Potential liability of educational institutions under Australian Consumer Law

David Ford, Senior Partner of Emil Ford Lawyers, analyses the application of the Australian Consumer Law to educational institutions. He discusses the decision of the Federal Court in the case of Unique International College as an example, where the Australian Competition and Consumer Commission accused the College of numerous breaches of consumer law. 

We are well into the age of consumerism. Nevertheless, many educators query the wisdom of classifying learners (and their parents) as consumers when they are making decisions about the acquisition of education services such as which school or tertiary institution to attend. Wise or not, the Australian Consumer Law has applied to educational institutions and the individuals acquiring their services for over eight years.

The practical consequences of this were evident recently when the Australian Competition and Consumer Commission took Unique International College to the Federal Court of Australia alleging numerous breaches of the Australian Consumer Law.[1] To summarise a judgment running to 779 paragraphs is not possible. However, the following gives an idea of some of what the Court had to deal with:

Unique is a vocational education and training provider operating from Granville in Sydney’s west. It offered potential students courses in respect of which many students would be eligible for Commonwealth financial assistance known as VET FEE-HELP.

Students eligible for VET FEE-HELP did not have to pay tuition fees. The Commonwealth paid these and the amount paid together with a 20% fee became a loan to the student from the Commonwealth. The loan balance increased annually in accordance with the CPI. The debt was only repayable once the student began to earn more than a prescribed minimum income. However, each student had a maximum lifetime amount which could be borrowed which meant that, even if it was never repaid, the VET FEE-HELP debt diminished the amount of VET FEE-HELP assistance available to that student in the future.

Unique told some prospective students that its courses were free or were free if the student did not earn more than the prescribed minimum income.

Unique also had incentive procedures. One was that it gave students who enrolled in any of its four VET FEE-HELP approved courses a free laptop or iPad. Another was that it paid a $200 reward to students who referred another student who enrolled in a VET FEE-HELP course.

As the courses could be taught online, students did not have to attend Unique’s Granville premises. Unique sent its staff members on road trips to various inland towns and conducted “sign-up” meetings in homes in those towns, which were typically places where the residents were of a lower socio-economic means and/or were comprised of a higher percentage of indigenous persons than the average town or city in the eastern states. Unique did not find out whether some students had the capacity to pay the course fees nor did it explain to those students the nature of the VET FEE-HELP scheme.

The ACCC attacked both Unique’s enrolment system and the way it had dealt with six individual students. One was a 19-year-old indigenous lad who had several disabilities including ADHD. He lived in public housing with his grandmother who assisted him to complete Unique’s enrolment forms. Although the young man had no formal education beyond year 10 and had only occasionally used a computer, his grandmother indicated on the forms that he did not have any disability or impairment, that he had advanced computer skills and had access to the Internet. This was all incorrect. Nevertheless, the Court was not at all critical of the grandmother. Rather, the judge said that he did not think that “Unique had any interest in the truth of what was said in the forms … only that the forms were completed.”

In the end, the young man entered into an enrolment agreement and applied for VET FEE-HELP without receiving any explanation about how that worked or the debt that he would end up with. He was also given a laptop. He had heard about this from others and it was clearly a significant factor in him and his grandmother turning up at the meeting at which the forms were signed. The Court found that Unique was exploiting people like this young man for its own pecuniary purposes and that its conduct was misleading. The Court also found that Unique’s conduct was unconscionable in the way that it had exploited an uneducated indigenous person with no understanding of what he was agreeing to in return for a laptop which was worth substantially less than the debt that was being incurred. Similar findings were made in relation to most of the other students involved in the case.

All educational institutions need to be aware of their potential liability under the Australian Consumer Law. Its requirements extend to the form of enrolment documents as well as the means of marketing the institution.[2]

David Ford is the senior partner at Emil Ford Lawyers. He is known for his expertise in education law, having advised more than 100 educational institutions throughout Australia over the past 30 years. David has presented at conferences in Australasia, Europe and South Africa and has published papers on topics including enrolments, student rights, LGBTI students, teachers’ liability, investigations, risk management, school counsellors and confidentiality, bullying and cyber bullying, outdoor education, school sport, discrimination, discipline and child protection. David is often engaged by schools to investigate allegations against members of staff. David is a member of the Australian, New Zealand, English, American and South African Education Law Associations, and of the Association of Workplace Investigators Inc and the Australasian Association of Workplace Investigators. He is a reviewer for the International Journal of Law and Education and the editor of Education Law Notes, a quarterly newsletter which keeps schools up to date with education law developments. Contact David at david.ford@emilford.com.au or connect via LinkedIn. You can also connect with Emil Ford Lawyers via LinkedIn.