Advice for early years sector

The Competition and Markets Authority (CMA) launched a COVID-19 taskforce back in March 2020 to identify any commercial practices that adversely affect consumers and to consider appropriate responses to help businesses comply with the law and protect consumers' rights.

One of the areas where the CMA received reports of unfair practices concerned the early years sector (nurseries and childcare providers). The main areas of concern related to payments and cancellations in the context of COVID-19 lockdown restrictions. This prompted the publication of a statement by the CMA on 30 April 2020, on how the law applies to consumer contracts, refunds and cancellations. On 28 July 2020, the CMA published an open letter.

The letter does not introduce any new laws but does set out in detail how the current law applies in the present circumstances. The CMA was clear that the vast majority of providers were striving to reach fair arrangements.

However, the CMA identified the following three main problem areas:

1. Providers requiring full or excessively large fees for services which are not being carried out due to the pandemic public health restrictions and government guidance.
2. Providers relying on unfair cancellation terms, such as requiring unreasonable notice to be given, or high cancellation fees in cases where the business is unable to provide the service.
3. Providers 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.

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. In addition, contract terms requiring consumers to pay providers who are not providing the services agreed in the contract are likely to be unfair and unenforceable.

The letter confirms that the CMA will not be taking any action against the early years sector at this stage but will continue to monitor the sector. For the time being, the CMA is asking providers to consider their contracts and arrangements with consumers and take any necessary steps to ensure they comply with the law. Individual consumers will, of course, still have the option of pursuing a claim against businesses for alleged breaches of consumer law.