Legal update
Administration fees – a welcome break for care providers
Tom Lumsden, a partner at Royal Tunbridge Wells-based solicitors CooperBurnett LLP, discusses the recent proceedings brought against Care UK by the Competition and Markets Authority regarding administration fees
The Competition and Markets Authority (CMA) brought proceedings against Care UK on the grounds that the ‘administration fee’ charged to self-funded residents at the point of admission was contrary to the Unfair Terms in Consumer Contracts Regulations 1999, the Consumer Rights Act 2015 and the Consumer Protection from Unfair Trading Regulations 2008. The CMA also argued that the practices
caused consumers to suffer loss, and that Care UK should be ordered to compensate consumers by refunding the administration fees that it received between October 2015 and July 2018. The proceedings arose from the CMA’s
investigation launched in December 2016 by way of a market study into the care market for the provision of residential accommodation with nursing or personal care for older people. The investigation looked at information from various stakeholders including care home providers, consumer bodies, local authorities, and members of the public. The CMA also commissioned research from Ipsos MORI into the experiences
of care home residents and their representatives regarding the process of choosing a care home. Following the CMA’s concerns, Care UK’s administration fee was abolished as from August 2018, but the provider denied it contravened any consumer protection laws, and refused to refund administration fees paid by residents from 1 October 2015.
Background to administration fees Upfront admission fees were first trialled by Care UK in 2013. An initial flat rate of £250 was set in certain care homes in the north of England, and a fee amounting to two weeks’ residential fees at other English care homes. These fees were only charged to self-
funded permanent residents. Self-funded residents were also required to pay four weeks’ residential fees in advance plus a refundable deposit equal to two weeks’ residential fees.
Care home providers who currently charge an administration fee and who do little or nothing to explain the contractual terms to decision-makers, or who do not have robust staff training in place, should think carefully about revising their policies and procedures
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The effect of the introduction of the
fee was to convert half of the deposit that had previously been charged, into a non- refundable fee. Care UK’s analysis suggested the average two-week administration fee during that period was £2,188. The administration fee was to cover the costs relating to a resident’s admission to a care home, including completing the relevant contract, undertaking relevant care needs and risk assessments, initial care planning, room preparation and consulting with the resident or their representatives. Care UK clarified that their fee was
intended to contribute to its total costs in handling admissions across its business as a whole. Care UK’s evidence was that the administration fee was often waived in full. The CMA tried to argue that the true purpose of the administration fee was not to recover the costs of services provided to consumers, but to boost Care UK’s profits. The High Court judge, Mrs Justice Bacon, noted that it was obvious that an administration fee would improve Care UK’s profitability, but that Care UK did not operate in a regulated sector where its profits were controlled. Care UK had also produced evidence to the court that the profitability of its residential care services division was below
www.thecarehomeenvironment.com January 2022
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