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Court Approves $5 Million Settlement of Nation's First Reverse Redlining Case Against a For-Profit College

On July 25, 2013, U.S. District Judge John A. Gibney, Jr. granted final approval to a $5 million class action settlement in a lawsuit against a company that owns and operates a for-profit vocational college in the Richmond, Virginia area. The school was known as Richmond School of Health and Technology (“RSHT”) until recently changing its name to Chester Career College. Relman, Dane & Colfax filed the lawsuit in 2011 and believes it is the first reverse redlining case ever filed against a for-profit college in the country.  The lawsuit alleged violations of the Equal Credit Opportunity Act, Title VI of the Civil Rights Act of 1964 and the Virginia Consumer Protection Act, and asserted state common law claims. 

In the amended complaint filed on December 7, 2011, eight named Plaintiffs alleged that RSHT uses a variety of deceptive practices to encourage students to take out large federal student loans for an education that the school knows is inadequate, and that RSHT targets African Americans and residents of low-income neighborhoods for enrollment.  The amended complaint attached declarations from forty additional students and seven former RSHT employees making similar allegations.  Thirty-five other students and five other former employees also provided declarations in support of the claims.

RSHT charges $10,000 to $28,000 for its programs, which it claims prepare students to become licensed or certified for positions in the medical field such as surgical technician, medical assistant, massage therapist, and others.  Yet Plaintiffs alleged that the school does not prepare students for certification or licensing tests, fails to offer externships to students who need them for certification or licensing, and does not provide basic resources such as training equipment, up-to-date textbooks, or even teachers in some of its classrooms. 

RSHT applies for and obtains several million dollars a year in federal financial aid on behalf of its students to keep the school operating, chiefly in the form of federal student loans.  The lawsuit alleged that RSHT commits fraudulent and dishonest acts to secure these funds, such as cutting and pasting student signatures onto financial aid forms and altering records in anticipation of regulatory audits.  RSHT fails to explain the loans to students and misrepresents how much they will have to pay every month when the loans come due.

As a result of these practices, the amended complaint alleged that students graduate from RSHT saddled with large debts but without improved employment opportunities. This leaves many students who are unable to pay back their loans with impaired credit, making it difficult for them to obtain loans and jobs in the future.  The lawsuit alleged that the school is concerned only with profit, not education.

Plaintiffs alleged that RSHT engages in "reverse redlining" by using various marketing strategies to target African Americans and low-income neighborhoods in the Richmond area.  This includes advertising on BET and hip hop radio stations.  At the time the complaint was filed, RSHT's student body was 75% African American even though the area population was only 30% African American.

The settlement requires RSHT to pay $5 million to the class, which includes all students who were enrolled at RSHT at any time from July 1, 2004, through February 28, 2013.  The parties estimate that there are approximately 4,162 members of the class.

The settlement also requires RSHT to maintain and disclose information about its students’ success, as well as information about assessments of the school by certain educational organizations.  It also requires RSHT to follow the refund policy recommended by the Council on Occupational Education, an accrediting organization.

Judge Gibney held a hearing on July 25, 2013, and granted final approval of the settlement the same day.

The detailed allegations of the eight named Plaintiffs are as follows:

Plaintiffs Mary Morgan and Sade Battle were enrolled in RSHT’s nine-month, $10,000 Community Home Health program at the school’s Richmond campus.  RSHT told them that the program would make students eligible for a community home health license, teach students to run their own home health care business, and give students a higher credential than the Certified Nurse Aide (“CNA”) license that Morgan previously held.  However, Morgan and Battle later learned there is no community home health license in Virginia.  RSHT did not prepare either Morgan or Battle to take any certification examination or operate their own home health businesses, and eventually offered to pay $900 for students to take a CNA class at another school.  While Morgan graduated from RSHT, completed the CNA course, and passed the CNA exam, all she received for RSHT’s $10,000 program was a $900 course at another school that provided her with a license she previously held.  Battle, however, was not able to graduate due to RSHT’s failure to arrange an externship that would align with her work schedule and childcare obligations, even though it had promised otherwise.  When faced with a choice of quitting the job that her family relied on and completing the RSHT externship, Battle had no choice but to leave RSHT.  Both Morgan and Battle faced significant student loan debts for an education that provided no career advancement opportunities.

Plaintiffs Amanda Smith and Loretta Towns graduated from RSHT’s Surgical Technology program at the school’s Richmond Campus, and Plaintiff Kyra Franklin graduated from the same program at RSHT’s Chester campus.  Smith, Towns, and Franklin paid over $20,000, mostly through federal student loans, for a program that RSHT represented would provide all the knowledge and prerequisites they needed to become certified surgical technicians.  RSHT’s curriculum, however, did not prepare them for the surgical technician exam.  RSHT also failed to give Smith, Towns, and Franklin the promised externships to provide them with the surgical experience required for certification.  As a result, Smith, Towns, and Franklin could not become certified surgical technicians and could not find jobs in their field of study.

Plaintiff La-Deva Dabney was a student in RSHT’s Medical Billing and Coding Program at RSHT’s Chester campus, and financed her education largely through federal student loans.  She was promised a high paying job upon completion of the program, help with job placement, and an externship that would provide valuable hands-on experience.  RSHT’s classes failed to prepare Dabney for the medical billing and coding exam and assigned her to an “externship” that consisted of sitting in the library with a set of practice exercises.  While Dabney passed the certification exam by engaging in her own intensive study program after graduation, she was not able to obtain a job in the field.  Despite repeated requests, RSHT did not provide any job placement assistance.

Plaintiff Ashley Thomas graduated from RSHT’s Pharmacy Technician program at RSHT’s Chester campus.  RSHT led Thomas to believe that her education would be financed through federal grants that she would not have to repay.  Over a month into the program, Thomas realized RSHT had taken out thousands of dollars in federal student loans on her behalf.  RSHT’s classes did not provide Thomas with the knowledge she needed to pass the Virginia pharmacy technician licensing exam, and thus she could not find work as a licensed pharmacy technician.  RSHT did not provide Thomas with any career assistance.

Plaintiff Tammara Herbert graduated from RSHT’s Licensed Practical Nursing (“LPN”) program and financed much of her $18,000 education through student loans.  She was promised that RSHT would give her the training she needed to start as an LPN as soon as she graduated.  Instead, the education Herbert received was wholly inadequate, including a course that was never even assigned an instructor.  RSHT’s training did not prepare Herbert to pass the exam to become a licensed practical nurse, and Herbert was unable to find a job as an LPN despite applying for dozens of positions.  After graduating, Herbert did not receive either the job or the job placement assistance RSHT had promised.

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