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Just because it's big doesn't mean it's good

FCRO Subsection: 
Editorial Staff

Australia is cancelling the debts of students of a large failed education provider that once had government backing. It's also obtained massive penalty and restitution orders. But there is a fly in the ointment.

SEPT 2018

The ACCC and the Federal Government Department of Education and Training commenced proceedings against Empower in December 2015 following a joint ACCC and NSW Fair Trading investigation.

Empower was a provider of VET FEE-HELP Diploma courses which cost up to AUD15,000 per course. It marketed and sold these courses using face-to-face marketing, including door-to-door sales. Courses marketed to consumers included Diploma of Management, Diploma of Business and Diploma of Early Childhood Education and Care.

Empower marketed and sold VET FEE-HELP funded courses to consumers in remote communities and low socio-economic areas, including Indigenous communities, in New South Wales, Western Australia, Victoria, Queensland and South Australia.

Empower ceased trading and in April 2017 resolved to enter into voluntary liquidation.

The Federal Court has found training college Cornerstone Investments Aust Pty Ltd, trading as Empower Institute (Empower), engaged in unconscionable and misleading or deceptive conduct, and made false or misleading representations when enrolling consumers into diploma courses.

Between March 2014 and October 2015, Empower enrolled more than 6,000 new students in its courses. Many of these students were vulnerable consumers and were signed up using incentives such as free laptops and cash, unaware they were incurring a significant debt.

“Empower misled vulnerable and disadvantaged consumers into enrolling in courses they would likely be unable to complete. Many consumers it enrolled had poor literacy and numeracy skills. Some who enrolled in online courses could not even use a computer and did not have access to the internet,” ACCC Chairman Rod Sims said.

“Empower also failed to provide clear and accurate information about the price of the courses and the nature of the VET FEE-HELP loan.”

“The court held that in all the circumstances, Empower’s conduct was unconscionable,” Mr Sims said.

“Empower was paid more than AUD64 million by the Government under the VET FEE-HELP scheme for enrolling students using these appalling tactics, while the students were left with large debts."

The ACCC will now seek remedies from Empower, including redress for affected consumers and pecuniary penalties.

The ACCC has taken action against a number of private colleges and can seek remedies from the court in those cases, but cannot itself, cancel the debts of affected consumers.

SEPT 2019

The ACCC and the Commonwealth Department of Education and Training commenced proceedings against Empower in December 2015 following a joint ACCC and NSW Fair Trading investigation.

Empower was a provider of VET FEE-HELP Diploma courses which cost up to AUD15,000 per course. It marketed and sold these courses using face-to-face marketing, including door-to-door sales. Courses marketed to consumers included Diploma of Management, Diploma of Business and Diploma of Early Childhood Education and Care.

Empower marketed and sold VET FEE-HELP funded courses to consumers in remote communities and low socio-economic areas, including Indigenous communities, in New South Wales, Western Australia, Victoria, Queensland and South Australia.

Empower ceased trading and in April 2017 entered into voluntary liquidation.

In September 2018, the Federal Court handed down judgment on liability, which found that Empower engaged in unconscionable conduct, misleading or deceptive conduct and breached the unsolicited consumer agreement provisions of the Australian Consumer Law.

The Federal Court has ordered $26.5 million in penalties against Cornerstone Investments Aust Pty Ltd, trading as Empower Institute (in liquidation) (Empower), the highest total penalties ever imposed for breaches of the Australian Consumer Law (ACL).

The Court also ordered Empower to repay more than $56 million to the Commonwealth for funding it had received to provide the courses

Empower ceased trading and in April 2017 entered into voluntary liquidation.

The Court found that Empower had engaged in a system of unconscionable conduct when it enrolled consumers in VET FEE-HELP funded courses, by marketing courses to consumers in remote communities, indigenous communities and low socio-economic areas, making false or misleading representations, using recruiters who were practically untrained and in some cases offering inducements such as free Google Chromebooks.

“Between June 2014 and December 2014, Empower enrolled more than 4,000 students, often using these appalling tactics,” ACCC Chairman Rod Sims said.

“Empower misled many vulnerable and disadvantaged consumers who had poor English language literacy or numeracy skills, and others who could not even use a computer and did not have access to the internet.”

“It should have been clear that these consumers were not likely to complete Empower’s courses, but would still be saddled with significant lifetime student debt,” Mr Sims said.

The Court described Empower’s conduct as involving a “callous indifference” to consumer protection, including signing up consumers for courses which meant they took on large VET-FEE HELP debts, for Empower’s financial gain.

“We welcome the record breaking Australian Consumer Law penalties of AUD26.5 million imposed by the Court, which reflect the seriousness of the conduct,” Mr Sims said.

“The magnitude of these penalties and the AUD56 million ordered to be repaid to the Commonwealth should serve as a serious warning to the vocational education sector, and all other Australian businesses, that engaging in unconscionable behaviour has very significant consequences.”

Based on the Court’s findings and using the new VET FEE-HELP Student Redress measures, the Commonwealth has decided to cancel the debts of over 6000 consumers enrolled in courses with Empower in 2014 and 2015.

“The ACCC welcomes the Commonwealth’s decision to cancel these student debts. It is important that victims are not saddled with a debt burden because they signed up to these courses as a result of Empower’s egregious conduct,” Mr Sims said.

The above is extracted and edited from ACCC media releases on various dates.

So what is the fly in the ointment? There is a dead company. Does it have any realisable assets? If so is it close to the amounts of the awards? Which will take priority: the penalty or the compensation?

ACCC has not issued any statement as to how it thinks the awards will be met.

If they won't, what was the point of pursuing it for a year after the original finding was made? How is that in the taxpayers' interests? Maybe more information will come out in due course.

 


 

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