ACCC wins record $26m penalty against bankrupt education provider Empower

The Federal Court has handed a record $26.5 million fine to failed training college Empower Institute, as well as a demand it repays more than $56 million to the Commonwealth Government for funding it received to run courses.

Key points:

  • Empower was one of several training colleges that rorted the Federal VET-FEE-HELP loan scheme
  • Students were often were left with heavy debts, no diploma and no job, after paying around $15,000 for their courses
  • While Empower is unlikely to pay the fine, the ACCC says it is a warning to others and allows for the students affected to have their debts cancelled

However, the fine may prove academic, given the firm put itself into liquidation once the Australian Competition and Consumer Commission (ACCC) started action against it in late 2017.

It is understood the fine is unlikely to ever be paid, but lawyers are trawling through the wreckage to see how much the Commonwealth will be able to retrieve.

Unconscionable conduct

Empower — the trading front for a parent company Cornerstone Investments — was one of a number of education providers that failed during a Federal Government crackdown on rorting of the taxpayer-funded VET-FEE-HELP loan scheme in 2015.

At the time colleges were accused of targeting vulnerable people outside places like Centrelink with the offer of free laptops.

Many students were left with heavy VET-FEE-HELP debts, no diploma and no job, after paying around $15,000 for their courses.

Empower is just one of a number of actions the ACCC has taken against VET-FEE HELP providers

  • Productivity Partners Pty Ltd, trading as Captain Cook College
  • Unique International College Pty Ltd
  • Australian Institute of Professional Education Pty Ltd
  • Phoenix Institute of Australia Pty Ltd and Community Training Initiatives Pty Ltd
  • Careers Australia Group Limited
  • Australian Vocational Learning Centre Pty Ltd
  • Get Qualified Australia Pty Ltd

The ACCC also took action against:

  • Acquire Learning & Careers Pty Ltd, who marketed VET FEE-HELP courses.

Those that are still before the courts are:

  • Captain Cook
  • Unique International College
  • Phoenix Institute of Australia
  • Australian Institute of Professional Education (AIPE)

“The [Federal] 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,” the ACCC said in a statement after the penalty was handed down.

Late last year, the Federal Court ruled Empower engaged in unconscionable conduct, misleading or deceptive conduct and breached the unsolicited consumer agreement provisions of the ACL.

Debts cancelled

Despite the unlikelihood of the penalty ever being paid, the ACCC maintains it is a significant win, given a court order was necessary to have students’ debts cancelled.

In all, the debts of more than 6,000 consumers enrolled in courses with Empower in 2014 and 2015 will now be cancelled.

The ACCC also argues the record penalty handed down demonstrates the serious nature of the conduct and will deter other businesses from engaging in similar conduct.

It is more than double the previous highest fines handed out under the Australian Consumer Law (ACL) legislation, exceeding the $12 million We Buy Houses was ordered to pay last November and the $10 million Ford was hit with in April 2018.

All these penalties were all imposed before amendments lifted the maximum penalty for an individual breach of the ACL from $1.1 million to $10 million last year.

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

Message sent

Mr Sims welcomed the Commonwealth’s decision to cancel the 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 magnitude of these penalties and the $56 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.”

New legislation, which came into effect earlier this year, means that the Department of Employment may now cancel a consumer’s VET-FEE HELP debt if they have not completed a unit.

The Department of Employment will now be admitted as an unsecured creditor in the liquidation of Empower.

The ACCC sits somewhat lower on the list of creditors and will only be able to recover penalties if there are funds available after all other creditors have been paid.

Sourceaap: https://www.abc.net.au/news/2019-09-20/accc-wins-record-26-million-penalty-from-bankrupt-training-body/11533080

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