The FTC has announced a stipulated order of judgment in a lawsuit that it recently filed against Saint James School of Medicine, a for-profit medical school located in the Caribbean, together with its operator and financiers.  The $1.2 million judgment will be used toward refunds and debt cancellation for students who financed their education within the past five years.

In its complaint, the FTC alleged that Saint James and its operators violated the FTC Act, the TSR, the Holder Rule, and the Credit Practices Rule.  The FTC specifically alleged that Saint James lured “consumers with false guarantees of student success…,”  and made “false or unsubstantiated representations regarding potential students’ likelihood of matching into residency programs upon graduation”  The FTC further alleged that the “Defendants’ financing contracts contain language attempting to waive consumers’ rights under federal law and omit legally-mandated disclosures.”

According to the FTC, Saint James misrepresented the Medical License Exam Pass Rate, claiming “96.77% FIRST TIME USMLE STEP 1 PASS RATE.”  The FTC alleged that since 2017, only 35% of Saint James students who have completed the necessary coursework passed the USMLE Step 1 exam.   The FTC also alleged that Saint James misrepresented the residency match rate, the percentage of medical school seniors who are accepted for residencies, stating Saint James falsely advertised their residency match rate was 83% (since 2018, the average match rate for Saint James’ students has been 63%).

With regard to Saint James’ financers, the FTC alleged that the financing contracts did not include federally required language under the Holder Rule and failed to provide the cosigners with the required Notice to Cosigner.

The proposed judgment also requires Saint James and its co-defendants to request tradeline deletion from consumer reporting agencies for Saint James students who financed their education through the corporate defendants within the past five years.  The judgment prohibits Saint James and its financers from continuing the alleged misrepresentations and engaging in further violations of law.  Additionally, the judgment permanently restrains and enjoins the defendants from “extending credit to a consumer unless the Notice to Cosigner Disclosure […] has been given to the cosigner prior to becoming obligated.”

In response to the FTC’s announcement of the proposed judgment, the director of Saint James issued a statement explaining the school’s decision to enter into a settlement despite its strong disagreement with the FTC’s approach.  The director stated:

[W]e did not want a lengthy legal process to distract from our mission of providing a quality medical education at an affordable cost.  However, we have added additional language and clarifications any time the USMLE pass rate and placement rates are mentioned.  We are committed to being an industry leader for transparency and accountability and hope that our efforts will lead to lasting change throughout the for-profit education industry.

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