The Federal Court has imposed record penalties of $438 million against former vocational college Phoenix Institute of Australia (Phoenix) and its marketing arm Community Training Initiatives (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.
Gina Cass-Gottlieb, ACCC chair, said this case involved cynical and calculated systemic unconscionable conduct towards disadvantaged individuals, on an industrial scale.
“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," Cass-Gottlieb said.
“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."
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, the judge considered “the exploitation of, and predation upon, the vulnerability and disadvantage” of each of them. The judge 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”.
Phoenix has also been 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,” Cass-Gottlieb said.
The court also made orders in relation to costs and redress.
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