Clause 7.3—Protecting pre-paid fees by students

Clause 7.3

Where the RTO requires, either directly or through a third party, a prospective or current learner to prepay fees in excess of a total of $1500 (being the threshold prepaid fee amount), the RTO must meet the requirements set out in the Requirements for Fee Protection in Schedule 6.

What clause 7.3 means for your RTO

‘Prepaid fees’ (sometimes referred to as ‘fees collected in advance’) means fees that are collected before the relevant services have been provided. These include payments made at any time before, during or after the student enrols. Any payment received before a service is delivered is unearned revenue and is a liability that must be paid back, either through service delivery or as a refund. Unless a university or government-administered, if an RTO or an agent operating on its behalf collects more than $1500 in prepaid fees from a prospective or current student any prepaid fees over $1500 must be covered by at least one of the measures available in Schedule 6.

The requirement to protect prepaid fees by students includes all students whether resident in Australia or overseas. RTOs registered on the Commonwealth Register of Institutions and Courses for Overseas Students (CRICOS) must satisfy both the requirements of this clause and of the Tuition Protection Service (TPS) under the Education Services for Overseas Students Act 2000 (ESOS Act). The TPS requires that not more than 50 per cent of the fees for an overseas student be prepaid, unless the student chooses to pay more. This applies even if 50 per cent of the course fees would be less than the threshold prepaid fee amount of $1500.

The requirements that apply to prepaid fees include all fees that a student is required to pay, including enrolment fees, tuition fees, materials fees and any other fee component that is a mandatory payment for the course.

RTOs are only required to protect prepaid fees from individual students and prospective students where the student or their representative pays the fees through direct enrolment. These requirements do not apply, for example, where an employer engages an RTO to provide training and/or assessment to members of its staff through a negotiated commercial transaction.

RTOs other than government entities and Australian universities

Where your RTO collects more than $1500 per learner in prepaid fees, you must take action to protect the prepaid fees that exceed $1500 for each student.

An RTO may apply different protection measure options to cover prepaid fees of different students, depending on circumstances. For instance, there may be reasons why an RTO opts to cover the prepaid fees of one student with an unconditional financial guarantee and the prepaid fees of another student through membership of an approved tuition assurance scheme.

If your RTO never receives more than $1500 in prepaid fees from any student, you do not have to take further action to protect the fees of students.

Government entities and Australian universities

If your RTO collects more than the threshold $1500 per student in prepaid fees, you must have and implement a policy that details how, if your RTO is unable to provide the services that have been paid for, students will be:

• placed into an equivalent course without having to pay any additional fees for the portion of the course they have paid in advance, or
• refunded for all fees paid in advance over $1500.

Structuring your fee payment schedule

Consider how best to structure your fee payment schedule. For example, if you offer a 10-week course that costs $2000, the course costs $200 per week. Therefore:

• You could collect $1500 at the time of enrolment and the remaining $500 after week seven without needing to have any protection measures in place.
• If you wanted to collect the total course cost at the time of enrolment, you would have to have one or more of the measures in Schedule 6 in place.
• There are many other options you could choose, such as collecting weekly fees, or collecting a deposit of up to $1500 at the time of enrolment and then a weekly amount equal to the calculated weekly cost of the course.

Options for fee protection measures

If your RTO is required to have fee protection measures in place, your RTO has the following options.

1. The RTO can hold an unconditional financial guarantee from a bank operating in Australia to cover at least the amount of prepaid fees in excess of $1500 for any student.
   • If choosing this option, your RTO needs to ensure the guarantee is structured so that you can refund students’ prepaid fees (in excess of $1500) in circumstances where your RTO is no longer able to deliver the training and assessment. For example, you may have an arrangement where an independent party has authority to access the guarantee.
   • You may be required to demonstrate how the amount of the guarantee was determined and how you monitor and ensure that this level is always greater than the amount of fees required to be protected.
   • This option does not need to be approved by ASQA, but you must be able to demonstrate how the guarantee meets the Standard, if requested by ASQA.
   • Note that ASQA is not available to administer any such guarantee or act as beneficiary. Any costs associated with the guarantee must be met by the RTO.
2. The RTO can hold membership of a tuition assurance scheme approved by ASQA that applies to all relevant students, including membership of:
   • Tuition Protection Service created under the Education Services for Overseas Students Act 2000 for overseas students on a student visa
   • Tuition protection arrangements created under the VET Student Loans Act 2016 for VET Student Loans to domestic students.
3. The RTO can apply to ASQA for approval of an alternative measure and implement any approved measure (use the Application for alternative fee protection measures form to apply). If you are seeking ASQA’s approval of an alternative fee protection measure, be aware that such a measure must demonstrate an equivalent level of fee protection as that provided by an unconditional financial guarantee from a bank operating in Australia.

The requirements for protection of prepaid fees apply no matter how the fees are collected. Any fees collected by a third party to your RTO (including by an education agent or broker or another company operated by the RTO’s owners) are subject to the same conditions. Your RTO is responsible for ensuring that protection measures are in place and implemented as required. These requirements apply to fees prepaid by students, regardless of when your RTO actually receives the payment.

As required by Standard 5, you must:

• notify students of the fees they must pay and when they are due
• provide students with information about their entitlements in the event that your RTO closes or otherwise ceases to provide services as agreed.

A guide to compliance

Government entities and Australian universities

If your RTO is in this category, you could demonstrate compliance by providing the fee protection policy and demonstrating how this is accessible to students. If your RTO has needed to enact the policy, you could show evidence of the process that was followed.

Enterprise RTOs

If your enterprise RTO delivers training and assessment services to employees at no cost, you could demonstrate that clause 8.4 does not apply through showing that pre-enrolment material provided to staff states that no fee is payable.

All other RTOs

If your RTO is not collecting more than $1500 in prepaid fees from any student, retain marketing and enrolment material that includes fee schedules showing the RTO does not require more than $1500 to be prepaid for any course. In this case, no further evidence would be required. In addition, your RTO’s website must not have facility to accept online fee payments beyond $1500.

If your RTO is collecting more than $1500 in prepaid fees from any student, retain evidence to show how any fees above the threshold prepaid fee amount are covered under at least one protection option. Evidence might be in the form of:

• confirmation of current membership in one or more approved tuition assurance schemes that includes all of the relevant courses and delivery locations
• evidence that the RTO holds a current unconditional bank guarantee for a suitable amount (calculated based on the total amount of prepaid fees in excess of $1500 per student the RTO would hold at any time).

Your RTO may use a combination of measures for different courses or different students. In this case, retain evidence of how all students’ fees are protected.

If ASQA has approved an alternative fee protection measure, retain evidence of current approval of that measure and your compliance with the measure.

How can my RTO demonstrate and provide evidence of compliant practice?

Regardless of the method your RTO uses to ensure students’ prepaid fees are covered by at least one protection option, under Standard 5 you must retain evidence of how students have been advised of:

• all payment terms
• the circumstances under which refunds may be issued.

Any information you provide to potential students, students or clients must be consistent with your RTO’s arrangements.

Many RTOs now facilitate student enrolments and payments through their websites. As part of its strategic review of RTOs’ marketing and advertising practices, ASQA has tested RTOs use of payment gateways such as shopping carts or payment portals. ASQA has found that in many cases information about fees payable is not available until the point of payment. Often the full value of the payment was only shown at the checkout, and the RTO provided no information or limited information on refunds (or other course information). Your RTO needs to ensure any tools your business uses to manage payments comply with the transparency and fee protection requirements of clauses 5.3 and 7.3.

If you are using a commercial ‘shopping cart’ system to collect online payments:

• ensure that the system does not allow students to prepay more than the threshold amount allowed by the arrangements you have in place
• ensure that clients are provided with the fee information upfront prior to finalisation of the payment (this may be as simple as specifying all course fees in the shopping cart and allowing only single purchases).

ASQA may review and test your website and payment gateways and may talk with past and current students and third parties to confirm that your practices have met the requirements of these clauses.

To demonstrate that your practice aligns with your policy, you could retain invoices or receipts for students that clearly state the components of the fees.

If you have arrangements with a third party to collect fees on your behalf, such as a broker or education agent, you could provide evidence of how you implement and regularly review the agreement you have in place with them to ensure they are meeting the requirements of clause 7.3.