June 20, 2015

Dodgy private colleges: failing students and taxpayers

By Gerard Brody & Katherine Temple

Mix one part deregulation with one part government funding then sprinkle with a few thousand dollars of student loans and what is the result? A consumer protection disaster.

We have received an increasing number of student complaints relating to private vocational education and training (VET) colleges and education brokers since the expansion of the VET FEE-HELP student loan scheme and the introduction of demand-driven funding. These students have often been lumped with thousands of dollars of debt after salespeople disguised as 'career advisors' have signed them up to unsuitable courses.

Most complaints we receive from students relate to unfair contracts, poor quality and unsuitable courses, aggressive marketing tactics and high course costs.

Unfair contracts

We often argue on behalf of our clients that private training provider contracts contain 'unfair terms'. For example, some courses have cooling off periods as short as 7 days, after which students are liable for the full cost of the course. Sometimes these cooling off periods expire before the course has even begun. Students often expect that fees will be incurred incrementally, and are shocked to find out that they are liable for the full cost of the course upfront.

Poor quality courses

We receive complaints about poor quality courses, including courses that have a lack of teaching staff and poor facilities. We are particularly concerned about the growth in online courses, where completion rates for VET FEE-HELP courses are as low as 7%.

Aggressive marketing practices

Some colleges and brokers are cold calling or door-knocking potential students to enrol them in courses. Some people have been contacted about courses after responding to job advertisements posted on websites associated with certain education brokers. There have also been reports in the media that education brokers are posting fake job advertisements in order to collect job seekers' personal information. High-pressure sales techniques are often used during cold calling and door knocking to convince students to enrol in courses that are unsuitable or unlikely to ever be completed.

Expensive course fees

Given that private colleges with access to VET FEE-HELP and government funding have near-guaranteed income, we consider that many private VET courses (particularly online courses) are excessively expensive. For example, the Double Diploma of Business & Management from Careers Australia costs $23,250 in most Australian states. The Double Diploma of Business & Management course at TAFE Queensland South West costs just $6,800. Recent media reports have also alleged massive pricing discrepancies between fee-for-service and VET FEE-HELP courses being offered by a number of registered training organisations.

Unsuitable courses

We continue to see examples of students being pressured into signing up to unsuitable courses. Brokers essentially operate on a commission sales model, which presents an inherent conflict with the interests of the student. This model provides an incentive for brokers to sign up students to unsuitable courses and VET FEE-HELP loans. In one example, we saw a young woman tell a broker that she was interested in doing librarianship, but was convinced to enrol in a business course.

Inadequate dispute resolution processes

At present, complaints by domestic students in Victoria must be taken to the Victorian Civil and Administrative Tribunal (VCAT). The VCAT process involves a court-like, adversarial hearing, which is much more formal and intimidating than an ombudsman process. We want to see a national industry ombudsman scheme created to resolve disputes between students and colleges. This scheme would be completely independent from industry.

An ombudsman service can contribute to compliance, monitoring and enforcement by providing information about common and systemic issues of complaint to regulators. Such as scheme may also improve complaint handing standards by education providers themselves, by acting as an additional discipline to avoid complaints.

Recent reforms

The federal government has recently announced significant reforms to the VET FEE-HELP training market. These include:

  • banning the use of enrolment 'inducements', such as laptops and tablets
  • unitised fee models
  • requirements to assess the capabilities of students prior to enrolment
  • improved disclosure
  • tougher penalties for non-compliance

The Australian Council for Private Education and Training (ACPET) also recently released an updated Code of Ethics, and guidelines for members dealing with brokers.

Recent government and industry reforms are welcomed and have tackled some of the issues being faced by our clients. However, we are concerned that the reforms may not adequately protect students from unscrupulous private colleges and education brokers, particularly those engaged in poor recruitment practices.

Further reforms needed

At a minimum, the VET FEE-HELP reforms must be extended to all courses. However, we have recommended that state and federal governments implement additional reforms, including:

  • requiring students who have been cold called or door knocked to 'opt in' by contacting the provider to confirm enrolment;
  • banning or restricting commission sales models;
  • enhancing suitability assessments;
  • increasing enforcement activities; and
  • establishing an independent industry ombudsman.

Further reforms are needed not only to protect students from predatory practices and poor quality courses, but also to ensure taxpayer funds are being invested appropriately.

Gerard Brody is the CEO of the Consumer Action Law Centre. Katherine Temple is the CALC's Senior Polic Officer