‘Parents should not have to pay fees for childcare which is not provided’

Parents should not have to pay for childcare services which are not being provided during the pandemic and should be offered a refund for services paid for in advance which are not provided, according to a new report.

The report follows an investigation by the Competition and Markets Authority into claims that some parents were being unfairly charged and denied refunds for childcare over the course of the last few months.

The CMA says only a minority of providers did this and has written an open letter to the early years sector to clarify its position. It says that contract terms requiring consumers [in this case parents] to pay providers who are not providing the services agreed in the contract “are likely to be unfair and unenforceable”.

It acknowledges that some contracts allow for a payment contribution to cover costs during a temporary interruption in service, but says this could include providing services in different ways to what was previously agreed, such as online learning. The CMA says asking for such a contribution is fine so long as it ends if the parent terminates their contract and is temporary and low (“no more than direct unavoidable costs to the business during the disruption such as mortgages/rents, where relevant ‘holiday periods’ could not be agreed, utilities, insurance premiums”). This would not include costs where nurseries get reimbursement, for instance, through government schemes such as the furlough scheme.

Voluntarily changing agreements

The CMA also says changing agreements on a voluntary basis is allowable, but says there should be no pressure applied to force parents to accept the changes. It states: “Consumers cannot be forced to agree to new arrangements and any terms that allow the business to impose new terms or unreasonably increase prices are likely to be unfair and not binding on the consumer”.

In addition, the CMA says notice periods and cancellations fees may be appropriate in normal circumstances, where the business is still able to provide a service but parents decide they want to stop receiving it. However, it notes that cancellation terms “must be fair and brought to consumer’s attention”. It says notice periods should be no longer than reasonable for the business to find a replacement child if the business continues to provide a service. And it says additional fees should not be charged if a child continues to attend during the notice period. If a child does not attend during the cancellation period, fees should be reduced to reflect this.

Removing a child’s place due to non-payment

Finally, the report says it is likely to be an unfair and illegal practice to warn or threaten to remove a child’s place unless a parent continues to pay full or substantially full fees during periods of lockdown. It adds that childcare providers should not put emotional pressure on parents to pay high fees by saying jobs will be lost or the provider will close if they don’t pay them as this could be a breach of consumer law.

The report calls on providers to review their agreements with parents to ensure they comply with law. It says that in addition to action taken by the CMA, individual parents can take action separately under consumer law if they think there have been breaches.

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