Senate

Supplementary Explanatory Memorandum

(Circulated by the authority of the Minister for Education and Training, Senator the Hon Simon Birmingham)

AMENDMENTS TO THE VET STUDENT LOANS BILL 2016

OUTLINE

These Government amendments to the VET Student Loans Bill 2016 (the Bill) will further enhance protections for students and taxpayers. The amendments will put in place a framework for a dispute resolution scheme to investigate, report on, and make recommendations in relation to, complaints about the behaviour of approved course providers in administering the VET student loans program and the superseded VET FEE-HELP program.

The proposed amendments will authorise the Minister to approve a dispute resolution scheme that is external to, and independent of, vocational education and training providers - a VET student loans Ombudsman.

The proposed amendments will also make some minor changes to strengthen student protections and improve the availability of information about VET student loans.

More specifically, the amendments will:

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require an approved course provider to participate in, and comply with the requirements of, the VET student loans Ombudsman scheme;

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require an approved course provider to cooperate with the VET student loans Ombudsman;

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enable the Ombudsman to collect, use and disclose information which is protected by the Bill (VET information) for the purposes of its functions;

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expand the ban on brokers enrolling students or accepting applications for approved courses;

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expand the prohibition on providers using third party contact lists, but enable the rules to specify exceptions;

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require the department to publish, twice yearly, comprehensive information about VET student loans, approved courses, and the approved course providers to which loans have been paid;

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ensure a robust Constitutional basis for regulation of approved course providers; and

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make some minor editorial corrections to the Bill.

The amendments will enable the Minister to approve external dispute resolution schemes by legislative instrument, providing flexibility in respect of the ombudsman model and the scheme operator. The approved scheme will be operated by the Commonwealth Ombudsman, which will require further legislative amendments in early 2017.

The VET student loans Ombudsman will have the power to investigate complaints relating to scheme members regardless of whether the complaint relates to behaviour under the VET student loans program or the superseded VET FEE-HELP program.

The Ombudsman will report on its investigations and recommend that providers and others take action, or stop certain behaviour, to address identified problems and provide redress to affected students. In addition, the Secretary of the Department of Education and Training will be able to consider the Ombudsman's findings in deciding whether to take action under the governing legislation, including administrative sanctions against providers and the remission of student debts.

The VET student loans Ombudsman scheme will commence on 1 July 2017, coinciding with the full implementation of the VET student loans program. In the interim, complaints about the VET FEE-HELP and VET student loans programs will be managed by the Department of Education and Training.

FINANCIAL IMPACT

The proposed amendments will not have a financial impact as they do not directly establish an ombudsman.

Regulatory Impact

The Office of Best Practice Regulation has advised that no further Regulation Impact Statement is required for these amendments.

PROPOSED GOVERNMENT AMENDMENTS

The Government proposes the following amendments to the Bill. The amendments are in sheet GX140.

Approved providers to participate in external dispute resolution scheme

Amendment (15) introduces a new Division 4A into Part 4 of the Bill (Approved Course Providers). Division 4A sets out the mechanism by which an external dispute resolution (EDR) scheme for approved course providers is established and enforced.

New clause 42A empowers the Minister to specify, by legislative instrument, a scheme that provides for the investigation and resolution of disputes relating to VET student loans and VET FEE-HELP assistance, and compliance by approved providers with the VET Student Loans Act 2016, and VET providers with the Higher Education Support Act 2003. The instrument must specify the operator of the scheme (see paragraph 42B(c)).

The rules made under the Bill will be able to set out matters that the Minister may or must take into account in specifying an EDR scheme under this clause - for example, matters such as the accessibility of the scheme to complainants, its independence from approved course providers, its fairness to affected parties, transparency of its operations, its efficiency, and its effectiveness at resolving disputes^[1].

New clause 42B defines what is meant by approved external dispute resolution scheme and approved external dispute resolution scheme operator .

New clause 42C provides that an approved course provider must comply with the approved EDR scheme of which the provider is a member. Accordingly, an approved course provider that doesn't comply with the scheme will contravene the Bill, which can lead to administrative sanctions being imposed by the Secretary under the Bill, including suspension of loan payments to the provider (see paragraph 21(g) of the Bill), or suspension or cancellation of the provider's approval (see clauses 36 and 37 of the Bill).

Amendment (10) inserts a new paragraph (h) into subclause 25(2) of the Bill, with the effect that a body applying to become an approved course provider must be a member of an approved EDR scheme. This is also an ongoing requirement of an approved course provider; a provider that ceases to be a member of such a scheme can have its approval suspended or cancelled.

Amendment (11) amends subclause 25(3) of the Bill, to enable the Secretary to exempt an approved course provider from the requirement to be a member of an approved EDR scheme. Similar to the exemption available for tuition assurance requirements, there may be some providers that already have adequate external student complaints and review processes, for example, some of the providers listed in clause 27 of the VSL Bill.

Amendment (16) inserts a new paragraph (e) into clause 46 of the Bill, which will require an approved course provider to cooperate fully with the operator of the approved EDR scheme of which it is a member. Again, failure by a provider to cooperate fully with the operator of the scheme can lead to administrative sanctions being imposed by the Secretary under the Bill.

Amendments (21) and (22) insert new paragraphs into subclauses 92(1) and 93(2) of the Bill, respectively. These will allow officers of approved EDR scheme operators to use and disclose VET information for their functions, and for the Secretary to disclose VET information to an approved EDR scheme operator.

Amendment (24) amends subclause 114(1) of the Bill to allow the Secretary to delegate his or her powers under the Bill to an officer of an approved EDR scheme. Although it is not currently proposed to delegate any of the Secretary's powers under the Bill to officers of approved EDR scheme operators, it might be necessary in future for the operator of an approved EDR scheme to require production of information (clause 53), or to be involved in reconsideration of reviewable decisions by an approved course provider (Division 2 of Part 7). Note that the Secretary can give written directions to delegates about the exercise of powers (subclause 114(2)).

Amendments (2), (3) and (5) insert or amend definitions in clause 6 of the Bill as required for the approved EDR scheme provisions.

Amendments to consumer protection provisions

Amendment (17) amends subclause 49(1) of the Bill to clarify that the restriction on the use of brokers and agents applies to arrangements in relation to approved courses.

Amendment (18) achieves two purposes. First, it amends paragraph 49(1)(a) of the Bill to expand the prohibition on providers' use of brokers and agents to include prohibiting arrangements to enrol students or accept applications for enrolment in an approved course. This first amendment removes the need to establish any understanding that some of the tuition fees would be paid for by a student loan. Second, it omits paragraph 49(1)(b) which prohibited providers from entering into arrangements for another person to mention the availability of VET student loans. This paragraph is not omitted to 'water down' the prohibition against brokers or agents. Instead, it is preferred to rely on the power in clause 64 of the Bill to regulate such conduct. Clause 64 enables rules to set out requirements in relation to the marketing of courses in circumstances where tuition fees for the courses may be covered by VET student loans. Using the rule-making power in clause 64 will provide for flexibility and better enable the marketing rules to target particular inappropriate conduct as it arises or is anticipated.

Amendment (19) amends paragraph 63(1)(b) of the Bill to make clear that the prohibition against the use of third party contact lists also applies when the provider uses the student's contact details received from someone else, to contact the student to enrol them in a course.

Amendment (20) omits subclause 63(2) of the Bill and substitutes a new provision to enable the rules to specify the circumstances for which the subclause 63(1) prohibition against the use of third party contact lists will not apply. This amendment will provide greater flexibility in determining exceptions to the prohibition. For example, the rules may allow referral of a student's contact details if the student has provided express consent, but only if the consent satisfies certain criteria - such as it must be in bold print, prominent, a separate optional tick box from other consents, not default ticked, name the provider and detail if any commission is payable to the referring person, etc. Alternatively, the rules may allow a person's contact details be referred to a provider (and for the provider to enrol the student and mention the availability of a student loan), but only if the person referring does so with the student's consent and receives no benefit or commission for making the referral.

Secretary to publish information on operation of VET student loans program

Amendment (23) inserts a new clause 103A into the Bill. Clause 103A will require the Secretary to publish certain information about the operation of the VET student loans program every 6 months, including:

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the number of approved course providers that operated during the previous 6 months (reporting period); and

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for each of those providers:

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the name of the provider;

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the value of VET student loans approved by the Secretary for approved courses offered by the provider during the reporting period;

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the number of students who undertook approved courses offered by the provider during the reporting period and whose tuition fees for the courses were paid (whether in whole or in part) using VET student loans;

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the number of such students who completed approved courses during the reporting period; and

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the amount of tuition fees charged by the provider to such students during the reporting period.

The rules made under the Bill can provide for additional matters to be included in the Secretary's twice-yearly report.

Alternative constitutional basis

Amendment (25) inserts a new clause 115A into the VSL Bill, the purpose of which is to ensure that, if there is any doubt about whether a provision of the Bill relating to an approved course provider is not supported by the primary source of Constitutional support for the Bill (the so-called "student benefits power" in section 51(xxiiiA) of the Constitution), that provision is limited to referring to approved course providers that are Constitutional corporations (i.e. corporations referred to in paragraph 51(xx) of the Constitution).

This provision is for the absence of doubt only; the Bill is valid to the maximum extent permitted by the Constitution generally (section 15A of the Acts Interpretation Act 1901).

Editorial corrections

Amendments (1) and (4) insert definitions in clause 6 of the VSL Bill that were inadvertently omitted from the Bill as tabled.

Amendment (6) replaces the word "accredited" in subparagraph 15(1)(b)(ii) with the word "registered" - under Part 3 of the Tertiary Education Quality and Standards Agency Act 2011, TEQSA "registers" higher education providers.

Amendments (7), (8), (9), (12), (13) and (14) correct linguistic errors in subclauses 17(4) and 28(3) of the VSL Bill (where the chapeau to the subclauses does not currently run into the following paragraphs correctly).