Early years organisations respond to CMA open letter

The Competition and Markets Authority (CMA) has issued guidance within an open letter to the early years sector so providers understand their obligations under consumer law towards parents.

The Covid-19 crisis has highlighted the importance of providers ensuring their contracts meet the requirements of consumer law and that they recognise consumers’ rights in the current situation.

On 20 March 2020, the CMA established its COVID-19 Taskforce that aimed 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. It received some reports of unfair practices by a minority of nurseries and early years providers, mainly relating to payments and cancellations in the context of Covid-19 lockdown restrictions.

Because of this, the CMA published information on how the law applies to consumer contracts, refunds and cancellations. The investigation 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. We are also aware that in many cases, consumers and providers have sought to reach new agreements on their childcare arrangements.’

The CMA’s view is that:

  • Consumers should not have to pay for services that cannot be provided.
  • Consumers should also be offered a refund where services are paid for in advance but do not take place as agreed in the contract.
  • Contract terms requiring consumers to pay providers who are not providing the services agreed in the contract are likely to be unfair and unenforceable.

Purnima Tanuku, chief executive of NDNA said: ‘We are pleased to have had the opportunity to work with the CMA to support them to understand the issues faced by the early years and childcare sector ahead of issuing advice and guidance to providers. 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.

‘During lockdown, settings were forced to close to all but vulnerable children and those of key workers and had severe limits on their income. We supported members with approaches to parents about voluntary contributions. We know that the vast majority of our members have not charged parents during lockdown or have asked for small contributions.

‘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.

‘We are now working to produce further advice for our members as well as parents and will be issuing this as soon as it is ready for publication.’

Commenting, Neil Leitch, chief executive of the Early Years Alliance, said:
We know that despite the huge challenges childcare providers have faced over recent months, the vast majority have been wholly fair, reasonable and balanced in their dealings with parents and we are glad that this has been recognised by the CMA.

‘We also welcome their acknowledgement of the significant financial pressure that childcare settings have faced which, as we know, are the result of years of inadequate funding. 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 possibly 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.’



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