The Federal Court has today imposed record penalties of $438m against former vocational college Phoenix Institute of Australia Pty Ltd (Phoenix) and its marketing arm Community Training Initiatives Pty Ltd (CTI) in proceedings brought by the ACCC and the Commonwealth.
The Court had previously found that Phoenix and CTI had acted unconscionably and misled students into thinking the vocational courses they were enrolling in were free and that they would receive “free” laptops when this was not the case.
Phoenix was also found to have failed to properly assess language, literacy, numeracy and computer skills of its many vulnerable and disadvantaged students to determine if they were suitable for the courses.
Most students were enrolled in two courses at the same time, leading to significant debts. On average, students incurred a debt of about $37,000 each, totalling more than $350 million in debts under the former VET FEE-HELP scheme.
Phoenix received more than $106 million in Commonwealth funding under the VET FEE-HELP scheme, and claimed an additional $250 million for students enrolled in its courses between January and November 2015.
The Court found the vast majority of students had no reasonable prospect of completing the courses. Only nine of Phoenix’s over 11,000 students completed a course, and none completed two courses.
“This case involved cynical and calculated systemic unconscionable conduct towards disadvantaged individuals, on an industrial scale,” ACCC Chair Gina Cass-Gottlieb said.
“The recruitment of vulnerable students by Phoenix and CTI caused significant harm to the students, who were left with large government debts for courses they were unlikely to be able to complete.”
“The size of penalty reflects the total financial benefit obtained as well as the further amount claimed by Phoenix from the Commonwealth, involving hundreds of millions of taxpayers’ dollars. This record penalty should send a strong deterrence message to all businesses that rorting government funded schemes by taking advantage of vulnerable consumers is unacceptable and will attract very substantial penalties to remove any financial incentive for such conduct,” Ms Cass-Gottlieb said.
The penalties imposed comprise $400 million for Phoenix and $37 million for CTI for their roles in the systemic unconscionable conduct, and $1 million for Phoenix for contraventions involving four individual consumers. In setting penalties for the conduct impacting those individual consumers, her Honour considered “the exploitation of, and predation upon, the vulnerability and disadvantage” of each of them. Her Honour also noted that “[t]he deliberateness with which the contraventions throughout the relevant period were undertaken by the…controlling minds of the respondents, highlights the morally abhorrent nature of the contraventions”.
In addition to the penalties, Phoenix will be ordered to repay all government funding it had received in relation to the conduct. While Phoenix and CTI are in liquidation, these orders ensure that Phoenix cannot receive the $250 million in government funding it claimed but which was not paid.
The Commonwealth has cancelled the debts of eligible students enrolled by Phoenix using the VET FEE-HELP Student Redress measures.
“Consumers who incurred debts as a result of inappropriate conduct by other vocational colleges should contact the VET Student Loans Ombudsman (VSLO) as soon as possible, so that the VSLO can investigate and seek to resolve their complaint,” Ms Cass-Gottlieb said.
The Court also made orders in relation to costs and redress.
Background
The ACCC commenced proceedings against Phoenix and CTI in conjunction with the Commonwealth Department of Education in November 2015 after a joint investigation with NSW Fair Trading.
In August 2021, the Federal Court found Phoenix and CTI had acted unconscionably and misled students about Phoenix’s online courses.
Phoenix was a provider of online VET FEE-HELP diploma courses, including in subjects such as business, management and early childhood education and care costing $18,000 to $21,000. Like CTI, Phoenix is a subsidiary of Australian Careers Network Limited, which purchased Phoenix in January 2015.
Phoenix and CTI went into administration after the ACCC and the Commonwealth commenced proceedings, and are now in liquidation.
The ACCC was successful in court action against Acquire Learning for conduct involving the VET FEE-HELP scheme. The ACCC also successfully took action, with the Commonwealth, against Unique International College, Cornerstone Investment Aust Pty Ltd (trading as Empower Institute), and Australian Institute of Professional Education in respect of conduct involving the VET FEE-HELP scheme.
The ACCC brought proceedings against Productivity Partners Pty Ltd trading as Captain Cook College in which the Federal Court found Captain Cook College made false or misleading representations and engaged in a system of unconscionable conduct. The Full Federal Court recently dismissed appeals from this judgment. Captain Cook, its holding company Site Group and Site’s former Chief Operating Officer Blake Wills have applied for special leave to appeal to the High Court.
Note
The VET FEE-HELP Student Redress Measures came into effect on 1 January 2019, and are due to expire at the end of 2023. The measures provide a remedy for eligible students who, due to the inappropriate conduct of their VET provider, incurred debts under the VET FEE-HELP loan scheme for units of study they did not complete.
If you think you may have been affected, contact the VET Student Loans Ombudsman (part of the Office of the Commonwealth Ombudsman) who will assess and investigate your complaint.
If the Ombudsman finds that you meet the legislative criteria, they may make a recommendation to a delegate of the Secretary of the Department of Employment and Workplace Relations that your VET FEE-HELP debt be cancelled.
Around $3.4 billion in VET FEE-HELP debt has been re-credited to over 185,000 students since 2016, the majority through the VET FEE-HELP Student Redress Measures, including $425.4 million to former Phoenix students.
The Federal Court has made orders annulling the debts of Phoenix students who were ineligible for relief under the scheme, but who nonetheless may have been subject to the unconscionable conduct.
