ACCC decisions, ASQA, VET FEE HELP and the end of the mega college
May 17, 2016 7 Comments
A few weeks ago I wrote a piece entitled Death knell of the high growth mega college looking at the significant issues that were facing a number of the most high profile mega colleges in the VET sector and suggesting that what we were seeing was in fact the last throes of the large, aggressively marketed and growth oriented private RTOs. Yesterday we saw what is another nail in that coffin with the ACCC announcing it had accepted a court enforceable undertaking from Careers Australia regarding false or misleading representations and engagement in unconscionable conduct, in breach of the Australian Consumer Law around the marketing of its VET FEE HELP courses. So before we look at what this means for Careers Australia and what it might mean for the sector lets have a quick look at the decision and undertaking itself.
Between 1 August 2013 and 31 March 2015, Careers Australia received and processed applications from around 40,000 students for enrolments into its VET FEE-HELP courses. Of these students, 20,242 were enrolled and incurred a debt to the Commonwealth. Careers Australia received approximately $190 million worth of payments from the Commonwealth in relation to these students. The ACCC was concerned (and Careers Australia has admitted by virtue of its undertaking) that some of its agents engaging in door-to-door marketing and telemarketing across Australia, made false or misleading representations and engaged in unconscionable conduct.
“This conduct affected some of the most vulnerable and disadvantaged groups of consumers in Australia. For example, it is unacceptable that Careers Australia allowed 80 consumers from a remote Aboriginal community in Yarrabah, Queensland to be enrolled into courses and incur debts when they were offered inducements to sign up but not alerted to the debts they would incur,” ACCC Chairman Rod Sims said.
So what does this mean for Careers Australia, well first and foremost it means that Careers Australia has undertaken to automatically cancel the enrolments of students who have not completed a unit of study, and repay the Commonwealth any amounts received as a result of those enrolments As a result of this undertaking Careers Australia has cancelled at least 12,130 of these student enrolments and either repaid or partially repaid to the Commonwealth amounts totaling at least $44.3 million. This is a phenomenal sum both in terms of money and in terms of sheer enrollment numbers. Sixty percent of its enrolments over 18 months up to March 2015, have been cancelled. In addition while $44 million has been repaid the other thorn is that Careers Australia will now not be eligible for in excess of $300 million which it may have been able to claim in relation to these students. Now let us let that sink in for a moment, it looks as if Careers Australia’s potential (and actual) cash flow has been gutted to the tune of somewhere between $50 million and $350 million depending on how they modeled future payments. In addition to this though there may be many more cancellations and potential refunding of cash as, as part of the decision, Careers Australia will also invite other students who may have been misled to approach them should they want to have their enrolment and debt cancelled. If even 10-15% of their other enrolled students feel they were mislead, given the dollar amounts charged for various qualifications we could see the repayment figure rapidly approach $100 million. One could be forgiven for suggesting that White Cloud Capital who own a significant portion of the company might be feeling a little worried at the moment as might the other shareholders. Of course being a private rather than a publicly listed company means that we won’t see a sharemarket implosion as we saw with Vocation and Australian Careers Network.
The next question is then a simple one and that is can Careers Australia survive this, and in addition to that simple question a more complex one, being, should it? It seems certain I think that as a result of this Careers Australia will and probably must at the very least downsize and attempt to control costs and must also rethink its business model, from the ground up if it does hope to survive this. There is a bigger question here though and that is should it survive this? Should a company which has acknowledge that its agents engaged in unconscionable conduct be allowed to continue as a Registered Training Organisation and hold a VET FEE HELP contract or for that matter any other contract. I mean I have worked in Yarrabah (in another life), I know first hand the conditions and levels of education and general skills and knowledge (and I mean no disrespect to the people of Yarrabah here at all) that exists there and I can tell you that without a shadow of a doubt no one with common sense, let alone a conscience could ever enter that community and think that 80 of the residents there understood what they were being signed up for.
I am struggling as I am sure many others in the sector are, with whether a company who knowingly allowed these kinds of activities to occur should be able to continue to operate in this sector. Surely this undertaking must however make ASQA as the regulator, the Federal Department of Education and even the various state training departments with whom Careers Australia has contracts, seriously consider their next actions. It begs the question, can the Federal government do anything else other than remove Careers Australia’s VET FEE HELP contract and if that happens will we see another of the mega providers slide into administration. If that happens I like so many others will feel deeply for both the staff and the students who are caught up the in the middle of it all.
What does this mean for the wider sector though? It means that anyone who was using a broker or agents and who wasn’t careful around the students they enrolled in their VFH programs should be feeling a little uncomfortable at this point, particularly considering that the ACCC currently has actions around four other providers and is looking into another five. On the other hand it is a good thing. This rampant growth fueled by education brokerages and agents who had a sign up everybody attitude had to stop. The damage it has done to the sector in beyond belief. I would however also like to see the ACCC go after the brokers and agents themselves, though I acknowledge that this may be significantly more difficult. This is however what the industry and the sector required, it required those who allowed these things to occur to be called to account so that these practices which in no way contribute to the outcomes of students, the sector, industry or employers can be stamped out and we can get back to doing what the vast majority of providers both public and non-public do and that is provide high quality training that makes a real difference in the lives of people.
Anyway that’s just my opinion.