Need to know
- VET FEE-HELP (VFH) was launched by the federal government in 2009 to help disadvantaged people earn diplomas, but it was ambushed by dodgy operators
- Captain Cook College's $20 million fine is just the latest in a series of record-breaking penalties
- In July 2023, the ACCC announced that around $3.4 billion in debt had been re-credited to over 185,000 students since 2016
The $20 million penalty recently handed down by the Federal Court against Captain Cook College comes at the tail end of the outsized VET FEE-HELP loan scandal.
VET FEE-HELP (VFH) was launched by the federal government in 2009 to help disadvantaged people earn diplomas in higher level vocational education and training (aka VET). It was later replaced by VET Student Loans in 2017. Courses on offer included diplomas in management, business, early childhood education, salon management and more.
Sadly, the initiative was met with a level of callousness and greed that could test one's faith in human nature. Captain Cook College is just one of the many online educators caught bilking the federal government, and making life tougher for people who were already struggling.
Like the other offenders, the business received tens of millions of taxpayer dollars through the VFH program. As a condition for the funding, Captain Cook College was required to have safeguards built into its enrolment and withdrawal processes to ensure students were engaging with the courses and not taking on debt and ending up empty-handed.
In September 2015, the business deliberately dispensed with these safeguards and continued to charge thousands of people who had signed up but never taken part.
Captain Cook College's conduct not only cost taxpayers tens of millions of dollars, but it also caused distress to the thousands of consumers enrolled in their courses who, for many years, were told they had significant debts to the government
ACCC chair Gina Cass-Gottlieb.
About 5500 of them racked up debts totalling over $60 million. Nearly all of them never completed any part of an online course, and around 86% of them never even logged in. For years, the business menaced these would-be students with threats about owing thousands to the government.
Their debts, along with other victims of the VFH loan fiasco, eventually had to be waived by the government.
"Captain Cook College's conduct not only cost taxpayers tens of millions of dollars, but it also caused distress to the thousands of consumers enrolled in their courses who, for many years, were told they had significant debts to the government," says Australian Competition and Consumer Commission (ACCC) Chair, Gina Cass-Gottlieb.
The court also imposed penalties of $10 million on Captain Cook College's parent company, Site Group International Limited (Site), and $400,000 on Blake Wills (Site's former COO).
Both knew about and were involved in the unconscionable conduct. But there seems to have been little contrition – the business unsuccessfully appealed its initial legal loss in July 2021 all the way to the High Court. It entered into voluntary administration in March this year.
No shortage of dodgy education and training businesses
The lure of government funding set loose a feeding frenzy among unscrupulous operators. Along with Captain Cook College, the ACCC has brought successful legal action against Unique International College, the Empower Institute, the Australian Institute of Professional Education, Acquire Learning, and the Phoenix Institute of Australia.
One common theme is that these businesses targeted remote Indigenous communities and low socio-economic areas in full knowledge that many who signed up would never complete a course. Charging them anyway was part of the grand plan. Almost all these operations went out of business as a result of legal action.
It all started to come undone in May 2017 when the ACCC won a $4.5 million against Acquire Learning and Careers for false and misleading conduct in the way it signed up disadvantaged and vulnerable students, which included commissions and bonuses for the telemarketers who reeled in the most. It was the second-largest consumer protection penalty to date, but this was just the beginning.
The Justice in the case commented that the tactics "resembled those of an unscrupulous fly-by-night operation" rather than a market-leading provider of student recruitment services, which is how the business described itself.
Door knocking and free laptaps were often part of the marketing strategy to lure in students.
Preying on disadvantaged communities
A new record was set when the Empower Institute got nailed with a $26.5 million penalty in September 2019 for unconscionably targeting remote Indigenous communities and low socio-economic areas, making various false or misleading claims, and often throwing in a free Google Chromebook as an inducement.
Just about anybody could have the job of convincing people to sign up to courses, which cost up to $15,000. Door-knocking was a standard procedure.
But it didn't end well for the business. In addition to the penalty, the Empower Institute was ordered to reimburse the federal government more than $56 million.
Then ACCC chair Rod Sims put it plainly: "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." He called the tactics "appalling". The court went with the phrase "callous indifference".
'Difficult to imagine worse conduct'
Next came Unique International College, which was hit with a $4.1 million penalty in October 2019. Free laptops (paid for by your tax dollars) were on offer if you came aboard, yet many among Unique's target demographic didn't have an internet connection. Door-to-door sales was also part of the marketing strategy.
Referring to one affected individual, the judge said "This was the exploitation of an obviously very vulnerable person for financial gain. It is difficult to imagine unconscionable conduct which could be worse."
$153 million for systematic predation
The Australian Institute of Professional Education (AIPE) took things to the next level in December 2021. Having received over $210 million from the Commonwealth for approximately 16,000 enrolments, the Federal Court applied a $153 million penalty for its unconscionable tactics, which included doling out free laptops and telling people with limited reading and writing skills that the courses were also free, which they weren't. The victims were each left with debts of around $20,000.
This was the exploitation of an obviously very vulnerable person for financial gain. It is difficult to imagine unconscionable conduct which could be worse
At the time the case set yet another record for the highest penalty to date imposed under the Australian Consumer Law. The presiding Justice said: "Substantial penalties are called for when a commercial enterprise systematically predates on both a government education support scheme designed to help disadvantaged members of the Australian community, and consequently, upon those consumers."
But the record penalty became a paper tiger. Because AIPE had been liquidated, it was never paid.
Prior to this legal outcome, AIPE had already been ordered to repay approximately $142 million to the Commonwealth in compensation for funding it wasn't entitled to. It's not clear how much of this was ever paid during the liquidation process.
Phoenix Institute penalty sets another new record
In the case of the Phoenix Institute and its marketing arm Community Training Initiatives, the ACCC's legal action resulted in a $438 million penalty, shattering the previous record. Once again, free laptops were involved, as well as the false promise that the courses were free. In fact, students affected by the misconduct incurred debts of around $37,000 each. In total, debts incurred under the VFH FEE-HELP scheme arranged by the Phoenix Institute exceeded $350 million.
This case involved cynical and calculated systemic unconscionable conduct towards disadvantaged individuals, on an industrial scale
ACCC chair Gina Cass-Gottlieb
Phoenix received around $106 million in Commonwealth funding, yet only nine of Phoenix's approximately 11,000 students ever finished a course. It claimed another $250 million from the government on top of this, but this was stopped short as legal action commenced and Phoenix went into liquidation.
"This case involved cynical and calculated systemic unconscionable conduct towards disadvantaged individuals, on an industrial scale," ACCC Chair Gina Cass-Gottlieb said at the time. The Justice in the case called the numerous contraventions of consumer law "morally abhorrent".
Across the board, the magnitude of the wrongdoing was breathtaking. In July 2023, the ACCC announced that around $3.4 billion in VFH debt had been re-credited to over 185,000 students since 2016.
The majority of that came through the VFH Student Redress Measures, which came into effect in January 2019 and ended on 31 December 2023. Invalid debt can still be waived, but it will likely take more effort and persistence than when this program was running.
What to do if you believe you still have invalid debt
As of 1 January 2024, a new multi-step process outlined by the Commonwealth Ombudsman in this PDF document has been in place for people who still have debt they believe should be waived. The onus is on affected people to take the initiative and follow through, but it's a process worth pursuing to clear your record and make sure any illegitimate debts don't continue to haunt you.
If you are experiencing financial hardship, you can call the National Debt Helpline on 1800 007 007 for free, confidential and independent information and advice. If you or anyone you know needs support, contact Lifeline on 13 11 14 or at lifeline.org.au, or Beyond Blue on 1300 224 636 or at beyondblue.org.au/forums.
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