Early years sector faces no action by consumer watchdog

Fiona Simpson
Tuesday, July 28, 2020

The UK’s markets and competition watchdog will not take any enforcement action against childcare providers following a probe into alleged unfair treatment of consumers during lockdown, the Competitions and Market Authority (CMA) has said.

No actions will be taken against the sector, the CMA says. Picture: Lucie Carlier
No actions will be taken against the sector, the CMA says. Picture: Lucie Carlier

The CMA included childcare and early years providers alongside wedding planners and holiday accommodation companies in an investigation over a rise in complaints relating to cancellations and refunds due to the Covid-19 pandemic.

In an open letter to the sector about the investigation, Gordon Ashworth, director of the CMA consumer group, found that “whilst the vast majority of providers were striving to reach fair arrangements with consumers in very challenging circumstances, there remained concerns that some were treating consumers unfairly.”

Ashworth’s letter advises providers to “take any necessary steps to ensure compliance with consumer law” noting three issues “which have caused some problems in the sector”.

It states that in some cases providers have charged “full or excessively large fees for services which are not being carried out due to the pandemic public health restrictions and government guidance.”

The CMA’s view is that “consumers should not have to pay for services that cannot be provided and should also be offered a refund where services are paid for in advance but do not take place as agreed in the contract”.

Some providers were also relying on “unfair cancellations terms” in contracts with parents resulting in them being charged high cancellation fees, Ashworth adds.

The letter also criticises some providers over “putting unfair pressure on consumers to agree to make payments by threatening that the child’s place will be lost or the provider will go out of business”.

Ashworth says: “Our view is that where legislation or other lockdown measures mean parents cannot make use of these services for a period of time, it is likely to be an unfair and illegal practice to warn or threaten to remove a child’s place unless the parent continues to pay full or substantially full fees during periods of lockdown.” 

Concluding, Ashworth says no action will be taken against providers but the CMA will continue to monitor the sector. 

The Early Years Alliance (EYA) said it was “glad” of the outcome and welcomed Ashworth’s “of the significant financial pressure that childcare settings have faced which, as we know, are the result of years of inadequate funding.”

A recent report by the alliance warns that nurseries and childminders face “mass closure” due to the financial impact of Covid-19 on the sector.

Neil Leitch, chief executive of the EYA, said: “Given how vital the early years sector is to society as a whole, no provider should have ever been put in a position where they were forced to ask parents for the financial support they should have been getting from the government.

"With more local lockdowns - or even a second coronavirus wave - widely expected, there is a real possibility that childcare providers may be ordered to temporarily close once again, meaning another huge drop in parental income for already-struggling nurseries, pre-schools and childminders.

"It is vital, therefore, that the government commits to giving the sector the financial support it needs, when it needs it - otherwise, we risk seeing many more childcare providers being forced to shut their doors for good."

Purnima Tanuku, chief executive of National Day Nurseries Association (NDNA) praised the investigation saying “the CMA has taken time to listen and understand the immense pressure providers were and still are under and recognised this in the context of consumer law.”

“These have been very challenging times for parents and providers. We welcome the fact that the CMA has decided to issue advice to the sector on staying within the regulations and understanding their obligations so that parents and providers get the best results, rather than take enforcement action,” said Tanuku.

Liz Bayram, chief executive of the Professional Association for Childcare and Early Years (PACEY), added: "We issued advice during lockdown that made clear what was reasonable and fair to expect in terms of support from parents and what was not. We know the vast majority of our members followed this advice, did not charge parents during lockdown or have asked for small voluntary contributions. Those who used PACEY’s model contracts will have already been well within consumer law requirements.

"These have been challenging times for parents and providers and, whilst clearly a tiny minority of providers didn’t follow good practice, it is important to recognise that the CMA has decided to issue supportive advice to the sector rather than take enforcement action."

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