Transparency and justification of fees – updated CMA Guidance for care home providers following the Care UK case

On 8 December 2021, the Competition and Markets Authority (the CMA) published its revised consumer law advice for care home providers (Guidance).

The updated Guidance follows the recent Care UK case[1] which questioned the legitimacy of charging an administration fee of up to £3,000 per resident. The court ultimately held the term complied with the Consumer Rights Act 2015 and we expect providers will now be asking if they can implement or reintroduce a similar charge.

The CMA has now updated and re-issued its consumer law advice for care home providers following the decision of the Care UK case and below we summarise the key changes which care home providers should take into account.

Key changes to the Guidance
The majority of the Guidance remains much the same but there are some key changes in relation to admission fees, communication and justification for additional charges and fees.

The notable updates to the Guidance include:

1. Care homes should still be cautious if they plan to charge administration fees or other non-refundable fees in advance.

2. The CMA recommends that care home providers avoid charging upfront payments unless there is a clear justification for it. Care homes should clearly inform residents on first contact about fees, what they cover, whether they are refundable and how they are refunded. Residents need to be given accurate costs so they can effectively compare different care providers to make an informed decision.

3. The CMA expressed concern that residents are being charged separately for services which are actually recovered through ongoing residential fees. The types of costs which should not be charged separately and in advance include:

• activities related to admission which do not involve the provision of materials
• maintenance or improvements to the home
• pre-contract activities which form the costs of the care provider doing business

4. It is important that both the existence of the fee and amount is disclosed early on in the admissions process. This should be provided on or before the first visit and not gradually revealed when the admissions process is already underway. Charging non-refundable fees late in the admissions process is likely to exploit a resident’s need to be admitted to the home and an ‘unreasonable’ approach, which limits their ability to avoid the fee, would therefore potentially be unenforceable.

The CMA also took this opportunity to update its advice surrounding fees after the death of a resident and there is a greater emphasis on the need to communicate with representatives as soon as possible after a resident’s death. Representatives should be informed about the proposed cause of action regarding the resident’s possession and the costs involved for removal and storage. The aim is not to put pressure on relatives who are grieving, but instead to give representatives the greatest opportunity to avoid or reduce possible storage charges.    

Next steps
The updated Guidance will not materially change the risk profile for providers who have recently updated their contracts. For those providers now wishing to apply or reintroduce administration fees, the Care UK case demonstrates there are legitimate grounds to do so but both the contractual terms and marketing materials must be carefully considered.

The Care UK case demonstrates that whilst the CMA Guidance is indicative of the way in which care home contracts will be considered ultimately it is the court that determines whether the terms comply with or breach consumer rights. As such, the Guidance is open to interpretation and we remain confident that most issues will turn on whether the rights and obligations are transparent and provided with enough notice. Providers must continue to give residents and their families enough information to understand what they are signing up to, so they can properly compare the offer of a room at one home with that of an alternative provider.

The CMA will take a decision on the next steps for its review of compliance with the consumer law advice for care home providers in mid-2022 which could mean that we may see some further changes to this Guidance in the foreseeable future.

A link to the updated Guidance can be found here.

For more information

If you would like any advice on your residential care contract following the updated Guidance, please contact Emma Watt or Rumandeep Dhariwal.

[1] CMA v Care UK Health & Social Holdings Ltd & another [2021] EWHC 2088

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