BILLS DIGEST NO. 5, 2017–18              7 August 2017

Education Legislation Amendment (Provider Integrity and Other Measures) Bill 2017

Dr Hazel Ferguson
Social Policy Section 

Date introduced:  1 June 2017

House: House of Representatives

Portfolio: Education and Training

Commencement: The day after this Act receives the Royal Assent. Various provisions have retrospective application.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at August 2017.

Purpose of the Bill

The purpose of the Education Legislation Amendment (Provider Integrity and Other Measures) Bill 2017 (the Bill) is to amend the Education Services for Overseas Students Act 2000 (the ESOS Act), the Tertiary Education Quality and Standards Agency Act 2011 (the TEQSA Act), and the Higher Education Support Act 2003 (HESA) to strengthen the regulatory capabilities of government to address possible unscrupulous providers entering into the higher education system.[1]

Structure of the Bill

The Bill consists of three Schedules, each in two parts, Part 1 covering the substantive amendments to the relevant Act and Part 2 the application provisions.

Schedule 1 amends the ESOS Act to strengthen fit and proper person and financial viability requirements, and extend reporting requirements and information sharing provisions.

Schedule 2 amends the TEQSA Act to introduce additional considerations into the assurance activities of the Tertiary Education Quality and Standards Agency (TEQSA), including fit and proper person requirements and strengthened financial viability requirements.

Schedule 3 amends the HESA to detail monitoring and regulatory powers including civil penalties in cases of non-compliance, and apply additional regulations to non-university higher education providers.

Background

The experience of VET FEE-HELP

The Bill is broadly consistent with recent reforms to Vocational Education and Training (VET) loans arrangements, which responded to mounting concerns over the administration and fiscal sustainability of the VET FEE-HELP scheme resulting from the entry of unscrupulous providers into the system.[2]

The Bill’s Explanatory Memorandum states:

The Government’s actions to address unscrupulous practices in the VET sector have resulted in a surge of VET providers, including some which had their VET FEE-HELP approval revoked, seeking to transition their operations into the higher education and international education sectors. It is clear that amendments to the higher education and international education legislative settings are necessary, when viewed against reforms to enhance regulatory tools and protections in VET Student Loans (VSL).[3]

The full impact of unscrupulous VET providers is still unfolding, but in 2016 the Australian National Audit Office (ANAO) reported a total of $2.2 billion had been lost through the VET FEE-HELP system:

As at 30 June 2016, the Australian Government Actuary estimated that $1.2 billion in loans issued inappropriately by VFH providers in 2014 and 2015 would not be recovered. The Actuary also estimated that a further $1.0 billion in VFH loans would not be repaid, largely relating to loan recipients not expected to meet the income repayment threshold for new debts raised in 2015–16.[4]

Costs to students and Australia’s reputation as a provider of international education may also be substantial. In 2015, in its submission to the Senate Standing Committee on Education and Employment’s enquiry into the operation, regulation and funding of private VET providers in Australia, TAFE Director’s Australia stated that both direct and broader reputational effects were being felt:

Firstly the reality of poor quality in VET provision in the case of a few providers and secondly the much greater problem of widespread perception of questionable practice that is doing significant damage to the reputation of VET nationally.[5]

Entry of VET providers into higher education

Significant overlap already exists between the VET and higher education sectors in Australia:

Since there is a continuum of knowledge and skills rather than sharp dividing lines between the AQF [Australian Qualification Framework] levels, the distinctions between vocational and higher education are partly a matter of convention ... Vocational and higher education providers also overlap. The public-sector vocational education providers, the TAFEs, are adding degrees to their course programs; eleven had done so as of mid-2016. Especially in Victoria, some universities are ‘dual sector’, with substantial TAFE operations. Other universities offer a smaller range of vocational education courses. In the private sector, many institutions offer both higher education and vocational education courses. All up, at least 86 organisations provide both higher and vocational education courses.[6]

As at June 2017, 4,587 registered training providers (RTO) have active registration to operate in Australia.[7] According to the most recent report of higher education provider applications (drawn from data at 31 March 2017) the number of these providers moving into higher education is growing:

There continue to be more new prospective providers indicating intent to submit an application to be registered as a HEP [Higher Education Provider]. However, the number decreased from 10 in Q2 2016/17 to 7 in Q3 2016/17. The percentage of these new prospective providers that are a registered training organisation (RTO) remains consistent with 80% in Q2 2016/17 identifying as RTOs versus 71% (5 out of 7) in Q3 in 2016/17.[8]

Higher education providers

In comparison to the VET sector, the number of existing higher education providers in Australia is relatively small. As at June 2017, in addition to the 43 universities (including 40 Australian universities, one Australian university of specialisation and two overseas universities) there are 123 other higher education providers registered with TEQSA.[9]

Most ‘non-university’ higher education providers (NUHEP) are private providers specialising in teaching in a particular field. However, large public institutions such as TAFEs and smaller specialist public institutions (such as the Australian Institute of Police Management) also make up that number.

Although students at these institutions do not have access to the same Commonwealth tuition fee support as those attending public universities, undergraduate and postgraduate domestic students can choose to defer their tuition fees through FEE-HELP, which, like the former VET FEE-HELP, is part of the Higher Education Loan Program (HELP).[10]

More often than not, new entrants to the higher education sector are NUHEPs. A 1999 survey listed 81 registered non-university providers, compared to the 123 operating today (not all of the 81 providers operating in 1999 are still current today).[11] As a consequence, this group of providers, when taken as a whole, appears both more diverse and less stable than the universities.[12]

The diversity of NUHEPs was enabled in part by the extension of HELP loans through FEE-HELP as part of the introduction of HESA in 2003, and peak bodies representing these providers, the Council of Private Higher Education (COPHE) and Australian Council for Private Education and Training (ACPET), have long emphasised their role in providing students with greater diversity of choice.[13] They also contend that the lack of availability of Commonwealth Supported Places (where government pays a portion of the tuition fee) and the application of a 25 per cent FEE-HELP loan fee disadvantages their students and undermines equity across the sector.[14]

These characteristics make it difficult to generalise about higher education providers, and this is borne out by recent analysis, which paints a mixed picture of outcomes for students attending NUHEPS. For example, analysis by TEQSA suggested that students attending a NUHEP may be more likely to withdraw from study. However, the study also highlighted that attrition varies considerably across all institutions, with NUHEPs at both the extreme high and extreme low end of the spectrum of outcomes.[15] In contrast to this, analysis of outcomes from those NUHEPs participating in Quality Indicators for Learning and Teaching suggests that students attending these institutions may be more satisfied than those at universities.[16]

Current regulatory arrangements

At the federal level, higher education regulation sits largely with the quality assurance agency TEQSA, which:

… registers and evaluates the performance of higher education providers against the Higher Education Standards Framework. All providers must meet the Threshold Standards in order to enter and remain within Australia’s higher education system.[17]

TEQSA’s risk-based approach to regulation focuses its assurance activities on those providers it considers most at risk of non-compliance.[18] Providers can apply to become self-accrediting authorities, in which case they accredit some or all of their courses according to the Standards. Other providers must have courses accredited directly with TEQSA. It is relatively rare for NUHEPs to be self-accrediting, with only 11 holding this status at the time of writing.[19]ESOS agencies, responsible for regulating delivery of education to overseas students studying in Australia on a student visa, include TEQSA, along with the VET regulator Australian Skills Quality Authority (ASQA), and the Secretary of the Department of Education and Training (Education).[20]

Funding programs under HESA, including HELP and the CGS, are administered by Education. Education assesses and oversees providers’ compliance with HESA and relevant Guidelines and undertakes financial viability assessments of HELP providers as part of their application to access HELP and annually thereafter and also facilitates the collection of data from HELP providers.[21]

The experience of VET FEE-HELP suggests that risk of inadequate oversight can occur at the intersection of responsibilities between Education and portfolio regulatory agencies, in particular if there is insufficient information sharing to facilitate risk monitoring and management:

There was poor engagement by Education with the Australian Skills Quality Authority and the Australian Competition and Consumer Commission to exchange information and intelligence about low quality or unscrupulous VFH providers. Within Education, until 2016 there was little analysis or internal management reporting of the VFH scheme to identify emerging problems.[22]

Unscrupulous practices in the higher education sector

Although cases of unscrupulous practices in higher education have not approached the scale seen in VET, recent cases of provider de-registration do raise concerns about whether there are appropriate protections in place, especially in relation to access to FEE-HELP.

In the most recent case, Careers Australia, operating through the Australian School of Management (ASM) withheld information about plans for rapid expansion in offerings to FEE-HELP students from TEQSA. In April 2017 the Administrative Appeals Tribunal heard that the planned increase, from 104 students in March 2015 when Careers Australia acquired ASM, to more than 8700, could have cost $87 million to the FEE-HELP scheme.[23] ASM’s registration was cancelled by TEQSA in June 2017 for failure to meet the Threshold Standards in relation to information provided to students and financial viability and sustainability. TEQSA further considered that ASM had failed to meet the conditions of its registration when it did not cooperate with TEQSA in performing its functions and failed to inform TEQSA of an event that would affect its ability to meet the Threshold Standards.[24]

As part of a series of actions against key VET providers, the Australian Competition and Consumer Commission (ACCC) recently took action against Careers Australia. On 16 May 2016, the ACCC accepted an undertaking from Careers Australia to cancel enrolments and repay to the Commonwealth amounts totalling at least $44.3 million. Careers Australia admitted that in violation of Australian Consumer Law, during the period from 1 August 2013 to 31 March 2015, through its door-to-door marketing and telemarketing, it:

•       misrepresenting that courses were free

•       misrepresenting that the courses would allow consumers to find employment or would increase their chances of finding employment and

•       offered inducements such as iPads and laptops and claiming they were provided for free if the consumer signed up to the courses.[25]

TEQSA has taken action in two other cases of providers failing to meet the Threshold Standards in recent years, cancelling the Australian Institute of Professional Education’s registration in 2016, and not renewing the Phoenix Institute’s registration in 2015.[26]

Committee consideration

Senate Standing Committee for the Scrutiny of Bills

The Senate Standing Committee for the Scrutiny of Bills has sought information from the Minister on:

•       why flexibility is necessary in relation to setting the criteria as to whether providers are fit and proper persons, and examples as to why 'market developments' mean that it is difficult to detail the relevant matters and circumstances in primary legislation

•       why it is more appropriate that the matters to be considered in determining whether a person is a fit and proper person are to be determined by TEQSA in a legislative instrument, rather than set out in primary legislation

•       why it is necessary to confer investigatory powers on any 'other person' to assist an authorised person and whether it would be appropriate to amend the bill to require that any person assisting an authorised person have specified skills, training or experience.[27]

At the time of writing no information was available as to the Minister’s response to the Committee.[28]

Policy position of non-government parties/independents

At the time of writing no non-government parties or independents have commented specifically on the Bill.

Position of major interest groups

Responses to the Bill have so far been cautiously supportive on the grounds that it will secure Australia’s higher education system against unscrupulous providers.

Rod Camm, Chief Executive Officer of the Australian Council for Private Education and Training (ACPET) stated:

I for one do support measures to help ensure integrity sits at the heart of our system. We can’t ever go through this again. I do though urge some restraint in the language and rhetoric around the changes. The new nomenclature of negativity does not accurately represent the majority of people that I know in the sector, nor does it position us to grown [sic] international exports.[29]

Phil Honeywood, Chief Executive of the International Education Association of Australia (IEAA) stated:

The changes will strengthen our national regulators’ ability to veto providers from receiving and/or maintaining their CRICOS [Commonwealth Register of Institutions and Courses for Overseas Students] registration by assessing an applicant’s previous education activities and the characters of its officers. Reporting on agent performance, and publishing data as appropriate, will promote greater transparency and accountability in educator-agent relationships and the wider sector.[30]

Financial implications

The Explanatory Memorandum notes that the Bill will have no financial implications.[31]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.[32]

Parliamentary Joint Committee on Human Rights

The Parliamentary Joint Committee on Human Rights has indicated that the Bill does not raise any human rights concerns.[33]

Key issues and provisions

Provider viability

As discussed above, financial viability assessments are currently undertaken by Education as part of a provider’s application to access FEE-HELP. Currently the HESA and the ESOS Act both contain provisions to ensure providers are fit and proper persons.[34] Consistent with the Threshold Standards, TEQSA also includes fit and proper person requirements in its assessments. The Bill seeks to strengthen these arrangements and ensure in particular that past actions of all key decision-makers are considered, in light of concerns over unscrupulous providers from VET moving into higher education.

While these changes are not controversial, focusing on consistency across the main Acts applying to higher education providers rather than introducing substantially new considerations in relation to provider viability, they are alert to the potential risks posed by new entrants to the sector. Importantly, allowing greater attention to the history of a provider’s key decision-makers establishes a risk-management approach that is more in line with the contemporary character of the tertiary education sector which (as discussed above) shows increasing overlaps and movement between VET and higher education.

Fit and proper person test in the ESOS Act

Schedule 1 amends the ESOS Act to strengthen the fit and proper person provisions applied to providers of international education and add to the range of events a registered provider must report to their ESOS agency.

Currently, the ESOS agency, in determining whether a provider or registered provider is fit and proper to be registered, must consider if the provider and related persons:

•       have been convicted of an offence

•       had registration cancelled under the ESOS Act (including the previous ESOS Act)

•       been issued with an Immigration Minister’s suspension certificate

•       had a condition imposed on their registration

•       had significant financial problems (as defined in the ESOS Act)

•       been disqualified from managing corporations under the Corporations Act 2001 or

•       have been involved in the provision of courses by another provider where any of these issues arose and resulted in a conviction or other action.

Items 4, 5 and 6 broaden these considerations to add any convictions for Commonwealth or State offences within the last five years (if these were punishable by imprisonment for two years or longer or a fine of 120 penalty units or more), cancellation of approval, or disciplinary, remedial or other compliance action arising from being a Commonwealth or State program or service provider.

Notification of certain events

Currently, registered providers must notify their ESOS agency of any offences relating to the ESOS Act. Proposed section 17A of the ESOS Act provides that registered providers must also notify their ESOS agency of an event that would significantly affect the provider’s ability to comply with the ESOS Act, and any prospective changes to the ownership or related persons of the registered provider. Such notifications must be provided within:

•       ten days if the change cannot be determined until it takes effect or

•       for other changes, as soon as practicable before the change takes effect.[35]

In relation to changes to the ownership or related persons of the registered provider, proposed subsection 17A(4) requires that the notice include information about the new owner or related person to enable a decision as to whether the provider is fit and proper to be registered. Hence notification of changes to the ownership or related persons of the registered provider trigger the application of the new ‘fit and proper’ person test (discussed above).

Retrospective application of amendments in Schedule 1

Item 16 provides that the amendments made by Schedule 1 apply not only after the commencement of the provisions, but also (in some circumstances) before the commencement of the provisions, meaning the amendments will have a retrospective application on providers and applications made (but not yet decided) before the commencement of the provisions.

Fit and proper person test in the TEQSA Act

Schedule 2 amends the TEQSA Act to provide for a definition of ‘fit and proper person’ (item 1), increase financial viability and transparency requirements (item 2), apply fit and proper person provisions to TEQSA’s consideration of new higher education provider applications (items 4, 9, 10 and 11) and enable TEQSA to take into account the history of persons related to the entity in its regulatory activities (item 7).

Currently, although TEQSA assesses if members of a provider’s governing body are ‘fit and proper persons’ as required by the Threshold Standards 2015, standard 6.1.2, the TEQSA Act does not contain any definition on which to base this assessment, nor do the Standards. Item 1 and item 4 therefore specify that TEQSA may, by legislative instrument, specify matters for consideration in determining if a provider is a fit and proper person. Items 9, 10 and 11 then specify that the status as a fit and proper person should be considered in granting an application for registration, and be a condition of maintaining that registration. The Explanatory Memorandum states that these will collectively ensure:

•       the process for provider approval will now include a requirement that an applicant not only satisfies the relevant Threshold Standards, but also that the applicant and each person involved in the decision-making processes for the conduct of its affairs (for example, each person of a provider’s corporate governing body) is a fit and proper person[36]

•       all providers applying for renewal of registration, as well as those persons who make, or participate in making, decisions that affect the whole, or a substantial part, of the body’s affairs (including higher education affairs) are required to be fit and proper persons.[37]

The above amendments in relation to registration applications and renewals is reinforced by proposed section 25A which has the effect of requiring that at all times a registered higher education provider and all persons who make or participate in the provider’s decisions that affect the whole, or a substantial part, of the provider’s affairs, must be fit and proper persons.[38]

Consideration of a providers history, financial status and capacity of providers by TEQSA

Currently, TEQSA considers the entity’s financial status and capacity and quality assurance mechanisms as well as its history of scholarship, student experience, financial status, compliance with Threshold Standards and laws regulating higher education in its risk assessments.

Item 2 replaces the TEQSA Act’s definition of an auditor with the requirement that an auditor be a registered company auditor within the meaning of the Corporations Act 2001. This will ensure a higher degree of probity than is currently the case, because auditors of a higher education provider’s financial statements must meet the new, higher standards imposed on company auditors imposed by the Corporations Act (or otherwise be approved by TEQSA).[39] The Explanatory Memorandum notes that in relation to this new requirement:

Providers will be given adequate notice and time to prepare for this amendment as it is not being required for any financial reporting until the reporting period commencing on or after 1 July 2018.[40]

Item 7 adds the history of persons related to the entity to the considerations examined by TEQSA when considering an entity’s financial status and capacity and quality assurance mechanisms. This change will allow TEQSA to consider if key decision-makers have a history of poor practices before joining the provider. In addition, item 8 amends section 15 of the TEQSA Act to expand the definition of a related person to include a person who:

•       is able to control, or to materially influence, the entity’s activities or internal affairs

•       is able to determine, or to materially influence, the entity’s financial or operating policies

•       is financially interested in the entity’s success or failure or apparent success or failure

•       is a holding company of the entity

•       is a subsidiary of the entity or

•       is a subsidiary of a holding company of the entity.[41]

This will have the effect of ensuring that the definition of ‘related person’ captures not only related entities (as applicable in the context of bodies corporate or relational terminology under the Corporations Act) but also more broadly to all regulated entities, including individuals and bodies politic. In turn this will enable the risk reflection principles to capture a wider range of instances where a person or entity exercises control or material influence over a regulated entity’s affairs, including in relation to its financial governance or operating policies and interests in its solvency or liquidity (or any companies which form part of the same corporate group as the regulated entity).[42]

Retrospective application of amendments in Schedule 2

Item 13 provides that the amendments made by Schedule 1 apply not only after the commencement of the provisions, but also (in some circumstances) before the commencement of the provisions, meaning the amendments will have a retrospective application on providers, and applications for renewal made (but not yet decided) before the commencement of the provisions.

Consideration of a providers history, financial status and capacity of providers under the HESA

Currently, section 16–25 of the HESA sets out how bodies are approved as higher education providers.

Schedule 3 will add a provider’s history and experience (and that of its key decision-makers) in higher education, including the scope of courses and level of qualifications, to the range of factors considered in approving a body as a higher education provider under the HESA. Proposed paragraph 16-25(fb) of the HESA will require that the Minister must be satisfied that the body has sufficient experience in the provision of higher education to approve that body as a provider.

In reaching such a conclusion, proposed subsection 16-25(2A) provides that the Minister may consider the following:

•       whether the body has been a registered higher education provider for three or more years

•       the history of the body, and each person who makes or participates in making decisions that affect the whole, or a substantial part, of the body’s affairs, in delivering higher education

•       the scope of courses and level of qualifications the body, and each person who makes or participates in making decisions that affect the whole, or a substantial part, of the body’s affairs, has experience in providing.

The use of the word ‘may’ means the above list is non-exhaustive, and would provide scope to, for example, consider if a provider seeking to move into higher education has key decision-makers and academic staff in place with backgrounds in higher education suitable to its plans, both in terms of governance and scope of courses. This consideration will be straightforward for those that have already been registered higher education providers for three or more years, while new entrants to the sector may need to hire staff with backgrounds in higher education.

Safeguarding FEE-HELP

Currently, Section 104–10 of the HESA allows the Minister to determine, by legislative instrument, that a specific course or all courses at a provider are ineligible for FEE-HELP. As a disallowable instrument, this determination is subject to Parliamentary scrutiny. Schedule 3 proposes a number of measures intended to raise the bar for NUHEPs to access FEE-HELP, in an effort to prevent a repeat of the losses attributable to unscrupulous providers in VET FEE-HELP.

Schedule 3, item 6 adds conditions to section 16–60 of the HESA to allow limits to be set on:

•       the number of students entitled to FEE-HELP at a provider

•       the total amount of FEE-HELP payable to a provider or

•       the units or modes of study for which FEE-HELP is payable.

This will allow the Minister to choose to limit FEE-HELP access for providers seeking to rapidly grow their operations through FEE-HELP enrolments. When viewed as a whole, the above changes along with that made by item 27[43] will allow the Minister to make a determination to limit FEE-HELP access at provider level without the requirement to table the decision in Parliament. However, the Minister must still have regard to the effect of the determination on students undertaking the course or courses under subsection 104-10(3).[44]

Proposed subsection 104-1(3) add additional conditions to Section 104–1 of the HESA to restrict FEE-HELP to students in a variety of situations, including where the relevant provider’s FEE-HELP limit (be it on the total number of students or total amount payable to the provider). In addition, proposed subsection 104(4) provides that a student is not entitled to FEE-HELP for a unit of study where the provider completes any part of the request for Commonwealth that the student is required to complete.

Proposed section 104-1A adds further restrictions on the availability of FEE-HELP entitlements. Proposed subsection 104-1A(1) provides that a student is not entitled to FEE-HELP if they fail a substantial number of units within a course of study (except where the provider has granted a special circumstances exemption).

Prohibition of certain marketing practices

Item 10 draws on experience with VET providers to disallow various marketing practices which became common in that system, including:

•       representing that HELP is not a loan or does not need to be paid back

•       offering inducements to take up Commonwealth assistance

•       mentioning the availability of FEE-HELP if engaged in cold-calling or using third party contact lists and

•       completing the request for Commonwealth assistance form on behalf of students.

Each of these practices is defined as a civil offence with an associated penalty.[45] (A full list of new civil penalties proposed in the Bill is provided at Appendix A.)

Civil penalty provisions were only recently added to the HESA through the Higher Education Support Amendment VET FEE-HELP Reform Act 2015, which sought to address the issues in VET which this Bill responds to. While enforcement of the HESA has previously relied on practices built up over long histories and the deterrent effect of providers’ needing to maintain their approval (which in theory the Minister could revoke), the introduction of these civil penalties recognise that with a more diverse sector there is a need to establish a deterrent and/or punishment below the level of de-registration.

Preventing inappropriate enrolments

Currently, providers typically set entry requirements for a course of study, and use of prerequisites to limit entry into units which assume specific prior knowledge, in order to safeguard academic standards; however, these specific checks have not been a requirement under the HESA.

Items 12 and 23 seek to protect vulnerable prospective students from being inappropriately enrolled, either without their knowledge or in units inappropriate to their academic ability as happened to many under VET FEE-HELP. As such, these items establish a responsibility for providers to ensure debts are only incurred by ‘genuine students’ (item 23) who are academically suited to the units of study they enrol in (item 12).

In the context of the overall purpose of the Bill, the intent of adding these requirements into the HESA is to ensure these checks are occurring across all providers, in response to incidences of VET providers enrolling students whose academic capabilities were far below those required for their courses. However, it is not clear exactly how this would function and concerns have been raised that applying these requirements at unit (rather than course) level will pose ‘considerable practical difficulty’ for providers.[46]

Re-crediting students where provider breaches conditions

Arguably, under the HESA it is already possible for students to have any FEE-HELP balance re-credited where the conditions for a student accessing HELP are not met (because the loan should not be made and is not a valid debt).[47]

Item 29 specifies that in cases where provider conditions are not met, any FEE-HELP balance incurred to the student must be re-credited by the provider. If the provider is not able to do so, proposed subsection 104-43(2) provides that the Secretary is able to re-credit the balance.

This amendment introduces more directive arrangements which resolve apparent uncertainty around whether the Department of Education can (or should) re-credit FEE-HELP balances in the event of providers failing to act in accordance with the HESA in relation to HELP debts.

Criticisms of new risk management approach

Part 2 of schedule 3, which sets out the application provisions of this part, has the effect that these key amendments to the HESA only apply to providers approved under section 16–25 (NUHEPs). Unlike the more nuanced approach to risk management taken by TEQSA, this approach captures institutions such as many TAFEs that are likely to be low-risk.

Warburton has raised concerns about this approach:

Do we really want a tertiary education sector bifurcated into ‘trustworthy’ education providers whose students can access government assistance and marginal providers where domestic, as well as international students, are required to pay full fee-fees upfront for their courses and do so in an environment in which there is inadequate enforcement of regulatory protections?[48]

While it is unclear why restrictions such as those on unscrupulous marketing practices would not also be applied to universities, this blunter approach to risk management is consistent with activities intended to sit with Education under the HESA through the administration of FEE-HELP.

Retrospective application of amendments in Schedule 3

Item 44 provides that the amendments made by Schedule 3 apply not only after the commencement of the provisions, but also (in some circumstances) before the commencement of the provisions, meaning the amendments will have a retrospective application on providers and applications made (but not yet decided) before the commencement of the provisions.

Information sharing

At present, sections 189, 190 and 194 of the TEQSA Act allow TEQSA to disclose information to a Commonwealth authority. Section 180–15 of HESA also allows the Department of Education and Training to disclose information to TEQSA for the performance of duties or functions of the HESA. TEQSA and Education also have in place a Memorandum of Understanding (MOU) to allow Education to make information available to TEQSA for the purposes of its risk assessment activities.[49] The Careers Australia case discussed above was discovered as a consequence of information sharing from Education to TEQSA, indicating that the sector is likely already be in a better position than VET was during the height of losses through VET FEE-HELP.[50]

Currently, section 175 of the ESOS Act allows ESOS agencies to share information about providers with relevant bodies for the purposes of administering the ESOS Act. Proposed subsection 175(1A) of the ESOS Act will compliment existing arrangements allowing the Secretary or ESOS agency to provide information to an ‘enforcement body’.[51] This will allow the Secretary or ESOS agency to provide information to a provider about the activities of its agents and to publish information about agents, for example, the number of student visas granted to students recruited or otherwise dealt with by an agent that have been cancelled or have ceased to be in effect.[52]

Increased regulatory powers

To ensure that the proposed amendments are able to be appropriately enforced, item 37 of Schedule 3 amends the HESA to insert a proposed Part 5-8 providing various regulatory powers to relevant agencies. The effect of the proposed amendments is to make the HESA (other than schedule 1A) enforceable under the Regulatory Powers (Standard Provisions) Act 2014.[53]

These changes reflect recent amendments to Schedule 1A, through the Higher Education Support Amendment VET FEE-HELP Reform Act 2015. These were essentially a stop-gap to address the issues in the VET sector until more substantial reforms could be legislated through the VET Student Loans Act 2016.[54] The features of the increased regulatory powers introduced here take their cue from the VET changes under these Acts.

Under the proposed arrangements, monitoring and investigation powers would allow regulators to demonstrate violation of the new civil penalty regime discussed above, with HESA and TEQSA investigators appointed to carry out these activities. New enforcement arrangements would allow TEQSA and Education staff with responsibilities under the Proposed Part 5-8 to issue infringement notices in accordance with allowable civil penalty provisions (set out in Appendix A).

Much of the impact of the proposed changes will be determined by the regulatory capacity of TEQSA and Education, although the Bill does largely limit enforcement activity to NUHEPs through the application provisions contained in part 2 rather than requiring coverage of the entire sector.[55]

Concluding comments

The Bill reflects key recent reforms to VET loans arrangements by increasing protection for students and the remaining HELP schemes from potentially unscrupulous providers entering into the higher education sector. While schedules 1 and 2 propose uncontroversial amendments to the ESOS Act and TEQSA Act to provide more consistent coverage in relation to fit and proper person and financial viability requirements, reporting requirements and information sharing provisions, schedule 3 proposes more substantial changes to the HESA, including a civil penalty and compliance regime, with additional regulations largely applied to NUHEPs.

The restrictions around FEE-HELP coupled with the detailed civil penalties and regulatory powers set out in the Bill appear to substantially increase the regulatory focus of the Department of Education and Training as the program manager of HELP, as well as adding to TEQSA’s existing responsibilities. Thus, one of the most significant questions raised by the Bill is whether increasing the regulatory powers of government will have the desired protective effect. The lessons of VET FEE-HELP are arguably as much about a lack of enforcement as a lack of appropriate powers. For example, the introduction in 2015 of new VET Guidelines prohibiting inducements was followed by media reports of providers continuing to offer inducements such as laptops.[56] It has been suggested that this in part reflects a lack of regulatory capacity within the Department of Education and Training:

Attaching civil penalties to existing provisions is not a solution for the absence of enforcement activity. Whatever is done to the provisions, someone has to enforce them or they will be ineffective. The ‘someone’ responsible for enforcing the Quality and Accountability requirements in HESA is the Minister and his department, with the Minister being ultimately responsible to the parliament for the job being done satisfactorily.[57]

The Explanatory Memorandum indicates that the Bill has no financial implications, however the information provided with the Bill does not include any discussion of the adequacy of the resources currently available to support enforcement activity, which needs to encompass monitoring compliance, utilising the proposed new categories of information, detecting and investigating breaches, and conducting legal enforcement action.

On the other hand, more proactive information sharing and regulatory arrangements already in place between TEQSA and Education, discussed above, appear likely to provide a better foundation for these changes than was the case for earlier efforts to reform VET FEE-HELP.

Appendix A: proposed new civil penalties—Higher Education Support Act 2003

Offence

Provision

Amount (PU)

Misrepresenting assistance (that HELP is not a loan or does not need to be repaid)

19-36

240

Offering certain inducements likely to cause a person to make a request for Commonwealth assistance

19-36A(1)

120

Mentioning the possible availability of FEE-HELP assistance if engaged in cold-calling

19-36B(2)

60

Mentioning the possible availability of FEE-HELP assistance if using third-party contact lists

19-36C(2)

60

Contravention of other marketing requirements as may be set out in the Higher Education Provider Guidelines

19-36D(2)

60

Completing any part of a request for Commonwealth assistance that a student is required to complete

19-36E

120

Failing to assess the student as academically suited to undertake the unit concerned

19-42(1)

120

Failure to comply with the provider’s own student grievance and review procedures*

19-45(5)

60

Failure to comply with HESA requirements relating to provision of statistical and other information to the Minister*

19-70(4)

60

Failure to co-operate with, or hindrance of, HESA or TEQSA investigators performing functions or exercising powers under the Act

19-71(2)

60

Failure to keep records in accordance with the Higher Education Provider Guidelines

19-72(2)

60

Failure to publish information in accordance with the Higher Education Provider Guidelines

19-73(2)

60

Failure to inform the Minister in writing of any event affecting the provider’s capacity to meet the conditions of Commonwealth assistance*

19-75

60

Failure to inform the Minister in writing of any event affecting the provider’s accreditation*

19-77

60

Failure to inform the Minister in writing of any event affecting the provider’s registration (unless the Minister has been advised of the same in relation to accreditation)*

19-78(1)

60

Failure to cooperate with the auditing body during the course of an audit

19-80(3)

60

Failure to comply with compliance notice*

19-82(4)

60

Failure to provide the Minister with a student contribution amount and tuition fee schedule according to the requirements set out in HESA*

19-95(2)

60

Failure to inform the Minister of any variation in student contribution or tuition fee amounts*

19-95(3)

60

Failure to comply with requirements relating to withdrawal from units of study

169-17(3)

120

Failure to publish census dates and EFTSL values according to the requirements set out in HESA*

169-25(3)

60

Variation of the census dates or EFTSL values without written approval of the Minister*

169-25(4)

60

Failure to adhere to Administration Guidelines in relation to electronic communications*

174-5(1A)

60

Giving false or misleading information

238-1A

60

*Offences marked with an asterisk are currently in HESA (with no civil penalties attached).

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[1].              Education Services for Overseas Students Act 2000 (Cth); Tertiary Education Quality and Standards Agency Act 2011 (Cth); Higher Education Support Act 2003 (Cth); Explanatory Memorandum, Education Legislation Amendment (Provider Integrity and Other Measures) Bill 2017, Australian Parliament website, p. 1.

[2].              These changes and the details of the VET FEE-HELP controversy are discussed in detail in J Griffiths, VET Student Loans Bill 2016 [and] VET Student Loans (Charges) Bill 2016 [and] VET Student Loans (Consequential Amendments and Transitional Provisions) Bill 2016, Bills digest, 41, 2016–17, Parliamentary Library, Canberra, 2016.

[3].              Explanatory Memorandum, op. cit., p. 1.

[4].              Australian National Audit Office (ANAO), Administration of the VET FEE-HELP scheme: Department of Education and Training; Australian Skills Quality Authority; Australian Competition and Consumer Commission, Audit report, 31, 2016–17, ANAO, Canberra, 2016, p. 7.

[5].              TAFE Directors Australia (TDA), Submission to the Senate Education and Employment References Committee, Inquiry into the operation, regulation and funding of private vocational education and training (VET) providers in Australia, 12 February 2015, p. 1.

[6].              A Norton, Mapping Australian higher education 2016, Grattan Institute, Melbourne, August 2016, pp. 11–12.

[7].              Australian Government, ‘Report list: RTO list with CEO contacts report’, Training.gov.au website.

[8].              Tertiary Education Quality and Standards Agency (TEQSA), Prospective higher education providers update: for January to March 2017, TEQSA, Melbourne, May 2017, p. 1.

[9].              TEQSA, ‘National register of higher education providers’, TEQSA website, May 2017; Higher Education Support Act 2003 (Cth).

[10].              Except for allocated places in priority areas, Commonwealth Supported places under the Commonwealth Grant Scheme (CGS), where the government pays a proportion of the tuition fee, are only available at public universities. For the 2016–17 financial year, FEE-HELP loans are available up to $126,101 for medicine, dentistry and veterinary science and $100,879 for other courses. For more information on FEE-HELP see Australian Government, ‘FEE-HELP’, StudyAssist website. More information on HELP is available in C Ey, Higher Education Loan Program (HELP) and other student loans: a quick guide, Research paper series, 2016–17, Parliamentary Library, Canberra, 2017.

[11].              L Watson, Survey of private providers in Australian higher education 1999, Department of Education, Training and Youth Affairs, Canberra, June 2000.

[12].              Norton, Mapping Australian higher education 2016, op. cit.

[13].              For example, TAFE Directors Australia, Concern over lack of genuine student choice in higher education reform plan, media release, 3 May 2017; J Ross, ‘Budget package undermines its own ideals: private colleges’, The Australian, 10 May 2017; COPHE and Australian Council for Private Education and Training (ACPET), Federal government’s higher education reforms lack equity, joint media release, May 2017.

[14].              Ibid.

[15].              TEQSA, Characteristics of Australian higher education providers and their relation to first-year student attrition, TEQSA, Melbourne, 6 June 2017.

[16].              A Norton, ‘Non-uni higher education provider students more satisfied than uni students’, AndrewNorton.net.au, blog, 25 March 2015; see also Social Research Centre, Quality indicators for learning and teaching, QILT website, accessed 22 June 2017.

[17].              TEQSA, ‘About TEQSA’, TEQSA website.

[18].              TEQSA, TEQSA’s risk assessment framework, version 2.1, TEQSA website.

[19].              TEQSA, ‘National register of higher education providers’, op. cit.

[20].              Department of Education and Training (DET), ‘ESOS agencies’, DET International Education website.

[21].              DET, ‘Applying to become a higher education provider’, DET website.

[22].              ANAO, Administration of the VET FEE-HELP scheme, op. cit., p. 30; The Australian Government has commissioned Professor Valerie Braithwaite, Professor of Regulatory Studies in the School of Regulation and Global Governance at the Australian National University, to lead a review of the National Vocational Education and Training Regulator Act 2011 (NVETR Act). The review is due to report by the end of 2017. DET, ‘Review of the National Vocational Education and Training Regulator Act 2011’, DET website, 7 July 2017.

[23].              B Butler, ‘Careers Australia plans “misleading”’, The Australian, 22 June 2017.

[24].              TEQSA ‘Australian School of Management’s registration cancelled’, TEQSA website, 16 June 2017.

[25].              Australian Competition and Consumer Commission (ACCC), ‘The ACCC: public registers: Careers Australia Group Limited (Careers Australia) undertaking’, ACCC website.

[26].              TEQSA, ‘National register of higher education providers’, op. cit.

[27].              Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 6, 2017, Parliament of Australia, Canberra, 14 June 2017, pp. 22–24.

[28].              Parliament of Australia, ‘Senate Standing Committee for the Scrutiny of Bills: ministerial responses’, Parliament of Australia website.

[29].              ACPET, ‘But wait there is more’, ACPET website, 5 June 2017.

[30].              International Education Association of Australia, ‘Government moves to prevent unscrupulous VET providers entering higher education’, Medianet website, 1 June 2017.

[31].              Explanatory Memorandum, op. cit., p. 4.

[32].              The Statement of Compatibility with Human Rights can be found at page 6 of the Explanatory Memorandum to the Bill.

[33].              Parliamentary Joint Committee on Human Rights, Scrutiny report, 5, 2017, Parliament of Australia, Canberra, 14 June 2017, p. 49.

[34].              Education Services for Overseas Students Act 2000, section 7A; Higher Education Support Act 2003, subsection 16–25(4), section 22–17.

[35].              Proposed paragraph 17A(3)(b).

[36].              Explanatory Memorandum, op. cit., pp. 38–39.

[37].              Ibid., p. 39.

[38].              Ibid.

[39].              Ibid., p. 35.

[40].              Ibid.

[41].              Tertiary Education Quality and Standards Agency Act 2011, proposed subsection 15(2).

[42].              Explanatory Memorandum, op. cit., p. 38.

[43].              Item 27 repeals subsection 104-10(4) that requires the Minister to make a determination on funding under subsection 104-10(2) not later than 6 months before the commencement of the specified course.

[44].              Explanatory Memorandum, op. cit., p. 56.

[45].              Penalties are expressed in penalty units to facilitate adjustment across the Act from time to time. A penalty unit is currently equal to $210.00, according to the Commonwealth Crimes Act, section 4AA.

[46].              M Warburton, Avoiding regulatory responsibility and its impact on student loan programs: how to really understand the Education Legislation Amendment (Provider Integrity and Other Measures) Bill 2017, LH Martin Institute, Melbourne, June 2017, p. 6.

[47].              M Warburton, The VET FEE-HELP debacle: helping its victims and lessons for administration, LH Martin Institute, Melbourne, December 2016.

[48].              Warburton, Avoiding regulatory responsibility and its impact on student loan programs, op. cit., p. 8.

[49].              TEQSA and DET, Memorandum of understanding: for the sharing of higher education data and information, TEQSA website, October 2016.

[50].              Butler, ‘Careers Australia plans “misleading”’, op. cit.; ANAO, Administration of the VET FEE-HELP scheme, op. cit.

[51].              The definition of enforcement body is according to the Privacy Act 1988.

[52].              Explanatory Memorandum, op. cit., p. 32

[53].              For information about the Regulatory Powers (Standard Provisions) Act 2014, see: J Murphy, Regulatory Powers (Standard Provisions) Bill 2014, Bills digest, 73, 2013–14, Parliamentary Library, Canberra, 2014.

[54].              From 1 January 2017, VET FEE-HELP was replaced by VET Student Loans under a new Act, the VET Student Loans Act 2016, with the VET FEE-HELP regulatory powers described under Schedule 1A continuing under grandfathering arrangements available to students until the end of 2017 (and in some cases longer).

[55].              Regulatory powers set out in the proposed Part 5–8 are confined to monitoring and enforcement of the new civil penalty provisions, which the application provisions contained in Part 2 limit to NUHEPs (those institutions approved as higher education providers under HESA 16–25). However, the proposed Part 5–8, section 238–1A applies a civil penalty to giving false or misleading information. As this is outside the limitations imposed in Part 2, at least some of the new enforcement arrangements are likely to apply to universities.

[56].              For discussion of this issue, see Griffiths, VET Student Loans Bill 2016 [and] VET Student Loans (Charges) Bill 2016 [and] VET Student Loans (Consequential Amendments and Transitional Provisions) Bill 2016, op. cit., p. 23–24.

[57].              Warburton, Avoiding regulatory responsibility and its impact on student loan programs, op. cit., p. 6.