The ACCC is again taking legal action against a VET provider, saying it shows clear holes in the VET FEE-HELP system.

The Australian Competition and Consumer Commission (ACCC) is taking Phoenix Institute of Australia to Federal Court on allegations of misleading and deceptive behaviour.

Phoenix Institute took in over $100 million in government funding between January and October 2015, signing up over 9,000 students in 17,000 courses across Australia.

ACCC chairman Rod Sims says the consumer watchdog will allege Phoenix Institute targeted vulnerable people across the country, falsely them the courses were free and then taking out FEE-HELP loans on their behalf.

They also lured prospective students with a free laptop.

“People sometimes with intellectual disabilities, sometimes people who couldn't use a computer, but the courses were all online. Not surprisingly the commencement rates were very low,” Mr Sims said.

The ACCC wants Phoenix to pay back the full $100 million in government funding.

Students can incur debts of up to $30,000 under the VET FEE-HELP system, but they are not made to repay it unless they earn over $54,000.

Mr Sims said this case and similar action taken against VET provider Unique International College Pty Ltd last month showed the system has flaws.

“I think it is impossible not to conclude there are problems with the program,” Mr Sims said.

The call has been taken as his strongest comments against the VET FEE-HELP system to date.

“For a program to allow this to be occurring is a problem ... it's often very hard to close the door after the horse has bolted, I know the Commonwealth is now aware of it.”

Mr Sims said several more private training providers will be taken to court before Christmas.

Phoenix Institute is run by Australian Careers Network (ACN), an ASX-listed company.

ACN was forced to notify the share market this week that the Australian Skills Quality Authority (ASQA) – another regulatory organisation – has sought to cancel the Phoenix Institute’s VET registration.

ACN says it will fight any such move.

Phoenix Institute has issued a statement criticism the wording in some of the ACCC’s allegations.

It says they “appear to be made in the absence of information”.

“The release states that ‘not surprisingly, course commencement rates were extremely low’. Phoenix is unable to comprehend how the ACCC has come to that conclusion as the information in relation to commencements is unavailable outside of Phoenix management and has not been requested nor provided,” Phoenix's statement says.

“Phoenix can only believe the comment is made in error and not in a vindictive manner.”