The CMA sets its sights on care home fees after death – what does it mean for providers?

Topics covered: CMA, Fees, Jenny Wilde, Ridout report

On 31 May 2018 The Competition and Markets Authority (CMA) published advice to UK care home providers on charging fees after a resident’s death.

The advice is based upon the Consumer Rights Act 2015 (CRA) and Consumer Protection for Unfair Trading Regulations 2008 (CPRs).

The CRA applies a test of fairness to terms in a consumer contract, even where those terms are negotiated. A term is unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ right and obligations to the detriment of the consumer. Unfair terms or notices are not legally binding and enforcement action can be taken. Where a consumer has paid money, this money is recoverable and orders can be made to refund such monies. The CRA also requires contract terms to be “transparent”.

Prior to the CMA’s investigation into residential care home contracts few operators considered the applicability of consumer law to service users.

The CMA had run a consultation after raising concerns about excessive fees being charged following the death of a resident. The aforementioned guidance has now been formulated based on the responses received and the CMA’s own draft of what it believes constitutes “fair practice” for UK care home providers. The guidance itself covers the charging of fees after a resident’s death and the treatment of their possessions.

Section 2.5 of the guidance sets out the CMA’s recommendation. It reads:

“As explained in more detail below, we are unlikely to object to contract terms which permit a care home to charge fees:

  1. a) for no more than a reasonable short and fixed period of up to three days, from the day following the resident’s death, provided that provision is made for fees to stop being charged if a new resident occupies the room within this period (see paragraphs 2.6 to 2.10); or
  2. b) until possessions are cleared from the resident’s room by their representatives, provided that a reasonable backstop period of no more than ten days is included in the contract term for fees to cease from that point (see paragraphs 2.11 to 2.14).

Care homes could also include terms which permit a representative, after the death of a resident, to request in writing an extension of the fixed period or backstop period, respectively”.

The CMA has recognised that there may be cases where relatives need access to a room for longer than three days. The guidance therefore suggests that it may be appropriate for care home contracts to set out a further short period during which fees can be charged if the room remains uncleared.

Care contracts should also clearly set out what steps the home will take to clear the room if it is not done within the specified period. This should include provision for notifying the deceased resident’s representatives and details of any charges the home will make for clearing the room and storage.

The CMA has also recommended that care homes should include provision in their contracts to set out in what circumstances they will sell or otherwise dispose of a resident’s belongings. Such provisions should set out the timings of any sale, make provision for adequate notice to be given to the deceased’s estate, make it clear that the home is obliged to obtain a reasonable price for the belongings and explain that the sale proceeds, minus reasonable expenses, will be paid to the deceased’s estate.

Whilst this guidance does appear to change the terrain for care providers it is just guidance, not a legal requirement. It is also vital to remember that this only applies to privately paying service users, not ones funding by the CCG or local authority. Many providers of care home services will be asking themselves how far they should go in changing their contracts but before making drastic amendments, providers ought to consider what the CMA’s powers of enforcement actually are.

According to the guidance, non-compliance with the consumer law that underpins this guidance could result in enforcement action by the CMA, local authority Trading Standards Services.

All have powers to enforce the consumer protection legislation referred to in the CMA’s advice and can bring civil proceedings or (in relation to certain breaches) criminal prosecutions, as appropriate.

The CMA’s guidance also notes that, where appropriate, enforcers can also seek redress for residents (including monetary compensation) or other remedies (such as the right for the resident to cancel the contract) where the resident has suffered loss as a result of the unfair terms or practices giving rise to the enforcement action.

A contract term (or consumer notice) which is found to be unfair is not enforceable against a resident, and any money paid because of that term may be recoverable by them. A resident would also be entitled to resist making payment on the basis that a term is unfair under consumer law.

Providers considering this advice will need to make a sensible and costs based decision on how to approach future contracts. Whilst there is clearly a need to provide fair terms for service users and their families, the care provider is also entitled to not put itself at a disadvantage after a service user dies.

The view at Ridouts is that from a reputational perspective, providers will not want to be the ones becoming embroiled in a dispute of this nature with a grieving family, particularly at a time when the story is likely to attract local / national press attention. One way of handling this matter is to remove the clause charging fees after death and to slightly increase the weekly fees for service users (by, for example £5) to absorb any losses at the end of the term. An amendment such as this should be done as a straightforward revision to a core term of the agreement which is not explicitly associated with the CMA’s advice.

This is clearly an emotionally charged and delicate issue, so any specific queries from families about such terms should be referred to a solicitor for careful consideration.

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