Why Profit Doesn't Necessarily Mean Quality

I recently met with someone and he asked me how a school such as CRI could be successful despite the fact that it had so many unhappy (and indebted) customers. Many feel that the foundation of capitalism is that in a competitive market, the producer of the better product will succeed. There is one glaring exception to this rule however:

There are always confidence men, luring consumers into purchasing inferior or illegitimate products and profiting from the unsophisticated persons who succumb to the fraud. These persons make money precisely because their products are inferior! They don't spend as much money on creating or refining the product and a lot on "marketing" it.

Cases of fraud are embedded in every institution, profit and non-profit, however, non-profit universities have little reason to defraud students. They don't need the student's money, they are funded by the state and endowments which is why they are much more selective. It's not to say that non-profit education is completely free from fraud, however, taken as a whole they are less modified to defraud than for-profit is.