Student Fee Protection Rules 2013 (v5)

Appendix B: Student Fee Protection Mechanism Options for Providers and Agents, and detailed criteria

Rules 3.1 (definition of “Mechanism”), 8.1, 8.2, 9.2, 13.7, & 13.8; clause 1.2(a) of Appendix A, & Appendix D

Mechanism 1

Trust accounts - general requirements for standard and static trusts

1.1 Must be held by a Supplier that is an Approved Independent Trustee.
1.2 NZQA approved trust deeds must be used between a Provider and a Supplier and between an Agent and a Supplier.
1.3 The standard or static trust must cover the period following receipt of Student Fees, up to and including at least the end of the relevant Refund Periods. Standard trusts or static trusts or the other Mechanisms in this Appendix must provide cover from the end of the relevant Refund Period to the end of the Course (inclusive of holidays).
1.4 The Trustee is responsible for ensuring it holds sufficient information about individual Students to enable it to carry out its role as Trustee.
1.5 There must be prudent investment rules in place which guide the investment of funds by the Trustee.
1.6 Appropriate reporting arrangements must be in place and allow NZQA to assess, on short notice, that an appropriate level of funds is held in trust.
1.7 In addition to the independence requirements in these Rules, the Trustee must meet any statutory and professional independence requirements.

Standard trust - specific requirements

(to cover the Refund Period, the period after that Period where the fees of individual Students are drawn down in arrears, and in respect of Courses under three months where no Refund Period applies)

1.8 The payment provided for in Criterion 7, Criterion 8, Criterion 9, or Criterion 10 of Appendix D must be clearly stated.
1.9 Subject to Rule 13.7, the Provider is paid from the balance of Tuition Fees (taking into account any payments under Criterion 7, Criterion 8, Criterion 9, or Criterion 10 of Appendix D) pro rata in arrears for the proportion of tuition delivered under the payment schedule referred to in clause 1.13 below.
1.10 The monies must be held in trust for individual Students rather than as a group.
1.11 Where accommodation expenses are paid by the Student, the Approved Independent Trustee may pay this expense to the Provider, the Student, or a nominated accommodation provider on a pro rata basis up to a month in advance where the Student has agreed.
1.12 Where living expenses are paid to the Student, then the Trustee may pay those expenses as an allowance to the Student, via the Provider, on a pro rata basis in advance or as otherwise agreed in writing with the Student.
1.13 There must be a payment schedule that indicates the dates and amounts of payments to be made, signed by both the Provider and the Student.

Static trust – specific requirements

(applying before or after the Refund Period, or in respect of Courses under three months where no Refund Period applies)

1.14 The trust must hold an amount that covers the maximum liability required to reimburse Students that the provider could experience should it close. The maximum liability is defined as the highest amount of Student Fees that could be paid out at any one time, including in relation to Students anticipated to pay fees within the next quarter.
1.15 The maximum liability calculations must be externally reviewed by an independent chartered accountant as required by Rule 13.2.
1.16 A static trust may be used to provide protection for homestay or accommodation payments and for living expenses, and may be used as a trust supplementary to another Mechanism if approved by NZQA.

 

Mechanism 2

Company or parent body guarantees

(applying after the Refund Period, or in respect of Courses under three months where no Refund Period applies)

2.1 Guarantees must be made in favour of an Approved Independent Trustee.
2.2 Approval for guarantees by NZQA will be considered on a case-by- case basis. Important features other than those already specified in these Rules that will be taken into account include (without limitation on any other concerns that may arise):
(a)     clear evidence that the proposed guarantor entity is financially sound and is demonstrably in a position to provide protection for the maximum liability in a voluntary closure or cessation by a Provider, or Course Closure Event;
(b)     the financial viability of the proposed guarantor as indicated by a financial security rating to the standard required of insurance or bond companies;
(c)     the wording of the formal guarantee and its recognition in the financial statements of the respective parties;
(d)     the adequacy of security for the amount of the guarantee; and
(e)     clear evidence that the proposed guarantor can pay the Approved Independent Trustee the necessary amounts to cover all refunds to Students, and can make the refunds to Students in a timely manner.
2.3 The following are not acceptable as a company or parent body guarantee:
(a)     a guarantee from a company that is not registered in New Zealand;
(b)     a guarantee from any other entity without a formal legal presence in New Zealand; or
(c)     personal guarantees.
2.4 A standard or static trust must be used to provide protection for homestay or accommodation payments and for living expenses.


Mechanism 3

Bank bonds

(applying after the Refund Period, or in respect of Courses under three months where no Refund Period applies)

3.1 The bond must be from a bank that is currently registered with the Reserve Bank of New Zealand under the Reserve Bank Act 1989 (other than banks marked “(B)”).
3.2 The bond must be for an amount that covers the maximum liability required to reimburse Students. The maximum liability is the highest amount of Tuition Fees that could be paid out at any one time, including in relation to Students anticipated to pay fees within the next quarter.
3.3 The bond must be held by, and expressed to be in the favour of, only the Approved Independent Trustee (and not the Provider).
3.4 There must not be a default clause for non-disclosure that allows the bank to decline cover due to non-disclosure by the Provider, and the bank bond must not have an expiry date.
3.5 The maximum liability calculations must be externally reviewed by an independent chartered accountant as per Rule 13.2.
3.6 A standard or static trust must be used to provide protection for homestay or accommodation payments and for living expenses.
A bank bond may be used as a trust supplementary to another Mechanism if approved by NZQA.
3.7 The Provider will need to discuss this option with their proposed bank, and must ensure the proposed bond is provided to NZQA for approval prior to entering the bond.

Mechanism 4

Deferred payment

Where no Student fees have been paid before the end of the Refund Period, use of a standard trust for the Refund Period is not needed.
Where Students pay Student Fees after the end of the Refund Period or prior to the end of tuition in respect of courses under three months where no Refund Period applies, and the fees include payment for undelivered tuition, a Mechanism must be used to protect them from the time of payment until the end of the Course.
A Mechanism does not need to be used where Student Fees are paid in arrears (eg: weekly, fortnightly, monthly) after the end of the Refund Period or paid in arrears in respect of Courses under three months where no Refund Period applies.  Where Student Fees are paid by a student in arrears of tuition delivered, the Student would not have advanced any fees for undelivered tuition, and should the Course cease to be provided the Student can stop paying the fees and there would be no risk of loss of fees paid.


 Mechanism 5

Student-based insurance policies

(applying after the Refund Period, or in respect of Courses under three months where no Refund Period applies)

5.1 The insurance policies for each student must be from a licensed insurer that is currently registered with the Reserve Bank of New Zealand under the Insurance (Prudential Supervision) Act 2010, and must be subject to the jurisdiction of New Zealand Courts and the New Zealand Insurance and Savings Ombudsman.
5.2 The policies must not contain any non-disclosure clause(s) relating to non-disclosure by the Provider that could be used by the insurer to decline cover or prevent payment of claims.
5.3 The policies must cover the maximum liability to reimburse students. The maximum liability is defined as the highest amount of Student Fees that could be paid out to Students of a Provider at any one time.
5.4 The policies must be held by the Approved Independent Trustee used by the Provider for the Refund Period, and payments under the policies must be made at the direction of that Trustee in a Course Closure Event, or in a voluntary closure or Course cessation by a Provider.
5.5 Without limiting student entitlements to a refund in the withdrawal period, the policies must provide for Pro Rata Refunds to Students, or pro rata payments to Alternative Providers (or their Suppliers if the Alternative Provider is a registered private training establishment), in a Course Closure Event, and in a voluntary closure or Course cessation by a Provider.
5.6 A standard or static trust must be used to provide protection for homestay or accommodation payments and for living expenses.
 
 
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