A court has ruled to formally annul thousands of student debts and slapped now-defunct private training college Phoenix Institute with a record $400 million (US$266.9 million) fine.
The Federal Court handed down the judgment on July 28, after earlier finding the school engaged in predatory enrolment of students, many of who racked up thousands of dollars in debt through government loan programs.
The debt-wipe applies to students who completed a range of online diplomas—such as business, management, early childhood education and community service work—in 2015 between Jan. 13 and Nov. 23.
The Federal Court also ordered a connected company, Community Training Initiatives (CTI) which acted as a marketing arm for Phoenix, pay $37 million (US$24.7 million) for its involvement in the wrongdoing.
Both companies have been placed into administration and may not be able to pay such a hefty fine.
They were also ordered to pay legal costs of the Australian Competition and Consumer Commission (ACCC), which pursued the case in conjunction with the Commonwealth.
Justice Melissa Perry said in her ruling, “it is difficult to think of a more serious case of unconscionability that has come before this court”.
“It is to be hoped that this phoenix does not rise from its ashes.”
Justice Perry said despite there being “no prospect” the companies will pay the penalties, the large fines were warranted as a means of general deterrence.
Only nine of the more than 11,000 enrolled students actually completed an online course with Phoenix and some were unaware they had been enrolled at all.
Most of the students were enrolled in two diplomas concurrently despite each diploma involving a full-time study load.
The ruling noted the HELP balances of students who did not complete a course had already been re-credited by the Commonwealth, and their vocational education and training (VET) FEE-HELP debts were cancelled.
The total amount of debt accrued by the students exceeded $428 million (US$285.6 million), according to the ACCC.
“This case involved cynical and calculated systemic unconscionable conduct towards disadvantaged individuals, on an industrial scale,” ACCC Chair Gina Cass-Gottlieb said on July 28.
“The recruitment of vulnerable students by Phoenix and CTI caused significant harm to the students, who were left with large government debts for courses they were unlikely to be able to complete.”
The school aggressively targeted prospective students through door-to-door marketing in poor areas, including Aboriginal communities, in 2015.
Justice Perry ruled last Phoenix’s marketing and enrolment business model showed a “callous disregard” for the interests of students.
“The tactics employed on behalf of Phoenix in soliciting enrolment applications were unfair and high pressure,” Justice Perry said.
“Consumers to whom brokers and agents marketed the online VET courses were more likely to include vulnerable individuals as compared with other individuals within the Australian community.”
