CMA had previously looked at taking possible court action against providers, but decided instead to write to the sector and parents and leave court action up to parents to decide.
The open letter states that while the guidance is directly related to concerns that have arisen during the pandemic, ‘In the longer term we would advise providers to review their arrangements and contracts to ensure they are compliant with consumer law at all times’ (point 4, page 2 of 6).
I think there is a lot of confusion around whether the information shared by CMA is ‘for now’ or ‘for the future’. The quote above from the CMA open letter makes it very clear that contracts must always be compliant with consumer law – not just during lockdown.
Consumer law is detailed and complex, so Childcare.co.uk have released a series of FAQs to support early years providers who are trying to work out whether their contracts with parents need to be revised –
https://www.childcare.co.uk/information/cma-faq.
Part of the problem is that while parents might be happy at the moment to pay for, for example, times when you are not available to work, this could change in the future if there is a problem in the relationship between you. According to this legal source, parents have up to 6 years to claim against you for contractual issues –
https://uk.practicallaw.thomsonreuters.com/1-518-8770.
I have tried in this blog to unpick the CMA letter and to complement the Childcare.co.uk FAQs for colleagues. CMA is about consumer law – protecting the consumer from unfair practice. CMA protects you from holiday companies and shops unfairly charging ... and it protects parents from you if you try to unfairly charge them for services you do not provide.
This means 2 main things –
**If you are charging parents unfairly you need to stop.
**If parents want to, they can use this ruling to take action against you for unfair charging – up to 6 years after the over-charging has taken place.
Looking at the CMA open letter in more detail –
**The COVID-19 crisis has highlighted unfair practices.
**Consumer rights must be recognised in your contracts and policies.
**The letter isn’t saying anything new – it is simply explaining consumer law as it has always been.
So, moving forwards, you need to look at your business planning – your contracts and fees policy – and ensure they are fair and reasonable to comply with current consumer law.
Here are some main takeaways from the open letter –
**Offering a refund - if parents cannot access your service for any reason including, but not limited to, lockdown and you have already charged them, they should be offered a refund. However, if parents have received some of your service – such as any home learning you have provided – they shouldn’t expect a refund for that.
Also note – any Govt funding was yours to keep – parents do not get that in any way, including asking for it stretched over the summer unless that’s their normal way of doing things.
**Voluntary payments - CMA say that parents might be asked to pay a small contribution towards costs until your service is available again. This contribution must be agreed in advance, clearly set out in the contract; it must be a fair amount and only requested for a short time. You will notice that the free, recently updated Childcare.co.uk contracts now include a section for this information - https://www.childcare.co.uk/childminders/updated-contracts.
Also note - you cannot threaten parents to make them pay. For example, you cannot say ‘pay me or I will go out of business.’ This is unfair and illegal practice according to CMA.
**Financial problems - if you don’t have the money to refund a parent who requests their money back CMA say it is reasonable to offer credit or re-booking as alternatives. However, a refund should still be an option and time frames for processing refunds must be made available to parents.
Also note – you cannot charge parents an admin fee to organise refunds or make changes to contracts.
**If you are shut - parents should not be required to pay for a service that has not been provided. This will include making changes to your contracts if you, for example, currently charge for bank holidays or your family holidays when you are closed.
Also note – CMA states that contracts which require parents to pay for a service they do not receive are unfair and unenforceable.
**Other refunds - parents should be refunded for advance payments if your service is not available – for example, unexpected closures for snow days or if you close due to staff illness.
**In the future - you cannot require parents to sign new contracts which require high payments for future lockdown or cancellation fees or long notice periods – terms and conditions in your contracts must be fair and reasonable.
Also note – if a child leaves during a notice period, CMA say that fees should be reduced to reflect lower costs – for example, you should not charge for food, resources, outings etc if it is not being provided for the child.
What next?
**Check your contracts to make sure they are fair and reasonable and reflect consumer law. You will find free contracts here from Childcare.co.uk - https://www.childcare.co.uk/childminding-contracts.
**Offer refunds or future free childcare to parents affected by any breaches, if necessary, to ensure you are compliant with consumer law.
Also note – consumer advice services suggest putting money to one side every month to protect against future business threats such as local coronavirus shutdowns.
I hope you find this brief overview useful.
Sarah