Police have arrested two people for allegedly failing to refund hundreds of thousands of dollars as promised to parents of a now-defunct school.

Officers said they picked up a man, 36, and a 44-year-old woman on suspicion of conspiracy to defraud in Ngau Tau Kok on Thursday.

The force said it had received multiple reports alleging that a school had collected capital levies from parents, and promised a refund if a pupil happened to drop out.

"However, the school subsequently ceased operations, and the complainants were unable to receive a full refund, suspecting they had been scammed," a police spokesperson said, adding that total losses amounted to roughly HK$1.85 million.

It's understood that one of those who filed a police report had paid fees totalling HK$380,000 to Inno Secondary School (Kowloon Tong) before enrolling in February.

The individual reportedly only received HK$95,000 in refunds after learning about a change of the institution's ownership in June, and was unable to contact the principal in getting the rest of the money back.

The spokesperson went on to say that the male suspect was the school's principal.

The school's registration application was earlier rejected by the Education Bureau over an unsatisfying management and financial situation, after a pupil of the private institution was suspected of holding dual student status in Hong Kong and on the mainland.