The Competition and Markets Authority (CMA) is currently part-way through a market study into the residential care homes sector, to assess whether it is working well for elderly people and their families.
It published an update paper on June 14 which identified, amongst other things, that while many care homes offer a good service, some might not be treating residents fairly; indeed certain business practices and contract terms might be breaking consumer law.
On the basis of the results of the market study so far, the CMA also launched a consumer protection case to investigate two specific areas of concern involving self-funding residents:
- the requirement to pay large upfront fees; and
- the fees charged after a resident’s death.
Other areas of emerging concern include poor initial information from care homes about their price structures and insufficient warning of price changes, while Citizens Advice has called on the CMA to consider imposing deposit protection schemes.
The effectiveness for residents of care homes own complaints processes is also being considered.
The CMA is looking at ways to ensure stronger protections for residents and their families, using the range of tools they have available.
These include powers of investigation and (potentially) enforcement where the law is being flouted.
Protection for consumers in relation to care home contracts is enshrined in the Consumer Rights Act (CRA) 2015. Key provisions of the CRA include requirements that:
- all written terms of a consumer contract must be transparent (section 68(1), CRA);
- transparent means plain and intelligible language and (if written) legible (section 64(3), CRA); and
- price/subject matter contract terms must be transparent and prominent (section 64, CRA).
A ‘grey list’ of terms (in schedule 2) which are considered ‘unfair’, include those which:
- tie consumers into a contract beyond what they would normally expect;
- unfairly prevent consumers recovering prepayments on termination; and
- subject consumers to disproportionate financial sanctions.
The CMA is concerned that in contravention of the above CRA requirements, residents are not made aware of all the applicable contract terms before they sign contracts.
Terms relating to price, including any deposits or other upfront payments, were found to be confusing or completely absent from pre-contract discussions with residents, with many complaining of ‘hidden charges’.
Residents are also being required to pay an upfront deposit at the same time as paying fees monthly in advance, potentially compensating the care home twice for the same loss.
The CMA’s initial findings in relation to fees charged after a resident’s death show care home providers retaining the right to recover full gross fees from a resident’s estate following death, including a requirement to compensate the care home provider for any shortfall in fees that would have been paid by the state.
The clear signal for care home providers from the CMA’s initial findings and investigation is therefore to ensure:
- All pricing details are clearly set out in as much detail as possible on websites and in pre-contract documentation seen by residents.
- Residents must be given time to read all contract documentation before signature.
- Requirements to pay upfront deposits and/or other management fees do not overlap with payment of monthly fees in advance to potentially allow the care home provider to recover twice for the same loss.
- Fees payable after the death of a resident should be made clear from the start and should be proportionate. Homes should not seek to recover costs for which the resident was not responsible in the first place.
The CMA is currently sending some care homes demands for information. Intended to unearth facts, these have statutory force under the Competition Act 1998. Powers to visit premises are also available.
Failure to cooperate, where investigative powers are being validly exercised, could be an offence by care home businesses and even by individual managers.
Later this year the CMA may decide to recommend the Government imposes legal changes on the commercial practices of care homes.
Meanwhile, trading standards authorities can bring prosecutions to challenge illegal current practices, while residents or their representatives may decide to challenge unfair contract terms in civil court cases.
Homes finding themselves under CMA investigation (or facing enforcement action) will need to take legal advice swiftly.
Due cooperation with any investigation needs to be combined with giving a fair account of their actions, so that their businesses are properly protected.
This article original featured in the September 2017 edition of Caring UK