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As a result of receiving complaints regarding the payment of fees for childcare services not provided during the lockdown, the Competition and Markets Authority (CMA) has published guidance for nurseries and early years providers (service providers) to help them understand how consumer law applies to their arrangements with parents during the current pandemic.

The CMA is an independent non-ministerial department that works to ensure consumers get a good deal when buying goods or services, and that businesses operate within the law. One of the ways in which they do this is by protecting consumers from unfair trading practices.

Contracts with consumers must be fair, as otherwise they could be deemed unenforceable. As a parent purchasing childcare services from a nursery is a consumer, the nursery must ensure its trading practices are fair.

The purpose of this note is to help the early years sector comply with consumer law and in reaching fair agreements with parents.

Charging full fees for services not provided during the lockdown

To comply with government guidance on public health restrictions, many service providers closed their doors and were stopped from providing their usual childcare services. In such circumstances, the CMA’s view is that:

  • the parent should not have to pay for childcare services that cannot be provided;
  • anything in a service provider’s terms and conditions requiring a parent to continue to pay when the service is not provided is likely to be unenforceable;
  • parents should be offered a refund for childcare services paid in advance which have not been provided, and no further demands for payment should be made until it is clear that the service can resume; and
  • parents should not have to pay for temporary breaks in the service, where the service provider is not in a position to actually provide care.

Relying on an existing term in a contract

Some contracts may provide for a payment of a contribution to cover costs during a temporary interruption in service. Others may allow for breaks in services through a force majeure clause (a clause which deals with the impact of events which are beyond the reasonable control of the parties to the contract).

The CMA has warned that a term which intends to allow the service provider not to perform any of its obligations but requires the parent to continue to pay the fees in full, is likely to be unenforceable. However, the CMA does not have an objection in principle to a term which allows a request for payment of a small contribution whilst the services are disrupted for a limited period.

Amending an existing contract

The CMA is unlikely to object to any amendments to an existing contract where both parties agree to that change being made. However, where there is a provision in the contract that allows the service provider to change the contract to impose new terms without the consent of the parent, that term is likely to be unfair.

Cancellation policies

Parents should not face disproportionate sanctions for ending a contract for the provision of childcare services.

Consequently, the service provider should not use provisions requiring a lengthy notice to terminate a contract or for the payment of unreasonable cancellation fees. Such terms should not be used if the service provider wishes to increase its pricing or is unable to provide the services itself (e.g. because of the lockdown).

Please note, notice periods and cancellation fees may be appropriate in normal circumstances where the services can be provided but the parent decides they want to stop receiving them.

Pressurising for payment

The CMA has made it clear that “no payments should be demanded unless there is an existing, clear and fair contractual basis for them”. Accordingly, parents should not be pressured to pay fees on the condition(s) that, if they failed to do so, their child would lose a place and/or the service provider would have to close their business, due to low funding.

Key points to note

To summarise the above, service providers cannot:

  • generally, charge for services they have not provided;
  • amend existing contracts unless the parent also agrees to the changes being made; and
  • place undue pressure on parents to pay for undelivered childcare services.
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