Phoenix Institute acted unconscionably and misled students

13 August 2021

The Federal Court has found that former training college Phoenix Institute of Australia Pty Ltd (Phoenix) and its marketing arm, Community Training Initiatives Pty Ltd (CTI), made false or misleading representations and implemented systems of unconscionable conduct in relation to online diploma courses.

Phoenix and CTI were found to have misled consumers and acted unconscionably when marketing to students and enrolling them into online diploma courses in 2015 under the VET FEE-HELP loan program.

Phoenix had enrolled almost 12,000 students in more than 21,000 courses in subjects such as business, management and early childhood education and care, and was paid $106 million by the Commonwealth for those enrolments.

The Court found that Phoenix and CTI had misled consumers into thinking the courses were free, and offered them “free” laptops for enrolling.

“Phoenix and CTI misled vulnerable and disadvantaged consumers into enrolling in courses costing at least $18,000, and most of the consumers were enrolled in at least two full-time courses at once, leading to individuals incurring debts of over $36,000. The behaviour of Phoenix and CTI left students with very large debts under the VET FEE-HELP loan scheme for courses they were unlikely to be able to ever complete,” ACCC Chair Rod Sims said.

In addition, Phoenix and CTI failed to properly assess the students’ suitability for the courses, including their language, literacy, numeracy and computer skills, and enrolled consumers, including vulnerable and disadvantaged students, into two full-time courses which they had no reasonable prospect of completing.

Phoenix and CTI also paid large commissions to sales agents whom they failed to properly train and monitor.

In her judgment, Justice Perry said the unconscionable systems “were informed by the desire to maximise profit over even modest levels of engagement by consumers with their courses, and by a callous indifference, among other things, to the suitability and eligibility of consumers to undertake the courses in which they enrolled”.

Phoenix was also found to have breached the Australian Consumer Law in its dealings with four individual consumers, by engaging in one or more of the following in relation to each individual:

  • making misrepresentations that courses were free;
  • offering inducements of “free” laptops for enrolling;
  • coaching consumers on how to complete enrolment documents or verification calls, or filling enrolment documents out on their behalf; and
  • proceeding with the enrolment despite the consumer not having the skills or experience necessary to successfully complete their courses.

In addition, Phoenix and CTI failed to properly assess the students’ suitability for the courses, including their language, literacy, numeracy and computer skills, and enrolled consumers, including vulnerable and disadvantaged students, into two full-time courses which they had no reasonable prospect of completing.

This is the ACCC’s fifth action in which the Court has found that a VET FEE-HELP provider has engaged in misleading and unconscionable conduct.

Using the VET FEE-HELP Student Redress Measures, the Commonwealth has already cancelled the debts of eligible consumers enrolled by Phoenix.

“We support the Commonwealth’s continuing work to cancel these students’ debts,” Mr Sims said.

The Court will decide on penalties and other orders at a later date.

Notes to Editors 

The VET HEE-HELP Student Redress Measures came into effect on 1 January 2019. The measures provide a remedy for eligible students who, due to the inappropriate conduct of their VET provider, incurred debts under the VET FEE-HELP loan scheme.

If you were affected, contact the VET Student Loans Ombudsman (part of the Office of the Commonwealth Ombudsman) who will assess and investigate your complaint.

If it is confirmed you incurred your debt because of inappropriate behaviour by your provider, the Ombudsman may make recommendations to the Department of Education, Skills and Employment to cancel your VET FEE-HELP debts.

More than $2.8 billion in VET FEE-HELP debt has been re-credited to over 152,800 students since 2016, the majority through the VET FEE-HELP Student Redress Measures.

Background

The ACCC commenced proceedings against Phoenix and CTI in conjunction with the Department of Education in November 2015 after a joint investigation with NSW Fair Trading.

Phoenix was a provider of online VET FEE-HELP diploma courses costing $18,000 to $21,000. It is a subsidiary of Australian Careers Network Limited, which purchased Phoenix in January 2015.

Phoenix and CTI went into administration after the ACCC commenced proceedings, and are now in liquidation.

The ACCC has previously taken against Acquire Learning and, together with the Commonwealth, has successfully brought proceedings against Unique International College, Cornerstone Investment Aust Pty Ltd (trading as Empower Institute), and Australian Institute of Professional Education in respect of conduct involving the VET FEE-HELP scheme.

The ACCC also brought proceedings against Productivity Partners Pty Ltd trading as Captain Cook College in which the Federal Court recently held that Captain Cook College had made false or misleading representations and engaged in a system of unconscionable conduct. 

Release number: 
125/21
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