ACCC takes action against Empower Institute following joint investigation with NSW Fair Trading

9 December 2015

Following a joint investigation by the Australian Competition and Consumer Commission and NSW Fair Trading into the conduct of private colleges, the ACCC and the Commonwealth (for the Department of Education and Training) have instituted proceedings in the Federal Court against Cornerstone Investment Aust Pty Ltd trading as Empower Institute (Empower).

Empower is a provider of VET FEE-HELP Diploma courses, costing from $14,800 to $15,000 per course. It markets and sells these courses using face-to-face marketing, including door-to-door sales. Between March 2014 and October 2015, Empower enrolled over 10,000 new students in its Diploma courses and was paid over $90 million by the Commonwealth in respect of those enrolments.

The ACCC alleges that from at least March 2014, Empower made false or misleading representations and engaged in misleading or deceptive and unconscionable conduct, in breach of the Australian Consumer Law, when marketing and selling VET FEE-HELP funded courses to consumers in remote communities and low socio economic areas in New South Wales, Western Australia, Victoria, Queensland and South Australia.

It is alleged that Empower offered inducements to prospective students to enrol in a course, including a free laptop and cash incentives. It is also alleged that, in the course of marketing courses and recruiting students, Empower made false or misleading representations including that the course(s) were free or were free if the consumer did not earn more than approximately $50,000 per annum.

In fact, the proceedings allege that these representations were false and consumers actually incurred a VET FEE-HELP debt payable to the Commonwealth Government. Repayment of this debt would commence if the students earned more than a specified amount in a financial year ($53,345 in the 2014-2015 income year).

It is also alleged that Empower’s conduct, including its marketing and enrolment process and its dealings with vulnerable consumers was, in all the circumstances, unconscionable.

ACCC Chairman Rod Sims said: “We allege Empower engaged in unconscionable conduct when it marketed to some of the most vulnerable and disadvantaged groups in the Australian community, including consumers from remote areas, low socio-economic backgrounds and consumers with very poor literacy and numeracy skills. Further, for these online courses, some enrolled consumers could not use a computer and did not have access to the internet. Not surprisingly, course completion rates were low.”

“It is alleged that the sales process used by Empower, which included offering free laptops and cash incentives, using unfair tactics, and failing to provide clear and accurate information about the price of the courses and the nature of the VET FEE-HELP loan, was in all the circumstances unconscionable,” NSW Fair Trading Commissioner Rod Stowe said.

“It is important that colleges are up-front with prospective students and clearly explain the price of the courses they are offering. Consumers need to be able to fully understand what they are agreeing to before making a decision to sign up to a course. The VET FEE-HELP loan incurred by students is a lifetime debt,” Mr Stowe said.

Mr Sims said: “Empower is the third private college the ACCC and the Commonwealth have instituted proceedings against for marketing practices which we allege breach the Australian Consumer Law. The joint investigation illustrates how seriously both the ACCC and NSW Fair Trading view these allegations. We are continuing to jointly investigate the conduct of private colleges in the education sector.”

The ACCC is seeking redress for affected consumers (by cancelling VET FEE-HELP debts), pecuniary penalties, corrective notices and orders requiring the implementation of a consumer law compliance program. The ACCC and the Commonwealth are seeking declarations, injunctions, orders for the repayment of course fees paid by the Commonwealth to Empower in respect of any VET FEE-HELP loans cancelled by court order, as well as costs.

The matter is listed for a Directions Hearing on 17 December at 9.30am before Justice Gleeson in Sydney.

 

Background

The locations in which Empower marketed and sold courses included Moree, Dubbo, Bidwill, Waterloo, Blacktown, Walgett, Bourke, Brewarrina, Wagga Wagga, Toomelah, Mount Druitt, Coonamble, Armidale, Bankstown,  Villawood and Dareton in New South Wales; Heidelberg West, Broadmeadows, Dallas, Coolaroo and Dandenong in Victoria, Balga in WA, Woodridge in Queensland; and Ceduna and Elizabeth Grove in South Australia.

 

Release number: 
MR 249/15
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