H.B. No. 1705
1-1 AN ACT
1-2 relating to proprietary schools; providing civil penalties.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Section 32.11, Education Code, is amended by
1-5 adding Subdivision (10) to read as follows:
1-6 (10) "Small proprietary school" means a proprietary
1-7 school that does not receive any payment from federal funds under
1-8 20 U.S.C. Section 1070 et seq. and its subsequent amendments or a
1-9 prepaid federal or state source as compensation in whole or in part
1-10 for any student tuition and fees or other charges and either:
1-11 (A) has an annual gross income from student
1-12 tuition and fees that is less than or equal to $100,000 for
1-13 programs regulated by the agency;
1-14 (B) exclusively offers programs to assist
1-15 students to prepare for an undergraduate or graduate course of
1-16 study at a college or university; or
1-17 (C) exclusively offers programs to assist
1-18 students, who have obtained, or who are in the process of
1-19 obtaining, degrees after completing an undergraduate or graduate
1-20 course of study at a college or university, to prepare for an
1-21 examination.
1-22 SECTION 2. Subchapter C, Chapter 32, Education Code, is
1-23 amended by adding Section 32.241 to read as follows:
1-24 Sec. 32.241. COMPREHENSIVE REVIEW. The administrator shall
2-1 conduct a comprehensive review of the existing rules and policies
2-2 governing proprietary schools and reduce regulation of small
2-3 proprietary schools by January 1, 1995. This section expires
2-4 February 1, 1995.
2-5 SECTION 3. Subchapter D, Chapter 32, Education Code, is
2-6 amended by adding Sections 32.321 and 32.322 to read as follows:
2-7 Sec. 32.321. STATUTORY WAIVER AUTHORITY. (a) The State
2-8 Board of Education after consultation with the Proprietary School
2-9 Advisory Commission may establish rules that waive, alter, suspend,
2-10 or replace any of the following provisions governing small
2-11 proprietary schools:
2-12 (1) the fee schedule authorized under Section 32.71 of
2-13 this code, provided that fees under a fee schedule established by
2-14 rule may not be less than the reasonable administrative cost for
2-15 regulation or more than the amount that a small proprietary school
2-16 would otherwise pay if it were not classified as a small
2-17 proprietary school;
2-18 (2) participation in the proprietary school tuition
2-19 protection fund required by Section 32.91 of this code;
2-20 (3) the refund policy provisions of Section 32.39 of
2-21 this code;
2-22 (4) the bonding requirements of Section 32.38 of this
2-23 code;
2-24 (5) the examination of a school for compliance under
2-25 Section 32.34(f) of this code;
2-26 (6) the reporting requirements of Section 32.33(o) of
2-27 this code; and
3-1 (7) the term for which a certificate of approval is
3-2 issued under Section 32.34(b) of this code, provided that a rule
3-3 adopted under this section may not provide for a term that exceeds
3-4 three years or is less than one year.
3-5 (b) A rule proposed under this section may be adopted only
3-6 if it will reduce the regulatory burden for small proprietary
3-7 schools and will adequately safeguard the interests of the students
3-8 of small proprietary schools to receive either the education for
3-9 which they have contracted or an appropriate refund.
3-10 Sec. 32.322. SMALL SCHOOL EXEMPTION. The administrator may
3-11 exempt small proprietary schools from any requirement of this
3-12 chapter to reduce the cost to small schools of receiving a
3-13 certificate of approval.
3-14 SECTION 4. Section 32.39, Education Code, is amended by
3-15 amending Subsections (a), (b), and (e) and adding Subsection (g) to
3-16 read as follows:
3-17 (a) Except as provided by Subsection (g) of this section, as
3-18 <As> a condition for granting certification each school must
3-19 maintain a cancellation and settlement policy which must provide a
3-20 full refund of all monies paid by a student if:
3-21 (1) the student cancels the enrollment agreement or
3-22 contract within 72 hours (until midnight of the third day excluding
3-23 Saturdays, Sundays, and legal holidays) after the enrollment
3-24 contract is signed by the prospective student;
3-25 (2) the enrollment of the student was procured as the
3-26 result of any misrepresentation in advertising, promotional
3-27 materials of the school, or representations by the owner or
4-1 representatives of the school.
4-2 (b) Except as provided by Subsection (g) of this section, as
4-3 <As> a condition for granting certification, each school must
4-4 maintain a policy for the refund of the unused portion of tuition,
4-5 fees, and other charges in the event the student, after expiration
4-6 of the 72-hour cancellation privilege, fails to enter the course,
4-7 or withdraws, or is discontinued therefrom at any time prior to
4-8 completion, and such policy must provide:
4-9 (1) refunds for resident courses will be based on the
4-10 period of enrollment computed on the basis of course time expressed
4-11 in clock hours;
4-12 (2) the effective date of the termination for refund
4-13 purposes in residence schools will be the earliest of the
4-14 following:
4-15 (A) the last date of attendance, if the student
4-16 is terminated by the school;
4-17 (B) the date of receipt of written notice from
4-18 the student;
4-19 (C) ten school days following the last date of
4-20 attendance;
4-21 (3) if tuition and fees are <is> collected in advance
4-22 of entrance, and if, after expiration of the 72-hour cancellation
4-23 privilege, the student does not enter the residence school, not
4-24 more than $100 shall be retained by the school;
4-25 (4) for the student who enters a residence course of
4-26 not more than 12 months in length, terminates or withdraws, the
4-27 school may retain $100 of tuition and fees and the minimum refund
5-1 of the remaining tuition and fees will be:
5-2 (A) during the first week or one-tenth of the
5-3 course, whichever is less, 90 percent of the remaining tuition and
5-4 fees;
5-5 (B) after the first week or one-tenth of the
5-6 course, whichever is less, but within the first three weeks of the
5-7 course, 80 percent of the remaining tuition and fees;
5-8 (C) after the first three weeks of the course,
5-9 but within the first quarter of the course, 75 percent of the
5-10 remaining tuition and fees;
5-11 (D) during the second quarter of the course, 50
5-12 percent of the remaining tuition and fees;
5-13 (E) during the third quarter of the course, 10
5-14 percent of the remaining tuition and fees;
5-15 (F) during the last quarter of the course, the
5-16 student may be considered obligated for the full tuition and fees;
5-17 (5) for residence courses more than 12 months in
5-18 length, the refund shall be applied to each 12-month period paid,
5-19 or part thereof separately, and the student is entitled to a refund
5-20 as provided by Subdivision (4) of this subsection;
5-21 (6) refunds of items of extra expense to the student,
5-22 such as instructional supplies, books, student activities,
5-23 laboratory fees, service charges, rentals, deposits, and all other
5-24 such ancillary miscellaneous charges, where these items are
5-25 separately stated and shown in the data furnished the student
5-26 before enrollment, will be made in a reasonable manner acceptable
5-27 to the administrator;
6-1 (7) refunds based on enrollment in residence schools
6-2 will be totally consummated within 60 <30> days after the effective
6-3 date of termination;
6-4 (8) refunds for correspondence courses will be
6-5 computed on the basis of the number of lessons in the course;
6-6 (9) the effective date of the termination for refund
6-7 purposes in correspondence courses will be the earliest of the
6-8 following:
6-9 (A) the date of notification to the student if
6-10 the student is terminated;
6-11 (B) the date of receipt of written notice from
6-12 the student;
6-13 (C) the end of the third calendar month
6-14 following the month in which the student's last lesson assignment
6-15 was received unless notification has been received from the student
6-16 that he wishes to remain enrolled;
6-17 (10) if tuition and fees are <is> collected before any
6-18 lessons have been completed, and if, after expiration of the
6-19 72-hour cancellation privilege, the student fails to begin the
6-20 course, not more than $50 shall be retained by the school;
6-21 (11) in cases of termination or withdrawal after the
6-22 student has begun the correspondence course, the school may retain
6-23 $50 of tuition and fees, and the minimum refund policy must provide
6-24 that the student will be refunded the pro rata portion of the
6-25 remaining tuition, fees, and other charges that the number of
6-26 lessons completed and serviced by the school bears to the total
6-27 number of lessons in the course;
7-1 (12) refunds based on enrollment in correspondence
7-2 schools will be totally consummated within 60 <30> days after the
7-3 effective date of termination.
7-4 (e) If a refund is not made within the period required by
7-5 this section, the school shall pay a penalty <interest on the
7-6 refund for the interval beginning with the first day following the
7-7 expiration of the refund period and ending with the day immediately
7-8 preceding the date the refund is made>. If the refund is made to a
7-9 lending institution, the penalty <interest> shall also be paid to
7-10 that institution and applied against the student's loan. The
7-11 commissioner of education annually shall establish the level of the
7-12 penalty <interest> at a level sufficient to provide a deterrent to
7-13 the retention of student funds. The Central Education Agency may
7-14 exempt a school from the payment of the penalty <interest> if the
7-15 school makes a good faith effort to refund the tuition, fees, and
7-16 other charges but is unable to locate the student. The school
7-17 shall provide to the agency on request documentation of the effort
7-18 to locate the student.
7-19 (g) A program that is 40 hours or less of class time, or a
7-20 seminar or workshop, is exempt from the 72-hour rule provided by
7-21 Subsection (b) of this section. The school shall maintain a policy
7-22 for the refund of the unused portion of tuition, fees, and other
7-23 charges in the event the student fails to enter the course,
7-24 withdraws from the course, or is discontinued from the class at any
7-25 time before completion of the course as provided by this section.
7-26 The policy must provide that:
7-27 (1) refunds are based on the period of enrollment
8-1 computed on the basis of course time expressed in clock hours;
8-2 (2) the effective date of the termination for refund
8-3 purposes is the earlier of:
8-4 (A) the last date of attendance; or
8-5 (B) the date the school receives written notice
8-6 from the student that the student is withdrawing from the class;
8-7 and
8-8 (3) the student will be refunded the pro rata portion
8-9 of tuition, fees, and other charges that the number of class hours
8-10 remaining in the course after the effective date of the termination
8-11 bears to the total number of class hours in the course.
8-12 SECTION 5. Subchapter D, Chapter 32, Education Code, is
8-13 amended by adding Section 32.402 to read as follows:
8-14 Sec. 32.402. NONQUALIFICATION AS PROPRIETARY SCHOOL. (a) A
8-15 school operating as a small proprietary school but that has an
8-16 annual gross income from tuition and fees that exceeds $100,000
8-17 (other than a test preparation school as defined in Section
8-18 32.11(10)(B) or (C)) that intends to receive a payment from federal
8-19 funds under 20 U.S.C. Section 1070 et seq. or intends to receive
8-20 prepayment of tuition, fees, or other charges from federal or state
8-21 funds shall send written notice to the administrator. The notice
8-22 must be sent not later than the following date, as applicable:
8-23 (1) the 60th day after the date on which annual gross
8-24 income is determined to exceed the maximum;
8-25 (2) the day before receiving a payment of federal
8-26 funds under 20 U.S.C. Section 1070 et seq.; or
8-27 (3) the day before enrolling a student who will prepay
9-1 tuition, a fee, or another charge in whole or in part from federal
9-2 or state funds.
9-3 (b) A school that no longer qualifies as a small proprietary
9-4 school shall apply for an initial certificate of approval as a
9-5 proprietary school within 30 days after the date the school has
9-6 notified the administrator that it no longer qualifies as a small
9-7 proprietary school. The administrator may apply or prorate any
9-8 fees paid by the school as a small proprietary school.
9-9 (c) A school that no longer qualifies as a small proprietary
9-10 school shall submit to the administrator an amount of money equal
9-11 to the difference between the fee for the small proprietary school
9-12 certificate of approval submitted by the school and the fee that
9-13 the school would be required to submit after its qualifications as
9-14 a small proprietary school cease.
9-15 (d) The authority of a school to operate under a small
9-16 proprietary school certificate of approval terminates on the final
9-17 determination of issuance or denial of an initial certificate of
9-18 approval. If a school fails to file a complete application within
9-19 the period required by Subsection (b) of this section, the school,
9-20 as a condition of issuance, must pay a late fee in an amount
9-21 established by State Board of Education rule of at least $100.
9-22 SECTION 6. Subchapter G, Chapter 32, Education Code, is
9-23 amended by adding Section 32.65 to read as follows:
9-24 Sec. 32.65. PENALTY FOR SMALL PROPRIETARY SCHOOL. (a) If a
9-25 school fails to timely comply with the requirements of Section
9-26 32.402 of this code, in addition to any other penalties authorized
9-27 by law, the administrator may assess a penalty in an amount not
10-1 greater than two times the amount that the school would have paid
10-2 in fees and other charges if the school had complied with the
10-3 requirements of Section 32.402 or may assess a penalty in the
10-4 amount of the tuition or fee charge to any students whose tuition
10-5 or fees were contracted to be funded by a prepaid federal or state
10-6 source.
10-7 (b) If the administrator finds that the school acted
10-8 intentionally, the administrator may, in addition to any other
10-9 remedy available under law, assess a penalty against the owner in
10-10 an amount not greater than four times the amount of the fees and
10-11 charges that the school should have paid or four times the amount
10-12 of the student tuition that was contracted to be funded from a
10-13 prepaid federal or state source.
10-14 (c) The failure to notify the administrator within four
10-15 months after the school's earnings exceed that of a small
10-16 proprietary school gives rise to a rebuttable presumption of intent
10-17 for purposes of assessment of a penalty.
10-18 (d) The failure to notify the administrator within 10 days
10-19 after a school has enrolled a student whose tuition or fees are
10-20 paid in whole or in part from a prepaid federal or state source
10-21 gives rise to a rebuttable presumption of intent for purposes of
10-22 assessment of a penalty.
10-23 (e) A civil penalty under this section shall be assessed in
10-24 accordance with the procedures stated in Section 32.611 of this
10-25 code. A penalty collected shall be deposited in the state treasury
10-26 to the credit of the general revenue fund.
10-27 SECTION 7. Section 32.71, Education Code, is amended by
11-1 amending Subsections (a), (f), and (g) and adding Subsection (h) to
11-2 read as follows;
11-3 (a) Certificate and registration fees, except those charged
11-4 pursuant to Subsection (d) of this section, shall be collected by
11-5 the Administrator and deposited with the State Treasurer. Each fee
11-6 shall be in an amount set by the Administrator and approved by the
11-7 State Board of Education in an amount not to exceed 150 percent of
11-8 each fee in the following schedule:
11-9 (1) the initial fee for a school:
11-10 (A) for a certificate of approval <the initial
11-11 fee for a school> is $2,000; or
11-12 (B) for a small proprietary school certificate
11-13 of approval is $1,000;
11-14 (2) the first <annual> renewal fee and each subsequent
11-15 renewal fee for a school is the greater of:
11-16 (A) an amount that is determined by applying a
11-17 percentage, not to exceed 0.3 percent, to the gross tuition and
11-18 fees, excluding refunds as provided by Section 32.39 of this code,
11-19 of the school; or
11-20 (B) $500;
11-21 (3) the initial registration fee for a representative
11-22 is $60;
11-23 (4) the annual renewal fee for a representative is
11-24 $30;
11-25 (5) the fee for a change of a name of a school or
11-26 owner is $100;
11-27 (6) the fee for a change of an address of a school is
12-1 $180;
12-2 (7) the fee for a change in the name or address of a
12-3 representative or a change in the name or address of a school that
12-4 causes the reissuance of a representative permit is $10;
12-5 (8) the application fee for an additional course is
12-6 $150, except for seminar and workshop courses, for which the fee is
12-7 $25;
12-8 (9) the application fee for a director, administrative
12-9 staff member, or instructor is $15;
12-10 (10) the application fee for the authority to grant
12-11 degrees is $2,000;
12-12 (11) the application fee for an additional degree
12-13 course is $250; and
12-14 (12) the fee for an inspection required by rule of the
12-15 State Board of Education of classroom facilities that are separate
12-16 from the main campus is $250.
12-17 (f) The administrator may allow payment of any fee
12-18 authorized under this section or under Section 32.91 of this code
12-19 that exceeds $1,000 to be paid by installment. The administrator
12-20 shall provide for appropriate interest charges and late penalties
12-21 in addition to any other remedy that is provided for by law for the
12-22 late payment of a fee installment authorized under this section.
12-23 The administrator may assess a reasonable service charge or
12-24 interest to be paid by a school that pays a fee by installment in
12-25 an amount not to exceed 10 percent annually of the fee that is to
12-26 be paid by installment <The Administrator, with the approval of
12-27 the State Board of Education, may increase any fee authorized under
13-1 this section at a rate not to exceed the increase in the National
13-2 Consumer Price Index For All Urban Consumers. The calculation of
13-3 the index in effect on September 1, 1989, shall be the base for
13-4 calculating the rate at which fees may increase. Fee increases
13-5 under this subsection do not have to be made annually>.
13-6 (g) All fees, interest, or other charges collected under
13-7 this section shall be used only for the administration of the Texas
13-8 Proprietary School Act.
13-9 (h) The administrator may apply or prorate a fee paid by a
13-10 small proprietary school that has complied with the notification
13-11 requirements of Section 32.402 of this code toward an initial
13-12 certificate as a proprietary school in the event that a school has
13-13 ceased to qualify as a small proprietary school during a
13-14 certification period.
13-15 SECTION 8. Section 32.91, Education Code, is amended by
13-16 amending Subsection (a) and adding Subsection (e) to read as
13-17 follows:
13-18 (a) Except as provided by Subsection (e) of this section, at
13-19 <At> the time that each school pays its annual renewal fee, in the
13-20 years provided by Subsection (c) of this section, the State Board
13-21 of Education shall also collect a fee from the school for deposit
13-22 to the credit of a special fund in the state treasury to be called
13-23 the proprietary school tuition protection fund.
13-24 (e) A school is not required to pay the fee for the tuition
13-25 protection fund under Subsection (a) of this section if, at the
13-26 time the school pays the annual renewal fee, the bond provided by
13-27 the school under Section 32.38 of this code is greater than the
14-1 unearned tuition of the school.
14-2 SECTION 9. Section 32.12(a), Education Code, is amended to
14-3 read as follows:
14-4 (a) The following schools or educational institutions are
14-5 specifically exempt from the provisions of this chapter and are not
14-6 within the definition of "proprietary school":
14-7 (1) a school or educational institution supported by
14-8 taxation from either a local or State source;
14-9 (2) nonprofit schools owned, controlled, operated, and
14-10 conducted by bona fide religious, denominational, eleemosynary, or
14-11 similar public institutions exempt from property taxation under the
14-12 laws of this State, but such schools may choose to apply for a
14-13 certificate of approval hereunder, and upon approval and issuance,
14-14 shall be subject to the provisions of this chapter as determined by
14-15 the administrator;
14-16 (3) a school or training program which offers
14-17 instruction of purely avocational or recreational subjects as
14-18 determined by the administrator;
14-19 (4) a course or courses of instruction or study
14-20 sponsored by an employer for the training and preparation of its
14-21 own employees, and for which no tuition fee is charged to the
14-22 student;
14-23 (5) a course or courses of study or instruction
14-24 sponsored by a recognized trade, business, or professional
14-25 organization for the instruction of the members of the organization
14-26 with a closed membership;
14-27 (6) private colleges or universities which award a
15-1 recognized baccalaureate, or higher degree, and which maintain and
15-2 operate educational programs for which a majority of the credits
15-3 given are transferable to a college, junior college, or university
15-4 supported entirely or partly by taxation from either a local or
15-5 State source;
15-6 (7) a school or course which is otherwise regulated
15-7 and approved under and pursuant to any other law or rulemaking
15-8 process of the State or approved for continuing education credit by
15-9 an organization that accredits courses for the maintenance of a
15-10 license, except as provided by Subsection (c) of this section;
15-11 (8) aviation schools or instructors approved by and
15-12 under the supervision of the Federal Aviation Administration;
15-13 (9) a school which offers intensive review courses
15-14 designed to prepare students for certified public accountancy
15-15 tests, public accountancy tests, law school aptitude tests, bar
15-16 examinations, or medical college admissions tests;
15-17 (10) a private school offering primary or secondary
15-18 education, which may include kindergarten or prekindergarten
15-19 program, and which satisfies the compulsory attendance requirements
15-20 of Section 21.032 of this code pursuant to Section 21.033(a)(1) of
15-21 this code; and
15-22 (11) a course or courses of instruction by bona fide
15-23 electrical trade associations for the purpose of preparing students
15-24 for electrical tests required for licensing and for the purpose of
15-25 providing continuing education to students for the renewal of
15-26 electrical licenses.
15-27 SECTION 10. Section 32.12, Education Code, is amended by
16-1 adding Subsection (d) to read as follows:
16-2 (d) Notwithstanding the exemptions listed in Subsection (a)
16-3 above, a dispute resolution organization, as defined by Section
16-4 154.001, Civil Practice and Remedies Code, may elect to seek a
16-5 certificate of approval pursuant to Subchapter D of the Texas
16-6 Proprietary School Act.
16-7 SECTION 11. This Act applies beginning with the 1993-1994
16-8 school year.
16-9 SECTION 12. The importance of this legislation and the
16-10 crowded condition of the calendars in both houses create an
16-11 emergency and an imperative public necessity that the
16-12 constitutional rule requiring bills to be read on three several
16-13 days in each house be suspended, and this rule is hereby suspended,
16-14 and that this Act take effect and be in force from and after its
16-15 passage, and it is so enacted.