Cold-call education company fined $351,000

Media Release

Issued 28 November 2017

Release No. 59

Cold-call education company fined $351,000

Maths education company Auckland Academy of Learning Limited (AAL) has been fined $351,000 on 11 charges under the Fair Trading Act.

AAL salespeople made misrepresentations while trying to sell an educational software programme known as CAMI (Computer Aided Mathematics Instruction) to consumers in their homes. They also failed to fully notify consumers of their rights to cancel the contracts they entered into during the required ‘cooling off’ period.

“AAL took advantage of parents’ and caregivers’ fears that children were not succeeding in school, and it used an inherently misleading test to encourage them to purchase an expensive product,” said Commissioner Anna Rawlings.

AAL cold-called consumers and identified homes with school-age children. Three of the charges were for misrepresentations made by AAL salespeople when they attempted to set up appointments to visit parents in their homes.

“Parents were told they had been selected to receive an ‘evaluation and tutoring session’ in maths and English, to determine whether their children had any ‘knowledge gaps’. In fact, the true purpose of AAL’s visit was to sell the CAMI system,” said Ms Rawlings.

A further three charges were for representations about the “educational assessment” given to children while at customers’ homes.

“AAL told parents the assessment demonstrated their children’s ability against their last school year’s work, but typically about half the questions were too difficult for the child’s school year level or were inappropriate. The tests did not correspond with the New Zealand curriculum or accurately identify gaps in children’s learning, as AAL claimed,” said Ms Rawlings.

In sentencing today in the  Auckland District Court, Judge Noel Sainsbury said “the assessment that was given to the children did not reflect what it claimed to be. It was higher than their level. Inevitably the children would fail.  That would put pressure on the parents concerned about their education.  I cannot see any other conclusion other than that was planned and deliberate. It was cynical marketing targeting people that are vulnerable because of their natural concern for their children."

In victim impact statements, parents said AAL told them their children “were behind”, “had massive gaps” or “had failed miserably”. Parents said they felt “guilted into buying CAMI” and like a “terrible parent”.

Three charges were for misrepresenting that parents needed to buy CAMI.

"This is not a case of rogue or overly enthusiastic sales reps and a company that was careless in its training or supervising. The basis for the misrepresentations was in the systems the company set up.  I consider that makes this serious offending," said Judge Sainsbury.

Most customers purchased a 24 month subscription with a total cost of nearly $6,200. Some purchased a 48 month subscription costing just over $11,000.

The sales visits were uninvited direct sales because consumers were not aware that the purpose of cold-calls was to sell CAMI, and the final two charges were for failing to give consumers oral notice of their right to cancel an uninvited direct sales contract within 5 working days.

Background

The offending occurred over a period of more than 4 years, from March 2011 until September 2015. During that time 3359 contracts were entered into, with more than one quarter cancelling during the cooling-off period, leaving about 2,400 ‘live’ contracts.

Sales income from March 2012 to September 2014 was more than $3,700,000.

The Commission received more than 175 complaints about AAL.

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