
is an unfair business practice for an entity operating a private
vocational school or an agent employed by a private vocational school
to:
(1)
Fail to comply with the terms of a student enrollment contract or agreement;
(2)
Use an enrollment contract form, catalog, brochure, or similar written material
affecting the terms and conditions of student enrollment other than that
previously submitted to the agency and authorized for use;
(3)
Advertise in the help wanted section of a newspaper or otherwise represent
falsely, directly or by implication, that the school is an employment agency,
is making an offer of employment or otherwise is attempting to conceal the fact
that what is being represented are course offerings of a school;
(4)
Represent falsely, directly or by implication, that an educational program is
approved by a particular industry or that successful completion of the program
qualifies a student for admission to a labor union or similar organization or
for the receipt of a state license in any business, occupation, or profession;
(5)
Represent falsely, directly or by implication, that a student who successfully
completes a course or program of instruction may transfer credit for the course
or program to any institution of higher education;
(6)
Represent falsely, directly or by implication, in advertising or in any other
manner, the school's size, location, facilities, equipment, faculty
qualifications, or the extent or nature of any approval received from an accrediting
association;
(7)
Represent that the school is approved, recommended, or endorsed by the state of
Washington or by the agency, except the fact that the school is authorized to
operate under this chapter may be stated;
(8)
Provide prospective students with any testimonial, endorsement, or other
information which has the tendency to mislead or deceive prospective students
or the public regarding current practices of the school, current conditions for
employment opportunities, or probable earnings in the occupation for which the
education was designed;
(9)
Designate or refer to sales representatives as "counselors,"
"advisors," or similar terms which have the tendency to mislead or
deceive prospective students or the public regarding the authority or
qualifications of the sales representatives;
(10)
Make or cause to be made any statement or representation in connection with the
offering of education if the school or agent knows or reasonably should have
known the statement or representation to be false, substantially inaccurate, or
misleading;
(11)
Engage in methods of advertising, sales, collection, credit, or other business
practices which are false, deceptive, misleading, or unfair, as determined by
the agency by rule; or
(12)
Attempt to recruit students in or within forty feet of a building that contains
a welfare or unemployment office. Recruiting includes, but is not limited to
canvassing and surveying. Recruiting does not include leaving materials at or
near an office for a person to pick up of his or her own accord, or handing a
brochure or leaflet to a person provided that no attempt is made to obtain a
name, address, telephone number, or other data, or to otherwise actively pursue
the enrollment of the individual.
It
is a violation of this chapter for an entity operating a private
vocational school to engage in an unfair business practice. The agency may
deny, revoke, or suspend the license of any entity that is found to have
engaged in a substantial number of unfair business practices or that has
engaged in significant unfair business practices.
