ACCC takes training college to court over allegations of misleading vulnerable consumers

A New South Wales-based VET diploma provider is in hot water over allegations it mislead consumers into signing up for more than $210 million worth of course enrolments.

The Australian Competition and Consumer Commission and the Commonwealth Government, on behalf of the Department of Education and Training, have initiated proceedings against Australian Institute of Professional Education Pty Ltd (AIPE) in the Federal Court and will argue the college breached Australian Consumer Law.

“We allege AIPE marketed its courses to some of the most vulnerable and disadvantaged groups in the Australian community, including consumers from low socioeconomic backgrounds and consumers with intellectual disabilities,” ACCC Chairman Rod Sims said in a statement.

The court action follows a joint investigation by the ACCC and NSW Fair Trading into the conduct of private colleges.

AIPE is facing allegations it made false or misleading representations and engaged in unconscionable conduct and therefore breached Australian Consumer Law.

The allegations span over three years from January 2013 to December 2015, potentially affecting more than 15,000 students who paid between $12,000 to $19,600 for a course.

In total, the ACCC claims AIPE received more than $210.9 million from the Commonwealth Government for these enrolments.

Sims said some of the consumers enrolled into AIPE’s online courses could not even use email and had poor writing, reading and computer skills.

“We allege that AIPE failed to take adequate steps to ensure that it was not taking advantage of these vulnerable consumers,” he said.

Russell Kennedy lawyer Laura Tan, who specialises in corporate and commercial law, told SmartCompany it’s highly unlikely the college would not have known it was misleading people and acting unconscionably.

“They [allegedly] made false and misleading representations that they would’ve known were not true targeting vulnerable groups with limited literacy,” she says.

The allegations follow a review into the pattern of behaviour allegedly permitted by the college, which allowed sales people to offer students incentives such as free laptops, mobile phone credits and free courses.

However, the consumer watchdogs found these incentives were actually incurring VET FEE-HELP debt for the students, which would be payable to the Commonwealth Government if they earned more than $50,000 in a financial year.

NSW Fair Trading commissioner Rod Stowe said in a statement this indicates unfair tactics were used by the college and he warned other educational institutes that prospective students must be informed accurately and properly on the actual cost of courses.

“AIPE is the fourth private college the ACCC and the Commonwealth have instituted proceedings against for marketing practices which we allege breach the Australian Consumer Law,” Stowe said.

“Prospective students need to know that by signing up for a course they do not get a free laptop, they incur a lifetime debt.”

The ACCC and NSW Fair Trading will act on behalf of affected consumers seeking redress through cancellation of their VET FEE-HELP debts, fines against AIPE, orders to repay course fees handed out by the Commonwealth and implementation of a consumer law compliance program.

Under Australian Consumer Law, unconscionable conduct and false or misleading conduct charges have maximum penalties of $1.1 million for corporations and $220,000 for individuals.

If the court finds AIPE did not take considerable measures to ensure it was not taking advantage of vulnerable groups, Tan says it could be found to have engaged in unconscionable conduct under the ACL.

“Its reputation will be affected and eligibility for government funding may potentially be impacted in the future,” she says.

AIPE responds

In a statement issued to SmartCompany, AIPE acknowledged the commencement of legal proceedings against it by the ACCC.

“While AIPE is yet to receive the court documents filed by the ACCC, it understands the ACCC alleges breaches of various provisions of the Australian Consumer Law,” the company said.

The training college said it will comment further about the allegations once it has received the documents and had time to review and consider its position.

“AIPE … seeks to comply with all of its obligations under the Australian Consumer Law and has volunteered significant amounts of information to the ACCC to demonstrate this,” the company said.

“AIPE notes that before the ACCC commenced its proceedings, AIPE had already terminated its arrangements with all domestic service providers.”

*This article was updated at 12.50pm on April 1, 2016 to include a response from AIPE.