Issue/ Summary of Complaint
1. The Student enrolled in a full-time course with the Provider and made payment in full of the course fees in the amount of $29,030.00 (“the Fees”) prior to the course
commencement date in July 2022.
2. Prior to the Course commencement date, the Student withdrew from the Course.
3. The Provider, in accordance with their refund policy, refunded the student 75% of the Fees.
4. This amount was amended to exclude the Agent’s commission on the basis that the Agent
had agreed to forgo their commission1.
5. The Student is of the opinion that the Provider is not entitled to withhold the balance of the
fees ($4,607.00) and is seeking a full refund.2
6. The Provider’s position is that they are entitled to retain up to 25% of the Fees as per their
withdrawal policy and compliance with relevant legislation. This, as per [4] above has been
amended to 16% and amounts to actual costs incurred as a result of the Student’s
cancellation.
7. On this basis, the Student raised a complaint with the International Student Contract
Dispute Resolution Scheme (iStudent) on 19 June 2022.
Background
8. The Student signed and submitted the Application Form/ Tuition Agreement (“the
Agreement”) dated 07 March 2022 to the Provider for the course commencing in July 2022 (“the Course”).
9. The Retailer also signed the form confirming that the terms and conditions had been explained to the Student in their role as agent.
10. Following the Provider’s assessment of the Application Form (the Student was also
required complete a written test and two interviews), the Student was accepted onto the
Course.
11. On 4 April 2022 the Student made full payment of all fees for the course in the amount of
$29,030.00 (“the Fees”) as per the Evidence of Payment dated the same date.
12. The Agreement sets out the Provider’s refund policy in their “Terms and Conditions” as
follows: (See footnote 1)
“c. If your course is more than three months you have up until the end of the 10th working day to withdraw and receive a full refund of tuition fees less any costs incurred by the [Provider] up to a maximum of 25%. If you withdraw on the 11th working day or more after the same date, you are not entitled to a refund.
d. The [Provider] may retain up to the specified amount above (c) provided the cost is
justified.
e. The enrolment and insurance fees are non-refundable.
f. Expenses incurred offshore on student recruitment and visa applications are non-refundable.
g. If requested the [Provider] will provide you with details of the cost components for the purpose of working out the maximum deductible percentage. In the event of a dispute over the amount deducted, you can refer the matter to the Disputes Resolution Scheme by contacting NZQA on 0800-697-296 or Fairway Resolution on 0800-774-422.
h. Conditions a-c also apply if you are unable to get a visa, or if you cancel your application before you arrive in NZ or before the first date of the course for which attendance of students at the establishment is required. The [Provider] will consider applications for refunds in exceptional circumstances. Any refund will be made at the discretion of the Chairman.”
13. Prior to the commencement date, the Student withdrew from the Course.
14. The Student’s reasoning for doing so was due to the impact of COVID-19 in her home
country.
15. It is the Provider’s submission that the Student withdrew as she had elected to study with another provider instead.
16. This is supported by the WeChat message detailed in [21] below and in the Student’s
Complaint to iStudent where she states “I got the offer from [another provider] recently, and I will continue my study in [another provider] next year, which will be a better choice for me”.
17. The Student requested a full refund of the Fees paid.
18. The Provider informed the Student that as per their refund policy detailed in [12], a 25%
“cancellation fee” would apply.
19. The Student disputed the reasonableness of the deductions made by the Provider and
requested a breakdown of their costs incurred.
20. The Provider in their email dated 12 July 2022 detailed these as follows:
Please see the following breakdown costs $7,257.50 as requested:
• Enrolment fee: $250
• Administration fee: $500 (Admin, counselling, processing, Public Trust fees, etc)
• Material fee: $2,500 (sunk costs for [redacted])
• Sunk Marketing costs: $1,357
Total: $4,607
• EOP: $29,030
• 25% of total fees: $29,030 x 25% = $7,257.50
• Balance of deduction available to the agent as part payment of commission: $7,257.50-
$4,607=$2,650.50
21. The Provider further confirmed that the Student was aware that the 25% cancellation policy would apply if the Student withdrew and supplied a copy of a WeChat message between the Student and her Agent in support of this which took place prior to the
Student making payment:
22. The Provider also referred to the signed Agreement and the Terms and Conditions detailed in [12] and confirmed that the 25% Cancellation Fee was in accordance with their stated Withdrawal and Refund Policy.
23. The Student is dissatisfied with the Provider’s response and has made a complaint to
iStudent on the basis that the Provider is not justified in deducting 25% of the fees paid as a
cancellation fee.
24. As per [4] and [5] above, this is now amended to reflect the 16% retention by the Provider.
Student’s Position
25. The Student has provided detailed submissions dated 18 August 2022, 23 August 2022 and 7 September 2022. I have carefully reviewed all submissions provided by the Student and summarise the key points as follows:
Contract of Enrolment
25.1 The Student disputes that she entered into a contract with the Provider on the
basis that while she had completed the written examination, the interview and made payment of the fees, she did not sign a contract and had not begun the
process of applying for a visa.
25.2 She disputes that the “Application Form/ Tuition Agreement” can be understood to be a contract on the basis that many students will apply to a school and would
subsequently decide not to accept the offer from the provider. Those students are
not required to pay towards the expenses of the provider and the only difference in
her situation is that she had paid the tuition fees.
25.3 Regarding the submission of the Provider that she was aware of the 25% retention in [21] the Student submits that her understanding of this and the Refund and Withdrawal policy was that this would only apply once she had a visa and at this
point she would have 10 days to withdraw from the course which would result in a
25% fee cancellation.
25.4 After receiving an offer from the Provider, the Student only paid the Fees in order to ensure inclusion in the “quota of early entry”. (see footnote 2)
25.5 Her reason for withdrawing from the Course was due to concerns relating to the
domestic COVID-19 situation and not due to the personal reasons (wanting to
attend [another provider]) as submitted by the Provider.
Unreasonableness of 25% cancellation fee
25.6 She informed the Provider of her withdrawal in early April and asked her Agent to return her “quota” so that it could be redistributed.
25.7 Her understanding (which is supported by her Agent) is that the Provider did not
incur any loss as a result of her withdrawal.
25.8 With regards to the quota, the Student submits firstly, that the Provider was able to reallocate the quota to another student and that the Provider was still offering
quota allocations in early June. Further, that if this was not the case, the Provider
failed to inform her of this and that if they had done so, she may have elected not
to withdraw from the Course.
25.9 Further, that while a maximum of 25% can be deducted in the case of early
withdrawal, this must be reasonable and the Provider has not shown this.
Specifically, the Student submits that the only cost which they can show relates
directly to the Student are the marketing costs.
26. On this basis the Student submits that the Provider is unreasonably withholding 25% of the fees paid as a cancellation fee.
Provider’s Position
27. The Provider has provided detailed submissions dated 23 August 2022 and 6 September
2022. I have reviewed these in detail and summarise the key points as follows:
Reasonableness of 25% cancellation fee
27.1 In the postscript to their submissions dated 23 August 2022, the Provider confirmed that the Agent had agreed to forgo his commission ($2,650.00) and as such the cancellation fee would be reduced accordingly.
27.2 As such, the Provider is retaining a 16% cancellation fee which is made up as
follows:
• Enrolment Fee: $250
• Administration Fee: $500 (Admin, counselling, processing, Public Trust fees, etc)
• Material Fee: $2,500 (sunk costs for [redacted] etc)
• Sunk Marketing costs: $1,357
Total: $4,670.00
27.3 The Provider submits that their Refund Policy complies with Clause 5 of the
Education (Refund Requirements for International Students) Notice 2012 in that:
“If an international student withdraws from a programme or training scheme of 3
months’ duration or more within the refund period, the maximum percentage of the
payment, or payments, that the private training establishment may retain is 25% of
the fee total”.
27.4 The Provider further states:
“The Education Notice 2012 requires us to justify the expenses, some of which are
itemized at the time of payment and some of which are “overhead costs such as
marketing, recruitment, and agents’ commissions that the establishment recovers
through fees” (Clause 7(2)), as also affirmed by Public Trust.”
27.5 The Provider was unable to mitigate their costs by reallocating the Student’s quota and that the instructions from Education New Zealand and the Ministry of
Education were clear and confirmed that the quota obtained by the Provider for the
Student could not be returned or reallocated to another student.
27.6 The Provider provided the following details regarding the $1,357.00 for “Sunk
Marketing Costs”:
“In our case these sunk marketing costs are calculated by dividing the annual sales and marketing spend by the number of new enrolments in the last year. The last financial year's expenses totalled $416,825, covering the wages of the sales team, marketing and promotion, printing and brochures, website management and maintenance. There were 307 new students recruited and enrolled in that same financial year. Therefore the marketing cost per capita was $1357. Our marketing effort and agent were absolutely successful in recruiting [The Student], and it is therefore fair for the school and the agent to have their recruitment costs covered. Having said that, if the agent is prepared to forgo the portion of commission included in the retention, we will of course not retain it.”
27.7 The Provider submits the following regarding the “Material Fee”:
“The material fees of $2500 are as quoted on the pricelist. The items covered are the school’s subscription to [redacted], royalties, library books and magazines, e-texts, photocopying, NZQA accreditation charges and general expenses. [The provider] pays significant up-front annual costs to provide substantial, quality services to students”.
Contract of Enrolment
27.8 The Provider submits that a contract was concluded with the Student and that this is evidenced by her signed “Application Form/ Tuition Agreement”, payment of the Fees and receipt of the Evidence of payment and that these constitute the
establishment of a valid contract.
27.9 Further, that the Terms and Conditions were clearly set out in the Agreement
signed by the Student and set out in [12] above that “there is no question that
[The Student] signed that she understood and agreed to these terms and conditions”.
27.10 The Provider also submits that the Student was aware that a 25% cancellation fee would apply in the case of a withdrawal and this is further supported by the
WeChat history detailed in [21].
28. The Provider has further offered that should the Student elect to proceed with studying with them, that they will put the retention back into her course fees.
Discussion
29. There are two questions which the International Student Contract Dispute Resolution
Scheme must determine:
29.1 Was a valid contract entered into between the Student and the Provider?
29.2 Is the Provider entitled to withhold the remaining cancellation fee of 16% of the Fees paid by the Student?
30. In order to determine the above, consideration must be given to the relevant statutory and contractual obligations on the Provider relating to refunds.
31. Based on the submissions of the Provider and the Student, I am convinced that the parties entered into a valid contract and specifically:
31.1 The Agreement clearly set out the terms of the contract, including that the purpose of the agreement was for the Student to be enrolled with the Provider for the
Course.
31.2 By signing the declaration the Student confirmed her “intention to be a bona-fide
student and that my intention is to study at [The provider]”.
31.3 The Student was also supported by an Agent who also signed the Agreement,
confirming that the terms and conditions had been explained to the Student.
31.4 The intention of the Student to enrol with the Provider is further supported by the
Student completing the subsequent written test and interview process.
31.5 The result of this was an offer from the Provider to enrol the Student on the
Course.
31.6 The Student, by paying the full tuition fees in the amount of $29,030.00, accepted the Provider’s offer.
31.7 The result of this was that a binding contract was entered into between the Student and the Provider the terms and conditions of which were clearly set out in the Agreement.
32. The Student’s decision to withdraw was therefore made subject to the Withdrawal and Refund Policy in the Agreement on the basis of which the Provider was entitled to retain a maximum of 25% of the Fees as a cancellation fee.
33. The Education (Pastoral Care of Tertiary and International Learners) Code of Practice 2021 at Part 6, Clause 46(1)(b) and (c) requires a provider to ensure that students are given
sufficient information regarding their rights and obligations in respect of refunds and that
refund policies must be fair and reasonable.
34. I am satisfied that the Agreement clearly sets out the refund policy and that the Student has confirmed her understanding and agreement to this by signing the form. The Student was also given assistance by an agent when completing the Agreement. As such, the Provider has taken all reasonable steps to ensure that the Student was aware of the Provider’s withdrawal and refund policy.
35. The Provider’s Refund and Withdrawal Policy is consistent with the Statutory requirements for refunds as set out in the New Zealand Government Education (Refund Requirements for International Students) Notice 2012 (the “Notice”). This states that an international student enrolled in a course of study of three months duration or more will be eligible for a refund for fees paid should they withdraw from the course within 10 working days of the commencement of the course. Further, the Provider may retain a maximum of 25% of the fees paid for actual expenses incurred.
36. Clause 6 of the Notice states that providers may only retain payments for expenses
incurred if they are able to show that the expenses fall into one or more of the categories
specified in Clause 7 of the Notice (Clause 6(a) ) and that the amount retained does not
exceed the actual expenses incurred (Clause 6(b) ).
37. The Provider has provided a breakdown of the specific costs resulting from the Student’s
enrolment and withdrawal which amounted to $4,670.00 and equate to 16% of the Fees
paid by the Student.
38. I am convinced by the Provider’s submissions that these costs relate to the Student’s
enrolment and further, that these could not be mitigated.
39. I am specifically convinced that the Provider was unable to reallocate the quota and could therefore not enrol a different student in the Student’s place,
40. As such, I find that the Provider has established the actual costs incurred by them as a
result of the Student’s enrolment and withdrawal which they are entitled to withhold and I am
satisfied that the Provider has discharged their obligation in terms of Clause 6(b) of the
Notice.
Final Decision
41. The final decision of the International Student Contract Dispute Scheme is that the
Student’s complaint be dismissed.
Final Determination
Further submissions
42. The proposed decision was provided to both the Student and the Provider.
43. No further submissions have been received from the Provider.
44. The Student has advised that she disagrees with the proposed decision of the International Student Contract Dispute Resolution Scheme and has made further submissions to support her argument that the Provider was able to mitigate their loss caused by her cancellation by reallocating her place to another student.
45. To support her argument, she has submitted screen shots of a conversation with the Agent. In the screen shots the agents advises the Student that the Provider “[The provider] gave me a total of 4 places. Then they reallocated the place you returned”.
Discussion
46. The Student’s submissions contradict those of the Provider as to whether they were able to mitigate any of the costs incurred as a result of the Student’s cancellation.
47. Specifically, the Provider’s submissions in [27.5] are that they were unable to mitigate their costs by reallocating the Student’s quota and that the instructions from Education New
Zealand and the Ministry of Education were clear and confirmed that the quota obtained by
the Provider for the Student could not be returned or reallocated to another student.
48. In order to make a determination on whether the Provider was able to mitigate their loss by reallocating the Student’s place, I have considered the 4th International Student Border Class Exception Implementation Framework released by the Ministry of Education and dated March 2022, which advises the following:
48.1 Timing
Timing Initial implementation of this border class exception, including the final allocation of places to providers and assessment of the majority of student nominations to those places, is expected to be completed within March and April 2022. Requests for Travel (RFT) are planned to open on 13 April 2022. It is intended that most students included within this border class exception, will begin to arrive in New Zealand as soon as possible after their visa is granted, with most aiming to be here for a mid-2022 study start.
48.2 Redistribution of places
Places allocated to a provider that have not had student nominations approved by
ENZ/MOE by Friday 6 May 2022 will become available to other eligible providers. It is likely this will be run within the same sub-sector on a first in first served basis. Consideration will be given to any imbalance of unmet demand across the sub-sectors in the allocation of places process. This decision will also consider the relative nomination status of each subsector. The process for this will be decided by ENZ and MOE.
48.3 Cancellation of nominations
Nominated students who do not continue with the process by applying for a ’Request for Travel’ (RFT) or visa, will have their nomination cancelled. The timeframes are:
• 2 weeks (10 working days) for a nominated student to apply for a RFT following the provider being notified of the successful nomination.
• While the immigration process allows 4 months for a nominated student to apply for a visa following an Invitation to Apply (ITA) being issued; providers are asked to work with their nominated students to ensure an application is made as soon as possible, ideally within 1 month of the ITA being issued by INZ. Nominated students are required to have confirmed that they are travel ready. It is understood that the situation of some students may change, however education agencies cannot guarantee that the place will remain available to the provider if a nominated student does not progress to completing an RFT. If a nominated student’s circumstances change
and they are no longer able to meet the requirements of this border exception process the provider should inform ENZ/MOE as soon as possible.
49. While this does not confirm that a reallocation was not allowed as per the Provider’s
submissions, the Framework does confirm that the ability of a Provider to do so would not
be guaranteed and that this would be determined by ENZ/ MOE.
50. Even if the Provider was able to do so, there is no evidence submitted by the Student which confirms that the Provider was able to recruit another student to take the Student’s place.
Final Decision
51. For the reasons given above, I am not convinced that the Provider was able to mitigate
their loss incurred due to the Student’s cancellation.
1 The initial complaint to iStudent related to the retention of 25% from the Provider. The Provider’s submissions dated 23 August 2022 confirm that the agent has forgone their commission (effective on the same date) and as such the retention by the Provider now excludes this amount and equates to 16% of the Fees paid by the Student. The Provider’s submissions confirm that this amount ($2,650.00) will be refunded to the Student.
2 The initial complaint by the Student is amended to the retention of the Provider of 16% of the Fees paid.
2 This refers to the Government’s approved entry to New Zealand for a group of 5,000 international students (Cohort 4). This cohort of students will have special permission to enter New Zealand, referred to as a border class exception. The students are expected to begin arriving from mid- 2022 and detailed in “Information for international students being considered for nomination under the 4th border class exception” released by the Ministry of Education.