This chapter explores a number of further issues raised in regard to the
bills. These issues relate to the new requirements to be an approved course
provider, the regulation of agents, brokers and markets and the transition
arrangements to the new scheme. The chapter also discusses the importance of
reporting and transparency in ensuring that the new scheme is not subject to
the same exploitation as the VET FEE-HELP scheme. The chapter concludes by
considering the proposed establishment of a VET student loans ombudsman.
Approved course providers
The explanatory memorandum for the VET Student Loans Bill explains that
the bill contains stronger eligibility requirements to qualify as an approved
course provider under the VET student loan program.
All existing VET FEE-HELP providers will have to apply to be approved
under the new program. The Consequential and Transitional Bill provides for
certain bodies, such as TAFEs, to be exempt from the re-application process.
Schedule 2 of the Consequential and Transitional Bill lists the
providers that are deemed to be approved course providers from 1 January 2017
and thus exempt from the re-application process.
The Queensland Department of Education and Training noted that one of
Queensland's public providers of VET, the Queensland Agricultural and Training
Colleges (QATC), may not come within the terms of Schedule 2. This is despite
it being a statutory body under the Queensland Agricultural Training
Colleges Act 2005 (Qld) and a currently approved provider of VET FEE-HELP
The Department suggested that the Transitional Bill may need to be
amended to ensure that the QATC is deemed to be an approved course provider to '...ensure
that the Bill achieves its policy objective of deeming public providers of VET
to be approved course providers of VET student loans'.
Three other issues arose regarding approved course providers: the
inability of trustees to be an approved provider, restrictions on third party
training arrangements, and the levying of a tax on approved providers under the
VET Student Loans (Charges) Bill. These issues are discussed below.
The VET Student Loans Bill states that the Secretary of the Department
of Education and Training may approve a body as an approved course provider if
the Secretary is satisfied that the body meets the course provider
requirements. The clause continues to state that, among other things, a course
provider must 'be a body corporate that is not a trustee'.
This aspect of the bill was of significant concern for the existing VET
FEE-HELP providers that are trustees, for example the Photography Studies
College (Melbourne), Churchill Education, Harvest Education Technical College
and Estrada College.
As Churchill Education explained: 'Effectively, under the proposed new changes,
we would be precluded from applying for approval as a VET Student Loan course
Photography Studies College (Melbourne) observed that the prohibition on
trustees being approved course providers was new, and had 'not been part of any
consultation process and is not referred to in the Regulatory Impact Statement'.
The college noted the potential impact of the prohibition on trustees:
It [the ban] therefore introduces a new regulatory burden -
the impact of which has not been tested or assessed for regulatory impact and
burden. This places an unfair burden on companies to disrupt their company
structures. The flow on effect of such material change will drastically
increase the regulatory, legal and tax burden on such body corporate companies.
It will require such companies to advise their national regulators – two of
them if they are dual sector providers - and in some cases State regulators as
well - of the company change.
This will trigger an unknown and untested level of additional
regulation and requirements, which could lead to such providers being rendered 'un registered'.
Such material change will trigger a requirement for providers to re-apply for
their status as either an RTO or a Higher Education Provider. This will be the
final nail in the coffin for many education companies already devastated by the
sweeping, unadvised and unforeseen changes.
Estrada College observed that it was not possible for trusts to swiftly
transition to another approved business structure, and further, that if trusts
were no longer able to lawfully operate, there would likely be significant job
It is not possible to change structure swiftly without an
immediate and significant impact on our business that educates many students
and supports many Australian families. Presently, we have 72 staff employed in
our Registered Training Organisation. And we are teaching over 8,500 VET FEE
HELP students... If these changes are to pass, we anticipate that it would be
necessary to make a large number of redundancies before the end of the year. We
support positive reform that focusses on quality training and employment
outcomes. However, permitting body corporates as trustees is a measure that
will have no negative impact on the scheme or the services offered to students,
and standards maintained by our Registered Training Organisation.
Australian College for Private Education and Training (ACPET) noted that
while it was working with the Department on transitional arrangements for
impacted members, it did not seem appropriate to exclude a specific corporate
arrangement regulated by ASIC. ACPET therefore recommended the provision
excluding trustees be removed from the bill.
Harvest Education Technical College considered that taking into account
its history of compliance, quality course provision and sound financial status,
the College should be not prohibited from operating.
Accordingly, the College suggested that the Minister be granted discretion to
allow a trust to be an approved course provider, so long as the trust had
demonstrated that it did not pose a financial risk:
Proper consideration should be given to enabling existing
businesses, such as Harvest Education Technical College, to continue operating
through their existing structures provided they are financially sound and
satisfy the other criteria contemplated by the legislation. There are a variety
of ways that that outcome might be achieved. For example, rather than trustees
being prohibited from being approved course providers, the Minister instead
could be given discretion in respect of the structure of an approved course
provider, provided that he is satisfied that it does not pose an unsatisfactory
financial risk to the Commonwealth and to students.
Churchill Education recommended that the clause should be removed from
the bill, or alternatively, a two year grace period be allowed until 31
December 2018 to allow trustees sufficient time to manage the transition to a
new corporate structure.
In her summing up speech, the Assistant Minister for Vocational
Education and Skills outlined the actions already taken by the Government to
prevent new providers from being trustees and the consultations undertaken by
the department with respect to existing providers which are trustees:
On the issue of Trusts, the government changed the VET
FEE-HELP legislation last year to require all new approved providers to not be
a trust. This was to reduce financial risk to the Commonwealth and increase
financial transparency. Although this requirement was not applied to existing
VET FEE-HELP providers that had already been approved, some have already sought
information on how to address this requirement, no doubt expecting the change
in the redesigned program. Where it is clear that the same entity continues,
but no longer acts in the trustee capacity, it will not change the department's
ability to assess the entity's track record as a training provider. The
department has briefed the stakeholder bodies TAFE Directors Australia (TDA)
and the Australian Council for Private Education and Training (ACPET) on this
issue, and will provide this advice to any organisations requesting
information. Any concerned provider can contact ACPET, TDA or the department to
discuss their individual situation.
Approved course provider charge
The VET Student Loans (Charges) Bill permits an approved course provider
charge to be imposed on approved course providers. The amount of the charge
will be prescribed by regulation or determined in accordance with a method
prescribed by regulation. It is anticipated that the amount of the charge will
be determined with regard to the size of the provider.
The regulations may provide for exemptions from the approved course provider
The Explanatory Memorandum to the VET Student Loans Bill (Charges) Bill
states that the charge's purpose is 'to fund the VET student loan program
including the costs incurred by the Commonwealth in administering the program,
data collection and analysis as well as compliance and enforcement activities'.
The lack of detail concerning this charge was of concern for some
participants. For example, Mr Mark Warburton, a former public servant and
former Principal Analyst for Universities Australia, said:
The full details of the proposed tax are not available, but
will be in regulation. The bill documentation does not specifically state if these
regulations will be disallowable, though I understand that is usual practice
for most legislative instruments. The introduction of the tax is not covered in
the Regulation Impact Statement for the new VET Student Loan scheme. The level
of the proposed tax and the full range of factors that might contribute to
determining its level is not clear.
ACPET was concerned about the lack of consultation before the introduction
of the charge, stating the charge was not:
...canvassed with industry during the VFH redesign
consultations and the details have not been announced. This measure comes in
addition to significantly reduced loan caps and will further erode the capacity
of providers to deliver to quality benchmarks. The application of the tax to
only private providers is anti-competitive.
Navitas held the same concerns, and recommended that the charge not be
supported. However, if it were to be imposed, Navitas suggested that it be
equally applied to public and private VET providers.
Mr Warburton suggested that given the purpose of the tax to fund the
loan program, 'it is unclear why a similar tax would not also be contemplated
for the loans schemes in the higher education sector'.
However, Mr Warburton cautioned about the appropriateness of such a tax on either
the VET or high education sectors:
...I have some concerns about its [the tax] appropriateness for
the regulation of Australia's tertiary sector. The tax is a charge which is
likely to be passed onto students in the form of increased course fees. To the
extent that this occurs, it will be paid upfront by VET students in any
circumstance where their fees exceed the VET Student Loan limits or their
course is not an eligible course.
Third party training providers
The VET Student Loans Bill introduces a requirement that to be eligible
for a VET student loan, the course must be provided by an approved course
provider and delivered by that provider. Alternatively, the course may be
delivered for the approved course provider by one or more of the following:
a different approved course provider;
a person or body that has been accredited by Tertiary Education
Quality and Standards Agency, the Commonwealth's higher education regulator;
a person or body that the Secretary has approved in writing to
deliver the course.
This provision will mean that approved course providers may no longer
outsource the delivery of their courses (or part of their courses) except to
those bodies referred to above.
This prohibition on the use of third party training providers was of
concern for some inquiry participants. For example, the Study Group argued that
there was an 'absolute need' for approved course providers to be able to use
third party training providers.The
Study Group explained that:
The main reason for engaging third party providers is the
specialist skill set they bring, the ability to support students in different
geographic locations otherwise underserviced the ability to support different
delivery models and with specialist support or electives and sometimes a simple
case of resource management.
The Group noted that the second reading speech had indicated that
individual subcontractors engaged to provide specialist expertise for part of a
course will be allowed on a case by case basis. However, no information has
been forthcoming as to how this will be determined.
Swinburne University of Technology was also concerned about the
prohibition on this party training providers:
[T]he restrictions on third party training arrangements in
the legislation will erode successful industry partnerships that involve high
quality public providers of vocational education work with employers, for
example Swinburne's partnership with Siemens Ltd to deliver an Industry 4.0
apprenticeship, an initiative championed and facilitated by the Federal
Notably, Swinburne expressed particular concern that its online delivery
unit would be unable to continue operating:
On its face, section 15 of the Bill would simply no longer
permit Swinburne Online to deliver courses on behalf of Swinburne University of
Technology. It would force Swinburne Online to seek an alternative legal basis
for delivering Swinburne courses, possibly through seeking registration as a
Registered Training Organisation in its own right... As a public university with
the authority to self-accredit courses granted by the Tertiary Education
Quality and Standards Authority Act, we submit that the Bill should make
provision for a course to be provided by a person or body that is delivering
the course for a provider authorised by TEQSA to self‑accredit its
courses of study.
Churchill Education explained that the use of third party training
providers was a common occurrence within the VET industry:
The practice of using third party contractors is widely
exercised in the Vocational Education sector by both TAFEs and the private
sector. In part, the use of contract trainers allows for trainers to also have
other jobs in the industry, which ensures they maintain industry currency, in
both skills and knowledge, and promotes higher educational outcomes. Churchill
Education uses four contract trainers, whose work was audited by ASQA this
year, with no compliance issues identified.
Churchill Education recommended that the bill be amended to allow the
course delivery to be completed by third party training providers, with the
approved course provider accountable for the work of the third party trainers.
Given the chequered history of some third party providers under the VET
FEE‑HELP scheme, the committee supports these aspects of the bills that greatly
strengthen the regulatory framework for course providers. This is achieved through
tougher eligibility requirements to qualify as an approved course provider, a
prohibition on trustees acting as approved course providers and the
introduction of a requirement that to be eligible for a VET student loan, the
course must be provided and delivered by an approved course provider. In
implementing these changes the committee encourages the Minister to ensure
industry partnerships which benefit students and enhance the quality of
training are supported.
Each of these elements combine to make a stronger VET system that
reduces the ability of students to be the victims of a small number of
unscrupulous providers, protects the quality of courses offered and ensures
that the reputations of high quality VET providers are not sullied as they have
been in the past.
The committee notes that some inquiry participants were concerned by the
prohibition on trustees being approved course providers. The committee believes
that the Minister for Education and Training, together with the department,
should closely consider these concerns during the finalisation of the proposed
On the issue of trusts the committee also notes that the department has
had held discussions with several VET peak bodies and is able to provide advice
to any organisation regarding their individual situation.
Further, the committee acknowledges that the proposal to levy an
approved course provider charge on approved course providers provoked a mixed
response, most notably in regard to the lack of detail currently available on
The committee notes that the amount of the charge will be prescribed by
regulation and is likely to be commensurate with the size of the provider. The
regulations may also provide for exemptions from the approved course provider
The committee considers that the levying of a charge on approved course
providers is an appropriate option for the government to recoup some of the
costs incurred in administering and monitoring the VET student loans program.
In determining the amount and application of the levy, the committee encourages
the Department of Education and Training to consult with key stakeholders to
ensure that the charge is implemented on a fair and equitable basis, taking
into account any impact on students.
Agents, brokers and marketing
The VET Students Loans Bill prevents providers from engaging third
parties, such as agents or brokers, to undertake activities on the provider's
behalf such as enrolling students for whom the tuition fees will be covered by
a VET student loan. This provision will ensure providers themselves are fully
responsible for any engagements with the students regarding their student
The Consumer Law Action Centre (CALC) supported this provision but
contended that the provisions could be strengthened:
Section 49 of the Student Loans Bill is a broad provision
which should provide regulators with the ability to enforce the ban. However,
without an associated ban on incentivised selling practices, Consumer Action
remains concerned that VET Student Loans providers could move sales agents
'in-house' with no real change to the way prospective students are identified,
targeted and recruited. The sector has been very adept at circumventing reforms
in the past to maintain their market position... Staff on commission-based
payment structures are often highly trained and motivated to sell. The very
nature of the way they are paid means they are not concerned that the good or
service is appropriate or affordable for the consumer, but simply that the sale
be closed. Vocational education should be about education, not sales.
Mr Mel Koumides, the Chair of the Australian Council of Private
Education and Training (ACPET) also argued that the ban did not extend far
enough, highlighting that some providers may seek to circumvent the proposed
We also welcome the banning of brokers, but I would suggest
that that does not go far enough. ACPET has received calls from brokers,
delighted that they are not banned. They have simply read the current
directions as being banned from the enrolment and course delivery process but
not before or after that. So if brokers are to continue then we recommend
strong controls and transparency on commissions and other matters to ensure
that that does not compromise the new VET general loan system going into the
Ms Jeannie Rea, the National President of the National Tertiary
Education Union (NTEU), was in favour of minimising the influence of brokers in
the sector. Ms Rea further suggested that the establishment of an
ombudsman would be an effective complaints mechanism to oversee 'in-house'
I think getting rid of brokers is a very good start, though.
I think then it does become a matter of what is seen to be appropriate
behaviour in-house as well, which I would agree is quite difficult to control.
But there certainly are measures that one could put around it...the ombudsman
would be a help there because then you would have a complaints mechanism, but
it is always better not to have something to complain about. Then, as to the
providers themselves, there should also be standards of behaviour and so on...But
I certainly think that getting rid of the third-party brokers would be a good
Mr Scott Gregson, Executive General Manager of the Consumer Enforcement
Division at the Australian Consumer and Competition Commission (ACCC),
contended that moves to limit the use of agents and brokers was likely to
reduce the number of complaints received about unprincipled behaviour:
We saw a system that had a focus on entitlement as opposed to
looking at quality and ensuring that service was delivered. We saw a system
that lent itself to third-party marketers underwritten by commissions and
incentives... Having that [marketing] direct through companies rather than
through third-party marketers, in our experience, will dramatically reduce the
instances. Just to give an example: when we looked at energy door-to-door sales
through third-party marketers, following our extensive actions in that industry
many stepped away from third-party marketers, and we saw a dramatic reduction
in complaints. Whether it has gone far enough, I have to say we have not
terribly looked at the policy as it has come through. I have had a quick look
at the announcements, and they seem to tick many of the boxes.
The CALC recommended the inclusion of a prohibition of commissions,
bonuses or incentives that can be paid for the enrolment of students into courses
with a VET Student Loan.
Similarly, the VET Student Loans Bill strengthens provisions relating to
the marketing of VET courses. This includes clauses relating to:
misrepresenting VET student loans;
offering certain inducements;
engaging in cold calling;
use of third party contact lists, and
other marketing requirements.
Once again the CALC supported the new provisions, and recommended that
the government further strengthen the provisions:
It is critical that this prohibition also covers situations
where the company or person that receives the personal details is linked to or
is the same as the person who contacts, markets or enrols people into courses...
[We recommend that the government] strengthen the prohibitions in sections 62
and 63 of the VET Student Loans Bill by also banning an approved course
provider from marketing or promoting a course to a person whose details they
have obtained for another purpose, for example, as part of an application for a
Churchill Education believed that the bill should 'prohibit any third
party from enrolling students with a VET Student Loan provider, regardless of
whether marketer or trainer'.
However, other submitters were less convinced of the need to ban agents
and brokers. For example, in her personal submission to the inquiry Ms Mary
Ancich considered that approved course providers should be permitted to use
agents and brokers so long as the course provider is 'totally responsible for
recruitment practices and enrolments. No student should be able to be enrolled
unless they have been personally vetted for suitability by the RTO'.
The Study Group was also unsupportive of the proposals to ban brokers
and marketing agents, suggesting that their use should be allowed subject to
strict guidelines and penalties for non-compliance:
Study Group recognises the unscrupulous practices of some
which are well documented and agrees that they should be banned from the
industry. It does not mean though that the use of brokers or agents should be
banned in their entirety.
Students come to Study Group via a number of different
channels and brokers and agents form a vital role in this facilitation. To ban
them entirely is an overreaction. Study Group is willing to work with the
Government to ensure the continuation of the use of brokers and marketing
agents but with strict guidelines with appropriate penalties for non-compliance.
The committee supports these aspects of the bills that provide greater
regulation on the use of agents, brokers and marketers. Under the current
scheme, vulnerable students have been taken advantage of, frequently to their
significant financial detriment. The bills represent a clear opportunity to
provide students with greater protection. The committee encourages the Minister
for Education and Training to consider the measures proposed by organisations
such as the CALC to the further strengthen students' protections and to discourage
the circumvention of the new VET loan arrangements by a small number of
Transition to the new scheme
Another issue related to the transition arrangements to the new scheme.
As noted in chapter one, the Consequential and Transitional Bill provides for
the following timeframes for the transition to the new scheme:
continued access to existing VET FEE-HELP students through to the
end of 2017 provided they were enrolled with existing VET FEE-HELP providers in
a course before 1 January 2017, in receipt of VET FEE-HELP for that course and
are actively training;
continued access to existing VET FEE-HELP providers approved for
VET FEE-HELP before 4 October 2016 for those continuing students; and
the closing of VET FEE-HELP to new providers from 4 October 2016
and to new students from 1 January 2017.
The Australian Chamber of Commerce and Industry (ACCI) emphasised the
critical importance of the three bills being passed as soon as possible to
allow for implementation of the new scheme for 2017:
The impact VET FEE-HELP had on the reputation of VET, the
distress caused to students that have been poorly served by a few 'dodgy'
providers, and the budgetary impact of the VET FEE-HELP scheme are strong
reasons why the Government needs to act immediately in securing the passage of
the VET Student Loans legislation... [The bills] need to pass with minimal delay
to ensure certainty for 2017. Parliament should commit to swift action to amend
legislation as necessary and pass the Bills to ensure certainty for providers,
industry, and students for 2017.
Master Builders Australia, Ai Group and BCA were also adamant that
the Parliament should pass the bills as soon as possible.
Although the government has clearly articulated the timeframes for the
transition to the new scheme, some participants were concerned that
insufficient time had been allocated to VET providers to ensure a smooth
transition. Others were concerned about the potential impact on current or
recently enrolled VET students who would be affected by the changes.
In regard to the impact of the transition for providers, ACPET expressed
concern over the short time for existing private VET providers to seek
provisional approval to participate in the new scheme, or to plan future
While Clause 27 will enable Table A and B providers [higher
education providers as listed in the Higher Education Support Act 2003],
TAFEs and other government owned providers automatic entry to VET Student Loan,
existing VET FEE-HELP private providers will need to seek provisional approval
to participate in VET Student Loan during the period 1 January to 30 June 2017.
These providers will then, during the provisional approval period, be required
to apply again for formal approval under new streamlined eligibility
requirements... At the time of writing no provisional application process had
been released – less than 3 months from the start of the new academic year for
some providers. They are unable to market programs, plan resources or staffing.
There is almost no time for private providers to plan and fund the necessary
infrastructure required to support course delivery. This will cause
considerable turmoil and ongoing uncertainty.
In order to address these concerns, ACPET recommended that the
provisional and formal application process for existing providers be merged
with the Department granting automatic approval for providers without
significant adverse compliance actions that are meeting provisional contractual
The Sydney Film School argued that given the significant extent of the
changes, the government should provide additional time for implementation once
legislation has been passed so that providers have time to adjust to the new
scheme. The School suggested that the government defer the start date of the
legislation, once enacted, to 1 July 2017 or 1 January 2018.
Concerns were also raised about the impact of the transition on
students, as outlined by the Academy of Interactive Entertainment:
There is little time for alternative funding arrangements to
be made for students enrolling in courses starting in 2017. There are no
details available for the banking industry to provide VET loan packages, to
help fund the gap between what the government new VET Student Loan scheme will
pay for, and what the cost of a particular course is. In addition, families and
students who have applied for their chosen courses are now in a position where
they have not been able to budget for funding the course fees on their own, as
they were anticipating being able to access VET‐FEE
As a direct example of the impact of the transition, Kairos Christian College
explained the potential effect for two of its students:
We have students studying two year programs in the Diploma of
Music and they will lose support as these courses are only till Dec 2017 and
currently their courses end only July 2018. If the proposed bill is passed in
parliament we have no backup to support these students...
TAFE Directors emphasised the importance of managing the transition well
to ensure that 'no bona fide student is disadvantaged':
Students particularly at risk in the transition are those
recently enrolled, including through State tertiary admission centres for the
2017 academic year, and those with study patterns that may reasonably take
longer than one year to complete. TDA notes that the Australian Qualifications
Framework specifies a duration of 18 months to two years for Diploma courses.
There will also be students who, through no fault of their own, encounter an
unexpected delay in their ability to complete their course. It is important
that transition arrangements are sufficiently flexible to meet student needs by
extending VET FEE-HELP loan access beyond 31st December 2017 and not causing
ArtsPeak advocated for a delay in the implementation of the bills
pending further consultation given the extent of the proposed changes:
These changes amount to a huge shift in vocational training
and the future priorities of the Australian economy and therefore it is
imperative that the community and the arts and creative sectors are consulted
and given adequate time to respond.
The Ai Group and BCA suggested that current students should be allowed
to complete their study even if their course is not on the new eligible course
Ai Group and the Business Council therefore propose that a
minor amendment is made to the legislation that explicitly allows for students
to continue in their course of study until they have completed, or the end of
2018, even if the course is not on the new approved course list. This clause
would only apply to students currently enrolled under the VET FEE-HELP scheme.
Other inquiry participants also suggested that the government honour the
loan contracts already entered into with students in the current VET FEE-HELP
program for the full duration of the course, or that transition arrangements
for students in the current loans program be extended to at least December
Remediation of debt
The Consumer Action Law Centre (CALC) argued that the transition to the
new scheme represented an opportunity to assist Australians carrying debts that
were accrued due to the 'unacceptable conduct' of a provider or broker. CALC
suggested that a scheme to remediate debt 'would recover much needed funds for
the Commonwealth and erase wrongly incurred VET FEE-HELP debts'.
The amount of debt unfairly incurred by students in the VET FEE-HELP
scheme is vast. Dr James Hart, the Group Manager of the Skills Programs at the
Department of Education and Training, advised that a newly formed unit within
the department had been able to remediate student debts of $13.2 million:
Since May of this year we have had a complaints handling
unit. We have been able to get the remission of $13.2 million in debt, so that
is the student will not have the debt and the Commonwealth will get that paid
back, and that equates to around 1,500 debts.
In addition, Dr Subho Banerjee, the Deputy Secretary for Skills and
Training at the Department of Education and Training, advised that the
Department is currently co-party to four actions with the ACCC to recover the Commonwealth's
expenditure from providers. In addition, there are 28 other matters being
The Hon Michael Lavarch, Commissioner for Risk, Intelligence and
Regulatory Support at the Australian Skills Quality Authority said that as a
result of their 2015 audit program, four providers had their registrations
cancelled. These four providers had VET FEE-HELP loan entitlements from
students amounting to about $288 million.
Mr Lavarch also stated that there were a further ten matters that had an
insufficient evidence base to support the cancellation of registration but that
nonetheless warranted action:
In another 10 instances we decided that we did not have an
evidence base which justified the imposition of sanctions in terms of a
cancellation, suspension or some other sanction, but we were sufficiently
concerned about what we found when we looked at these 10 providers to place
some conditions on the providers and impose an enhanced monitoring regime. The
conditions that we imposed went to the supply of data and information to us,
which would be over and above the normal supply of data and information that an
RTO supplies. In the case of those 10 providers, one of them has subsequently
gone into liquidation, so there are still nine in play. We are doing follow-up
work with those providers as part of our 2016 [audit] program.
Mr Gerard Brody, the Chief Executive Officer of CALC said that the
transition to the new scheme represented an important opportunity to tackle these
'legacy issues' of the VET FEE-HELP scheme by remediating unfairly accrued debt:
Given what we know about enrolment practices that were
engaged in by significant players in the sector, including door-to-door sales
in lower socioeconomic regions and cold-calling jobseekers, coupled with the
disgracefully low completion rates, we surmise that tens of thousands of
Australians, and maybe more, were enrolled in courses as a result of what the
bill calls 'unacceptable conduct'. As widely accepted, these Australians are
now carrying large debts, with nothing to show for it. Tackling the legacy
issues must be of the highest priority for government. As policymakers, you
cannot simply accept there is a problem and legislate to reform for the future
and not be prepared to remedy those exploited by the problem you are seeking to
To achieve debt remediation, CALC made a number of recommendations, as
the Department of Education and Training contact all students
with incomplete courses to determine whether the enrolment was as a result of
'unacceptable conduct', with re-crediting of the student's FEE-HELP balance to
amend section 25(2) of the VET Student Loans Bill 2016 to include
a requirement for an approved course provider to appoint an independent third
party to assess all previous VET FEE-HELP enrolments by that provider, and
refund/re-credit any loan deemed to be a result of 'unacceptable conduct';
That the meaning of 'unacceptable conduct' in section 71(2) in
the bill, which is to be defined by the rules, include conduct that contravenes
the Australian Consumer Law; and
amend section 68 to remove the proposed time limitation of 12
months for the re-crediting of a FEE-HELP balance.
Given the gross abuse of the current VET FEE-HELP system by a small
number of unscrupulous providers, the committee is strongly of the view that
the bills should be implemented as soon as possible.
However, in order to not disadvantage currently enrolled students, the
government should consider honouring the loan contracts already entered into
with students in the current VET FEE-HELP program for the full duration of the
course, or that transition arrangements for students in the current loans
program be extended until December 2018.
Reporting and transparency
In order to avoid the failures of the VET FEE-HELP scheme, it was argued
that the new scheme should have an emphasis on reporting and transparency to
ensure that any issues with the scheme are identified as earlier as possible to
enable corrective action to be taken. As observed in Chapter 2, Ms Rea
highlighted that slow access to data was one of the factors that contributed to
the ongoing abuse of the VET FEE-HELP scheme:
So it was not until the actual data started to come out—which
started to show the explosion in enrolments, and the rapidity of that started
to show, the enrolments and of course the amount being taken out in loans—that
it became clear there was something more than a few bad eggs, a few rorters, a
little bit of gaming going on here and there.
Mr Lavarch similarly observed that under the VET FEE-HELP scheme, ASQA
had limited access to data on the scheme which inhibited its ability to
undertake investigations in the VET sector:
We had relatively little information about performance under
the VET FEE-HELP program. We are not the administrator of the program. Our
providers do not engage with us as approved VET FEE-HELP providers. Information
such as enrolment numbers, growth in enrolment, percentage of loan increase and
the like is not supplied to ASQA. I think the department will say in its
evidence that the regime around that was not particularly adequate, as events
have turned out. It seemed to have been adequate in the higher education space
from which the scheme has been borrowed to be brought into the VET space but
was not adequate in the VET space. For our 2016 [audit] program we have worked
closely with the department to look at the data sets that they have had
available to compare with the data sets that ASQA has available to select the
providers to be examined.
Accordingly, the ACCI argued that it was of the 'utmost importance' that
the new loans scheme promoted transparency:
There are many reasons for the failure of the VET FEE HELP
scheme, but the faults in program design and oversight could have been
identified earlier if the Minister and department were required to report on a
regular basis concerning the utilisation of the scheme. It is of utmost
importance that the replacement program has built in requirements for greater
transparency including the regular reporting of real-time data to better
monitor the progress of the new program.
Ms Jenny Lambert, ACCI's Director of Employment Education and Training,
emphasised this during her appearance before the committee:
A really important message is that the legislation must
require transparency... We would add to that list that was proposed a list of
qualifications as well. As we have seen from the VET FEE-HELP situation and,
indeed, the evidence the previous witnesses pointed to about the reforms that
happened in Victoria, you cannot predict 100 per cent of what providers are
going to do. So you try and get the system design as good as possible, and then
you have got to monitor it. Part of the monitoring has to reveal it to others
to make it more transparent so that others can see what is going on. One of the
downfalls with the VET system at the moment is that the data takes so long to
get in the public domain through the system.
Mr Lavarch concurred that regular reporting and transparency must be
embedded in the new system:
It will be very important that there is appropriate
monitoring and visibility. One of the weaknesses is that it seems like people
were scrambling six months or 12 months later to realise that a provider was
sitting there with $3,000 worth of loan and you blinked and they had $30
million worth of loan: 'Oh, I've discovered that six months later.' That is,
again, a recipe for unfortunate outcomes, which is what we received.
The VET Student Loans Bill specifies that there may be ongoing
information requirements for the purposes of ensuring that approved course
providers are complying with the Act, and that the Secretary of the Department
of Education and Training has access to information and documents related to the
operation of the Act.
These ongoing information requirements may require an approved course
provider to provide the Secretary with a broad range of information relating
the provider's financial position;
courses of study provided by the provider and the delivery of
the provider's students, including information and documents
relating to enrolment, attendance, completion rates, education outcomes and
existing and projected enrolment numbers;
tuition fees charged by the provider;
changes in the provider's management or governance arrangements;
information the provider has collected for the purposes of, or in
relation to, applications by students for VET student loans.
Notably, in addition to these requirements for providers to submit
information, the VET Student Loan Bill stipulates that the Secretary of the
Education and Training Department can cause an audit of an approved course
provider to be conducted to determine whether the provider is complying with
the Act, and/or one or more students enrolled by the provider are genuine.
Mr Lavarch explained that as a consequence of this provision it will be far
easier for ASQA to monitor the activities of approved course providers:
In essence, we will stand in the shoes of the department as
their agent to undertake the audit, but the other important change, which is in
the consequential amendments bill, is that it makes a condition of registration
for an RTO to be compliant with both the run-out of the VET FEE-HELP program
and the VET student loan program going forward. That will enable ASQA when we
do our audits, whether we are in there wearing the hat of the department and
doing a departmental audit pursuant to the VET student loan legislation or
visiting the provider wearing our own hat under our own legislation—this change
to our legislation will enable us to look at compliance against the new VET
student loan and the run-out of the VET FEE-HELP program.
Mr Lavarch stated: 'We think that is a good outcome, and it is something
which ASQA advocated for in its consultations with the department when the
legislation was being developed'.
The committee believes that better reporting arrangements and greater
transparency, especially in relation to data, will be central to restoring
faith in the VET sector. Better and timely access to data will greatly minimise
the risk of a reoccurrence of the widespread rorting and abuse that occurred
under the previous scheme.
The committee encourages the Minister for Education and Training to
provide annual updates to the Parliament on the VET student loans arrangements
including information on individual providers and the courses they provide.
The enhanced ability of ASQA to investigate matters in the VET sector
provides further protection for students and course providers that any
misbehaviour in the sector will be quickly identified and rectified.
An additional protection for the sector will be the establishment of a
VET student loans ombudsman. This measure is discussed in the final section of
In her second reading speech, the Assistant Minister for Vocational
Education and Skills advised that in order to further strengthen student
protections the government intends to establish a VET student loans ombudsman.
No further detail on this proposal has yet been forthcoming.
Mr Lavarch observed that Australia currently has a patchy framework to
resolving student issues:
Australia seems to have a relatively fragmented structure in
terms of the position of access to ombudsman support to resolve student
matters. There is the international student ombudsman, which covers students
who are here on a student visa. That is a Commonwealth body. If I happen to be
studying with a public institution, I will have a pathway that takes me to one
of the state or territory ombudsmen. If I happen to be in some states—for
instance, Queensland or South Australia—positions called training advocates
exist in those states, which play some role. If I am in another jurisdiction,
there may not be that particular structure.
The establishment of a VET student loans ombudsman was a widely
supported action. For example, Mr Gregson of the ACCC was of the view that the
establishment of a single point of complaint, be it an ombudsman or a similar
office, would be a positive development to mitigate risk:
There is no doubt that, where issues arise across industries,
to have one common area for complaints to be compiled, trends to be identified
and either regulatory action taken or referred assists with dealing with issues
sooner than later. Whether that is achieved through current infrastructure,
whether it is achieved through an ombudsman or other lobbyists in the area,
they are all mechanisms in which you could actually have the compilation of,
and the greater oversight of, particular industries at risk.
The CALC described the establishment of an ombudsman scheme as 'a
significant step to resolve disputes involving the VET sector and students as
The CALC further outlined support for the establishment of an ombudsman:
An ombudsman will assist the sector to rebuild its reputation
and the trust and confidence of students, parents and employers. The fact that
the Government is acting quickly to establish this service is welcomed, as
accessible and free dispute resolution is complimentary to a rigorous consumer
Mr Brody of CALC, advocated for the establishment of an industry
ombudsman scheme for the VET sector.
He explained why the Centre supported an industry based scheme, which rather
than any alternative approach:
Firstly, industry ombudsman schemes are independent in the
sense that the person appointed is not subject to the direction of industry.
They are funded by industry, so therefore it provides, I think, a general
incentive for industry to prevent complaints from occurring because they do not
want to be subject to the costs of those complaints. We also think that
industry ombudsman schemes tend to be more flexible. They can adapt their rules
more easily without having to come back to the legislature every time and
therefore respond to changes in the marketplace. Industry ombudsman schemes
also have a role in systemic mispractice: where they identify one complaint
that may have happened to many other people, they can take steps to ensure that
redress is provided to all and can also provide that information to regulators
who can then take enforcement action if they deem that is necessary.
Mr Brody continued to outline the six key principles contained in the
Australian Treasury's 'Benchmarks for Industry-based Customer Dispute
Resolution' necessary for a successful industry ombudsman scheme:
The federal Treasury released, in 2015, principles for
industry ombudsman schemes, and that means they are subject to six benchmarks.
Independence is core amongst those, but they also include accessibility, to
ensure that it costs nothing to take a complaint there; that they are proactive
around more vulnerable members of the community; they include accountability,
to ensure that they report back to the public on issues and complaints that
they have seen; and they include effectiveness, to ensure that the scheme
covers the field in terms of the complaints that are generally going to apply
in that sector. And our view is that, in the main, those schemes have worked
well. In fact, we would say that industry ombudsman schemes have probably been
the single biggest step forward in consumer protection in Australia in the last
TAFE Directors considered that the ombudsman should play a consumer
awareness role in addition to a complaints handling role:
It is important that the role of this officer [the VET
Ombudsman] be more than managing complaints. Rather the role should provide
consumer awareness of the decisions of regulators, including from non-referring
States, and consumer protection which to date has required the intervention of
Commonwealth, State and community based consumer protection bodies.
ACPET welcomed the announcement of a VET student loans ombudsman,
describing it as a positive development:
We have long advocated for an independent umpire for the
sector to give students a better avenue to have their complaints resolved. An
ombudsman also offers the vast majority of providers the protection of knowing
that those who do the wrong thing will be weeded out.
The Academy of Interactive Entertainment was similarly supportive of the
establishment of a VET ombudsman: 'One essential process is the appointment of
a VET Ombudsman to protect and advocate for students who access these loans and
the associated public awareness campaigns that are associated with this'.
However, the Academy expressed concern about the time necessary to
establish the office and the lack of detail currently available on its powers
The amount of administrative work required to effectively
establish this important office is simply not possible prior to 1 January 2017,
and without this in place, the entire system should be delayed.
Additionally, there is no legislative detail on the exact
responsibilities of, and relationship between, ASQA, the Secretary and the
Ombudsman or where the additional resources to manage and monitor the
introduction of a new system will come from.
Dr Terri MacDonald, the NTEU's National Policy and Research Officer argued
that the office should also be tasked with examining the higher education
sector as well:
We are certainly supportive of an ombudsman... It is very
important, though, that it has independence and that it has the ability to
investigate not only VET but also higher education. That would make it quite
big, so, of course, how you would manage that would have to be nutted out...
Mr Brody concurred that the remit of the ombudsman include all
VET-related complaints, not just those relating to the VET Student Loans
The committee strongly supports the establishment of a VET Ombudsman as an
essential mechanism for the resolution of disputes in the VET sector.
The committee believes that the Government should be guided by the
principles of ensuring that the Ombudsman is accessible to all VET students,
and accountable through regular public reporting on the outcomes of complaints.
The committee further believes that the Treasury's benchmarks should be used as
a central tenet to establishing the Ombudsman's operations and functions.
Once established, the committee encourages the government and private
providers to actively promote the Ombudsman to ensure that VET students are fully
informed about their rights.
The committee recommends that the Government establish a VET Ombudsman
and work with key stakeholders to ensure that the Ombudsman operates in a way
that is fit for purpose.
Concluding committee view
It is widely agreed that the current VET FEE-HELP system has been
exploited by a small number of unscrupulous providers and, as a consequence, a
large number of students have been taken advantage of. In particular Indigenous
Australians, older Australians and Australians with disability were signed up
for significant loans for courses they did not need or could not complete.
These unfortunate actions from the minority have damaged the reputations
of the many high quality VET providers that operate in Australia. These
providers equip their students with the necessary skills and knowledge to make
a positive contribution to the Australian economy.
It is critically important that this damage to the reputation of the VET
sector be repaired to ensure the sector's integrity and longevity, and
importantly, to provide a highly skilled and capable workforce to drive
Australia's economic growth.
These bills represent a significant improvement. In order to affect this
positive change as soon as possible, and to provide certainty for students and
the VET sector, the committee recommends that the Senate pass the bills.
The committee recommends that the Minister for Education and Training incorporate
the views outlined in this report and that the Senate pass the bills.
Senator Bridget McKenzie
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