New York Attorney General Eric T. Schneiderman has filed a lawsuit and obtained a temporary restraining order against The College Network, an Indianapolis-based study guide preparation firm, and its owner Gary Eyler, alleging false and deceptive business practices that have cost nursing students tens of thousands of dollars for largely worthless study materials.
The attorney general named as co-defendant in the suit is the $453 million Southeast Financial Credit Union, based in Franklin, Tenn., which partnered with The College Network to provide student loans. American Credit Exchange, a debt collection agency also owned by Eyler, was also named in the suit.
A statement prepared by the attorney general's office announcing the June 4 suit alleges that as many as 2,000 New York consumers seeking associate degrees in nursing were victimized by the firm. The suit charges that, through advertising and high-pressure sales tactics, The College Network created the false impression that it was offering online nursing degrees, and that it was affiliated with Excelsior College, an accredited institution based in Albany, N.Y., that offers such degrees.
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The firm's website also made misleading claims of affiliations with Indiana University and Purdue University, once again creating false impressions for prospective students.
The suit alleges that The College Network charged consumers approximately $500 for each study guide and required prospective students to purchase upfront guides for every course they would need to earn their degree from Excelsior. In many cases, the total cost of the network's program exceeded $10,000, which forced most consumers to accept the financing offered by The College Network. In addition, in many cases, the network did not disclose that the loans were being provided by Southeast Financial Credit Union.
Other deceptive practices alleged in the court papers include the promise of "program advisors" – really high-pressure salespeople who visited prospective students in their homes – to finance third-party test administration fees by creating the false impression that The College Network would readily provide consumers with a check to sit for an exam. These fees added as much as $3,000 or more to the total amount of the loan.
According to the suit, when consumers contacted The College Network to obtain a check so that they could register for an exam, many learned for the first time that The College Network would not send them a check until they scored as high as 90% on online quizzes and practice exams. Many consumers were unable to achieve the required score and those who managed to qualify often had to wait months for their checks.
In addition to New York, attorney generals in Florida, Indiana, Ohio and Texas also have recently received complaints about The College Network, with more than 200 complaints filed in Indiana alone.
Read more: Southeast Financial Credit Union says the petition has no merit …
A call to John Jacoway, president/CEO of Southeast Financial, was returned by Justin Wilson, director of client services for DVL Seigenthaler, the credit union's Nashville-based public relations firm. Wilson later responded with a prepared email statement from credit union spokesman Lisa Reitmeyer.
"We believe Southeast Financial Credit Union's inclusion in the New York Attorney General's petition has no merit. The target of this matter is The College Network," Reitmeyer wrote.
"Southeast Financial's role has only ever been to provide and service loans to customers who chose to do business with The College Network," the statement continued. "Southeast Financial has had no role in the development, marketing or sales of The College Network's products, which are the practices that form the core of these allegations."
The lawsuit noted that Southeast Financial provided the bulk of the funds for the College Networks "until recently." The credit union declined to share additional information beyond the formal statement about how much of the credit union's student loan portfolio was dedicated to the network's clients and when it stopped issuing those loans, according to a subsequent email from Wilson.
In addition to his role as Southeast Financial president/CEO, Jacoway is chairman of Volunteer Corporate Credit Union's board of directors.
The New York attorney general's suit wasn't the first time Southeast Financial came under fire for its affiliation with The College Network.
On Jan. 11, 2012, network client Christine Blok filed a suit against both organizations in the U.S. bankruptcy Court in Fayetteville, Ark., making many of the same charges in the attorney general's suit in an attempt to dismiss $10,465 owed to the network for a loan made by Southeast Financial.
The court referred the case to arbitration, citing an agreement Blok had signed with the network.
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