Royds Withy King Comment on Competition and Markets Authority guidance on care contracts

The Competition and Markets Authority (CMA) final guidance on care contracts and consumer law obligations was published recently. The guidance will, says law firm Royds Withy King, have wide-reaching implications for care homes and care providers, requiring them to review the way they operate in terms of admissions procedures, marketing, complaints handling and how they contract with service users. 

Care providers who do not comply with consumer legislation will need to make significant and substantial changes to their service user contracts or risk substantial fines and enforcement action from the CMA, Trading Standards, CQC, and directly from service users. Hazel Phillips, Head of Royds Withy King’s dedicated Social Care team, said: “The CMA believes that many care providers are breaking consumer law through their current practices. Its initial report was published at the end of 2017, with its final guidance published today. “The CMA is already scrutinising the practices of larger operators and we would expect them to shortly turn their sights onto all care providers. Most service user contracts and admissions documents we see do not fully comply with consumer legislation. Practices and contracts need to be reviewed and changed as quickly as possible to avoid penalties, legal action or reputational damage. “CQC are considering their response to the guidance and are likely to take non-compliance into consideration when awarding ratings for the well-led category.” 

The CMA has raised concerns around a number of practices including: 

  • Inaccurate and misleading information on websites and in marketing materials 
  • Charging fees for prolonged periods after death 
  • Asking for substantial upfront payments 
  • Making hidden charges for ‘extra services’ 
  • Charging fees for absences 
  • Failing to provide contracts, or providing contracts which are vague and unclear 
  • Asking third parties to act as a guarantor for care fees in inappropriate circumstances 
  • Charging third party top-ups without due regard to the Care Act and Care & Support Statutory Guidance and the NHS Continuing Healthcare framework 
  • Increasing fees in an unfair manner 
  • Lack of transparency around the treatment of Funded Nursing Care contribution 
  • Unfair termination clauses 
Hazel Phillips said: “The CMA guidance proposes that care providers provide information in a prescribed way at three separate stages – on first contact, before an offer is accepted, and on confirmation and finalisation of an offer. Weekly fees charged and what they do and do not cover will need to be made clear. 

“Up-front fees and security or reservation deposits will be more closely scrutinised. Already, Sunrise Senior Living has agreed to repay £2m in compensation for charging up-front fees, and we would not be surprised if further compensation payments were to follow in respect of the practices of other providers.” 

The CMA guidance restricts charges after death to a backstop period of up to 10 days. 

Hazel added: “The use of third-party guarantors will need to be very clearly worded and explained, and a separate contract will be required where it has been agreed with a local authority that a third party will pay a top up. Unexplained and unfair fee increases will increasingly be challenged. 

“Care providers will need to review their practices and contracts as a matter of urgency following the CMA’s final guidance.”