On 8 October 2020, the UK Competition and Markets Authority ("CMA") announced that Care UK had agreed to refund certain NHS funded residents that had been charged a "shortfall" fee, which the CMA alleged was unfair and breached UK consumer protection laws. This is part of the CMA's broader investigation into the UK care homes sector and continues the CMA's increased use of its consumer protection laws.
| what you need to know - key takeaways |
- The commitments secured from Care UK form part of the CMA's wider review into the care homes sector. Care home providers should carefully consider the application of the CMA's 2018 consumer law guidance for care home providers to ensure that they are complying with consumer law, including ensuring that options are laid out clearly for consumers and that fees are commensurate with services provided.
- This case also provides further evidence of the CMA's broader increased drive to use its existing consumer protection powers, including its ability to secure refunds for consumers.
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On 8 October 2020, the CMA announced that Care UK Health and Social Care Holdings Ltd and Care UK Community Partnerships Ltd ("Care UK") had agreed to refund certain residents who were charged a 'shortfall' fee while receiving NHS Continuing Healthcare ("CHC") funding, which is designed to cover the cost of essential care.
Where residents were entitled to funding from the NHS, Care UK required residents to pay a fee if they wished to receive care from a Care UK premium care home (the "Shortfall Amount"). This Shortfall Amount was equal to the difference between the amount of CHC funding and the amount which was represented to the resident as the residential fee. The relevant terms and conditions stated that the Shortfall Amount would be invoiced to the resident as if it were an 'Enhanced Room Fee', even if an enhanced room was not provided, and required the resident to waive any claims that the Shortfall Amount was illegal, void or otherwise not payable (the "Relevant Terms").
The CMA considered that this conduct was unfair and in breach of consumer protection laws (under the Consumer Rights Act 2015 ("CRA") which prohibits unfair contract terms, and the Consumer Protection from Unfair Trading Regulations 2018 ("CPRs") which imposes a general duty not to trade unfairly with consumers), as well as the applicable NHS rules. In its 2018 consumer law advice to care home providers the CMA stated that asking residents in receipt of CHC funding to make top-up payments is likely to infringe consumer law, including by amount to a misleading commercial practice under the CPRs.1
As a result of the CMA's investigation, Care UK has committed to:
- refund residents that had been charged the fee since 1 October 2015. It is expected to pay out more than GBP 1 million to around 160 affected residents by the end of November 2020;
- stop charging the Shortfall Amount or any fee that is a condition to providing NHS Continuing Healthcare, including payment for an enhanced/better standard of room where Care UK did not offer the resident a "meaningful choice" between the enhanced room and a room at the same home which did not require any additional payment; and
- not use the Relevant Terms, or enforce or attempt to rely on any of them,
unless such conduct becomes expressly permitted by amendments to relevant NHS rules/guidance.
The CMA's action in this case forms part of its wider probe into the care homes sector, having opening an investigation in June 2017. In January 2019, Care UK (and two other care home providers) made changes to their terms and conditions, and another large care home provider has agreed to pay out more than GBP 2 million in compensation. The CMA is separately seeking a court order against Care UK in relation to a non-refundable and compulsory upfront administration fee it charged on commencement of a care home contract. Although Care UK agreed to stop charging the fees from 1 August 2018, it did not agree to make any refunds. As the CMA does not have the power to impose such remedies on companies found to have infringed consumer protection law, the CMA has issued court proceedings to seek a court order. These proceedings are currently due to be heard in the High Court in May 2021.
The CMA's work in relation to care homes is part of a wider focus on consumer protection enforcement. This has included work in response to COVID-19 (focussing on unjustifiable price increases and cancellations and refunds), as well as ongoing investigations into the leasehold sector and into fake and misleading online reviews. In connection with a further investigation looking at social media endorsements, the CMA announced on 16 October 2020 that Instagram has committed to a package of changes to tackle hidden advertising on its platform.
For a summary of the UK consumer law regime, as well regimes in other jurisdictions around the word, see the International Comparative Legal Guide to Consumer Protection Laws and Regulations 2020.
With thanks to Natasha Gromof of Ashurst for her contribution.
- CMA Guidance (CMA96), UK care home providers for older people – advice on consumer law, November 2018, para 4.134.
- The CMA was only able to secure refunds for fees paid from 1 October 2015, as this is when its powers to seek financial redress for consumers came into force under the CRA.
