Calendar No. 357

106TH CONGRESS

1ST SESSION S. 1455

A BILL

To enhance protections against fraud in the offering of financial assistance for college education,

and for other purposes.

OCTOBER 29, 1999

Reported with an amendment
II

Calendar No. 357

106TH CONGRESS

1ST SESSION S. 1455

To enhance protections against fraud in the offering of financial assistance

for college education, and for other purposes.

IN THE SENATE OF THE UNITED STATES

JULY 28, 1999

Mr. ABRAHAM (for himself, Mr. FEINGOLD, Mr. DEWINE, and Mr. HAGEL)

introduced the following bill; which was read twice and referred to the

Committee on the Judiciary

OCTOBER 29, 1999

Reported by Mr. ABRAHAM, with an amendment

[Strike out all after the enacting clause and insert the part printed in italic]

A BILL

To enhance protections against fraud in the offering of financial assistance for college education, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘College Scholarship

5 Fraud Prevention Act of 1999’’.
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1 SEC. 2. FINDINGS.

2 Congress makes the following findings:

3 (1) A substantial amount of fraud occurs in the

4 offering of college education financial assistance

5 services to consumers.

6 (2) Such fraud includes the following:

7 (A) Misrepresentations regarding the pro8 vision of sources from which consumers may ob9 tain financial assistance (including scholarships,

10 grants, loans, tuition, awards, and other assist11 ance) for purposes of financing a college edu12 cation.

13 (B) Misrepresentations regarding the pro14 vision of portfolios of such assistance tailored to

15 the needs of specific consumers.

16 (C) Misrepresentations regarding the pre17 selection of students as eligible to receive such

18 assistance.

19 (D) Misrepresentations that such assist20 ance will be provided to consumers who pur21 chase specified services from specified entities.

22 (E) Misrepresentations regarding the busi23 ness relationships between particular entities

24 and entities that award or may award such as25 sistance.
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1 (F) Misrepresentations regarding refunds

2 of processing fees if consumers are not provided

3 specified amounts of such assistance, and other

4 misrepresentations regarding refunds.

5 SEC. 3. ENHANCED CRIMINAL PENALTIES FOR COLLEGE

6 EDUCATION FINANCIAL SERVICE ASSIST7 ANCE FRAUD.

8 (a) ENHANCED PENALTIES.—Chapter 63 of title 18,

9 United States Code, is amended by adding at the end the

10 following:

11 ‘‘§ 1348. Enhanced penalties for college education fi12 nancial service assistance fraud

13 ‘‘(a) IN GENERAL.—A person who is convicted of an

14 offense under section 1341, 1342, or 1343 of this title

15 in connection with the obtaining or providing of any schol16 arship, grant, loan, tuition, discount, award, or other fi17 nancial assistance for purposes of financing an education

18 at an institution of higher education shall be fined under

19 this title, imprisoned not more than 10 years, or both.

20 ‘‘(b) OTHER PENALTIES.—Any penalties imposed

21 under this section shall be in addition to any penalties

22 under any of the sections referred to in subsection (a).

23 ‘‘(c) INSTITUTION OF HIGHER EDUCATION DE24 FINED.—In this section, the term ‘institution of higher
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1 education’ has the meaning given that term in section 101

2 of the Higher Education Act of 1965 (20 U.S.C. 1001).’’.

3 (b) CLERICAL AMENDMENT.—The table of sections

4 at the beginning of that chapter is amended by adding

5 at the end the following:

‘‘1348. Enhanced penalties for college education financial service assistance

fraud.’’.

6 SEC. 4. EXCLUSION OF DEBTS RELATING TO COLLEGE FI7 NANCIAL ASSISTANCE SERVICES FRAUD

8 FROM PERMISSIBLE EXEMPTIONS OF PROP9 ERTY FROM ESTATES IN BANKRUPTCY.

10 Section 522(c) of title 11, United States Code, is

11 amended—

12 (1) by striking ‘‘or’’ at the end of paragraph

13 (2);

14 (2) by striking the period at the end of para15 graph (3) and inserting ‘‘; or’’; and

16 (3) by adding at the end the following:

17 ‘‘(4) a debt in connection with fraud in the ob18 taining or providing of any scholarship, grant, loan,

19 tuition, discount, award, or other financial assist20 ance for purposes of financing an education at an

21 institution of higher education (as that term is de22 fined in section 101 of the Higher Education Act of

23 1954 (20 U.S.C. 1001)).’’.
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1 SEC. 5. LIST OF BUSINESSES AND ORGANIZATIONS OFFER2 ING COLLEGE EDUCATION FINANCIAL AS3 SISTANCE SERVICES.

4 (a) LIST.—The Secretary of Education shall main5 tain on the Internet web site of the Department of Edu6 cation a web page that—

7 (1) lists businesses and organizations that offer

8 financial assistance (including scholarships, grants,

9 loans, tuition, awards, and other assistance) for pur10 poses of financing an education at institutions of

11 higher education; and

12 (2) provides the Internet web site address of

13 such businesses and organizations.

14 (b) APPLICATION FOR PLACEMENT ON THE LIST.—

15 A business or organization may apply to the Secretary of

16 Education for placement on the list.

17 (c) CONSULTATION.—The Secretary of Education

18 shall consult with the Chairman of the Federal Trade

19 Commission in an effort to ensure that a business or orga20 nization applying for placement on the list is a legitimate

21 business or organization.

22 (d) INELIGIBILITY.—A business or organization shall

23 not be listed on the page if—

24 (1) the business or organization was prosecuted

25 by the Federal Trade Commission and convicted of

26 using an unfair or deceptive act or practice under
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1 the Federal Trade Commission Act (15 U.S.C. 41 et

2 seq.) during the 5-year period preceding the submis3 sion of an application under subsection (b);

4 (2) the business or organization is operated by

5 an individual who operated a business or organiza6 tion that was prosecuted by the Federal Trade Com7 mission and convicted of using an unfair or decep8 tive act or practice under such Act during the 5-year

9 period preceding the submission of an application

10 under subsection (b);

11 (3) the Department of Education receives a sig12 nificant number of complaints, as determined by the

13 Secretary of Education, from students alleging the

14 business or organization has not in good faith deliv15 ered on promises made by the business or organiza16 tion; or

17 (4) the business or organization is under inves18 tigation by the Federal Trade Commission.

19 SECTION 1. SHORT TITLE.

20 This Act may be cited as the ‘‘College Scholarship

21 Fraud Prevention Act of 1999’’.

22 SEC. 2. FINDINGS.

23 Congress makes the following findings:
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1 (1) A substantial amount of fraud occurs in the

2 offering of college education financial assistance serv3 ices to consumers.

4 (2) Such fraud includes the following:

5 (A) Misrepresentations regarding the provi6 sion of sources from which consumers may ob7 tain financial assistance (including scholarships,

8 grants, loans, tuition, awards, and other assist9 ance) for purposes of financing a college edu10 cation.

11 (B) Misrepresentations regarding the provi12 sion of portfolios of such assistance tailored to

13 the needs of specific consumers.

14 (C) Misrepresentations regarding the pre-se15 lection of students as eligible to receive such as16 sistance.

17 (D) Misrepresentations that such assistance

18 will be provided to consumers who purchase spec19 ified services from specified entities.

20 (E) Misrepresentations regarding the busi21 ness relationships between particular entities

22 and entities that award or may award such as23 sistance.

24 (F) Misrepresentations regarding refunds of

25 processing fees if consumers are not provided
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1 specified amounts of such assistance, and other

2 misrepresentations regarding refunds.

3 (3) In 1996, the Federal Trade Commission

4 launched ‘‘Project Scholarscam’’, a joint law enforce5 ment and consumer education campaign directed at

6 fraudulent purveyors of so-called ‘‘scholarship serv7 ices’’.

8 (4) Despite the efforts of the Federal Trade Com9 mission, colleges and universities, and nongovern10 mental organizations, the continued lack of awareness

11 about scholarship fraud permits a significant amount

12 of fraudulent activity to occur.

13 SEC. 3. SENTENCING ENHANCEMENT FOR HIGHER EDU14 CATION FINANCIAL ASSISTANCE FRAUD.

15 Pursuant to its authority under section 994(p) of title

16 28, United States Code, the United States Sentencing Com17 mission shall amend the Federal sentencing guidelines in

18 order to provide for enhanced penalties for any offense in19 volving fraud or misrepresentation in connection with the

20 obtaining or providing of, or the furnishing of information

21 to a consumer on, any scholarship, grant, loan, tuition, dis22 count, award, or other financial assistance for purposes of

23 financing an education at an institution of higher edu24 cation, such that those penalties are comparable to the base

25 offense level for misrepresentation that the defendant was
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1 acting on behalf of a charitable, educational, religious, or

2 political organization, or a government agency.

3 SEC. 4. EXCLUSION OF DEBTS RELATING TO COLLEGE FI4 NANCIAL ASSISTANCE SERVICES FRAUD

5 FROM PERMISSIBLE EXEMPTIONS OF PROP6 ERTY FROM ESTATES IN BANKRUPTCY.

7 Section 522(c) of title 11, United States Code, is

8 amended—

9 (1) by striking ‘‘or’’ at the end of paragraph (2);

10 (2) by striking the period at the end of para11 graph (3) and inserting ‘‘; or’’; and

12 (3) by adding at the end the following:

13 ‘‘(4) a debt in connection with fraud in the ob14 taining or providing of any scholarship, grant, loan,

15 tuition, discount, award, or other financial assistance

16 for purposes of financing an education at an institu17 tion of higher education (as that term is defined in

18 section 101 of the Higher Education Act of 1954 (20

19 U.S.C. 1001)).’’.

20 SEC. 5. SCHOLARSHIP FRAUD ASSESSMENT AND AWARE21 NESS ACTIVITIES.

22 (a) ANNUAL REPORT ON SCHOLARSHIP FRAUD.—

23 (1) REQUIREMENT.—The Attorney General and

24 the Secretary of Education, in conjunction with the

25 Federal Trade Commission, shall jointly submit to
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1 Congress each year a report on fraud in the offering

2 of financial assistance for purposes of financing an

3 education at an institution of higher education. Each

4 report shall contain an assessment of the nature and

5 quantity of incidents of such fraud during the one6 year period ending on the date of such report.

7 (2) INITIAL REPORT.—The first report under

8 paragraph (1) shall be submitted not later than 18

9 months after the date of the enactment of this Act.

10 (b) NATIONAL AWARENESS ACTIVITIES.—The Sec11 retary of Education shall, in conjunction with the Federal

12 Trade Commission, maintain a scholarship fraud aware13 ness site on the Internet web site of the Department of Edu14 cation. The scholarship fraud awareness site may include

15 the following:

16 (1) Appropriate materials from the Project

17 Scholarscam awareness campaign of the Commission,

18 including examples of common fraudulent schemes.

19 (2) A list of companies and individuals who

20 have been convicted of scholarship fraud in Federal or

21 State court.

22 (3) An Internet-based message board to provide

23 a forum for public complaints and experiences with

24 scholarship fraud.
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1 (4) An electronic comment form for individuals

2 who have experienced scholarship fraud or have ques3 tions about scholarship fraud, with appropriate mech4 anisms for the transfer of comments received through

5 such forms to the Department and the Commission.

6 (5) Internet links to other sources of information

7 on scholarship fraud, including Internet web sites of

8 appropriate nongovernmental organizations, colleges

9 and universities, and government agencies.

10 (6) An Internet link to the Better Business Bu11 reau in order to assist individuals in assessing the

12 business practices of other persons and entities.

13 (7) Information on means of communicating

14 with the Federal Student Aid Information Center, in15 cluding telephone and Internet contact information.