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Record $26.5m penalty for ‘appalling’ sales tactics

Adam Zuchetti
Adam Zuchetti
20 September 2019 1 minute readShare
Federal Court of Australia

Australia has a new record penalty for breaching consumer laws, after defunct training company Empower Institute was fined $26.5 million for appalling tactics used to market and sell its diploma courses.

The ACCC revealed back in September 2018 that the Federal Court ruled that Cornerstone Investments Aust Pty Ltd, trading as Empower Institute, had engaged in unconscionable conduct and making false or misleading representations to students enrolled in diploma courses.

At the time, the regulator said Empower had enrolled over 6,000 students into its courses between March 2014 and October 2015, many of whom it claimed where “vulnerable consumers” enticed by incentives such as free laptops and cash rebates, unaware that they were actually incurring substantial debts as a result.

“Empower was paid more than $64 million by the government under the VET FEE-HELP scheme for enrolling students using these appalling tactics, while the students were left with large debts,” ACCC chair Rod Sims said at the time of the verdict.

A full 12 months later, the Federal Court has now handed down its penalties against the company, which is now in liquidation. It was ordered to pay a $26.5 million fine, which the ACCC said set a new record for penalties handed down for breaching Australian Consumer Law.

Yet the penalty dwarfs the additional $56 million repayment order made against the company as reimbursement of government funding it had received.

Mr Sims welcomed the “record-breaking” penalty, which he said “reflect[s] the seriousness of the conduct”.

He said that Empower had enrolled consumers into VET FEE-HELP courses and marketed these courses in Indigenous communities, remote and low socio-economic areas, even offering inducements to entice them.

“Between June 2014 and December 2014, Empower enrolled more than 4,000 students, often using these appalling tactics,” Mr Sims said.

“Empower misled many vulnerable and disadvantaged consumers who had poor English language literacy or numeracy skills, and others who could not even use a computer and did not have access to the internet.

“It should have been clear that these consumers were not likely to complete Empower’s courses, but would still be saddled with significant lifetime student debt.”

He added: “The magnitude of these penalties and the $56 million ordered to be repaid to the Commonwealth should serve as a serious warning to the vocational education sector, and all other Australian businesses, that engaging in unconscionable behaviour has very significant consequences.”

Mr Sims expressed his gratitude for the federal government’s decision to waive the student debts of the affected consumers.

“It is important that victims are not saddled with a debt burden because they signed up to these courses as a result of Empower’s egregious conduct,” he said.

The penalties bring to an end a lengthy litigation process that was commenced by the ACCC back in December 2015.

Cornerstone Investments Aust Pty Ltd was placed into liquidation on 26 April 2017, ASIC records show, at which time Sydney firm HoganSprowles was appointed as liquidator.

Record $26.5m penalty for ‘appalling’ sales tactics
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Adam Zuchetti
Adam Zuchetti

Adam Zuchetti is the former editor of MyBusiness and a senior freelance media professional, specialising in the fields of business, personal finance and property. In 2020, he also embarked on his own business journey – inspired in part by the entrepreneurs and founders he had met through his journalistic work – with the launch of customised pet gifting and subscription service Paws N’ All.

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