Nurseries, childminders and pre-schools that charged full fees during lockdown are facing mounting pressure to refund parents after an industry watchdog deemed it unfair to charge fees for services that were not provided.
The Competitions and Markets Authority wrote an open letter to the early years sector this week, warning that they could face legal action from parents for ‘illegal and unfair practices’ during the height of the Covid-19 pandemic.
The watchdog said these included trying to pull at parents’ heartstrings with threats of closure or children losing a place if they didn’t pay during lockdown.
However, two nursery owners have hit back and say that without asking for parent support during lockdown, it would have been a fight to survive.
Are nurseries now on the naughty step? The CMA has said parents are within their rights to ask for a refund through the courts
Lucy Lewin, founder of Little Angels in Uppingham, East Midlands, said she charged parents 20 per cent of the usual cost to keep afloat, while Suzanne Fowler who owns two nurseries in Kingston, London, believes the sector should have received more government support.
The CMA said the letter was penned to help early years providers understand how consumer protection law applies to the arrangements they have with parents during the Covid-19 pandemic and then detailed some of the unfair practices that it had alerted it to act.
It said: ‘The 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.’
Why did the CMA focus on the nursery sector?
Back in March, the CMA established its Covid-19 taskforce which would monitor market developments during the pandemic and identify any commercial practices that would adversely affect consumers.
From there, it would consider appropriate responses to help businesses comply with the law and consumers’ rights.
It said that it had received reports alleging some unfair practices by minority of nurseries and early years providers, mainly relating to payments and cancellations during the Covid-19 lockdown.
I had to fight to survive
Lucy Lewin founder of Little Angels sent an letter to her MP and local authority highlighting her struggle to keep her business afloat
The CMA letter was met with anger by some in the early years sector with one nursery founder penning a letter to her MP and local authority.
Lucy Lewin (pictured right), founder of Little Angels in Uppingham, claimed her sector was as emotionally drained as public sector workers.
‘We had to fight to survive. Yes, some of us asked parents to help – I know I did.
‘Yes, I told them that without their help I would close – because it is fact.’
Referring to the CMA letter and subsequent press coverage, Lucy added: ‘This kind of blow, this awful prejudice for our sector, this slander is just another stab in the heart of all of us, the majority who do what we do with integrity, compassion and love.’
She also slammed the Prime Minister for focusing on health instead of helping businesses in need.
She said: ‘If the Prime Minister really wants to help, rather than jogging, or cycling his way out of the pandemic maybe he should visit my setting and see for himself what passion, belief, love, team work and sheer bloody determination looks like.
‘We are not an evil, greedy sector. We are overlooked, forgotten and tired.’
Asked whether she would refund parents, Lucy said: ‘At present I have not made a decision. I asked for 20 per cent contribution and 99 per cent paid.
‘If I return money to parents I am putting myself at risk of closure, as I am only at 15 per cent occupancy.’
This prompted the CMA to publish a statement on how the law applies to consumer contracts, refunds and cancellations and announced it would examine nurseries and early years providers as one of the three sectors of concern.
We are not an evil, greedy sector. We are overlooked, forgotten and tired.
Lucy Lewin – Little Angels
The CMA said it found that ‘whilst the vast majority of providers were striving to reach fair arrangements with consumers in very challenging circumstances, there remained concerns with some treating consumers unfairly.’
The CMA said it had no problem with businesses and consumers agreed to revise their contracts or with parents voluntarily agreeing to continue to make some payments as long as this was fairly agreed without any pressure.
But not all in the nursery sector managed their affairs in a fair manner.
The CMA warned: ‘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.’
Three problems in nursery sector
1. Providers requiring full or excessively large fees for services which were not being carried out due to the pandemic public health restrictions and government guidance.
It said: ‘Our view is that consumers should not have to pay for services that cannot be provided. Consumers should 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 pay providers who are not providing the services agreed in the contract are likely to be unfair and unenforceable.’
2. Providers relying on unfair cancellation terms or high cancellation fees where the business is unable to provide a service.
The CMA explained: ‘In general, notice periods and cancellation fees may be appropriate in normal circumstances, where the business is still able to provide a service, but the consumer decides they want to stop receiving it.
3. Providers putting unfair pressure on consumers to agree to make payments by threatening that a child’s place will be lost, or the provider will go out of business.
The CMA highlighted that resorting to these threats was in its view an ‘unfair and illegal practice’.
It added that warning parents that the business would cease to trade was in breach of consumer law.
Will there be any enforcement action?
The CMA said that it will continue to monitor the sector but that it would not announce any enforcement action at this stage.
But it added: ‘Where providers are not compliant, they may risk action by the CMA or any other enforcer under consumer protection law, e.g. local authority trading standards services.
Some said they would pay full fees, which we didn’t accept. They didn’t have to, it isn’t right to pay for something you don’t use but we had no choice.
Suzanne Fowler – Flowers Day Care
‘Independent of any action which the CMA may consider, providers need to be aware that consumers can take action themselves, through the courts if necessary, to challenge breaches of contract and terms which they think are unfair.’
Even though the child care sector can now reopen its doors, it is still struggling to make ends meet.
A report out this month by Ceeda, an independent research company with a focus on childcare providers, shows how the industry continues to struggle with occupancy.
It said that while almost nine out of every 10 providers were open for families in the week commencing 6 July the average occupancy only increased by three per cent on the previous week to 48 per cent.
It added that four fifths of childminders had opened their facilities to parents but that occupancy remained static at 35 per cent.
Parents have equally struggled during the pandemic with many furloughed, made redundant or having to work full time while homeschooling their children.
Parents who pay into childcare voucher schemes were also being denied refunds by their employers inspite of not being able to use the vouchers during lockdown.
Some have accumulated balances of more than £1,000, but were told that they were non-refundable.
However, the HMRC have said that refunds were at the employer’s discretion.
Parents saved my business while government and insurers did nothing
Suzanne Fowler, who owns two childminding businesses Flowers Day Care and Little Flowers in the London borough of Kingston, employs 11 staff with payroll outgoings close to £4,000 per week.
She said that with no fees coming they nearly prepared to close the business.
‘We tried to claim on two insurance policies – the virus is new so they both said they would not cover our forced closure because Covid was not in the insurance documents.
‘We looked into all the grants offered – we weren’t eligible for any of them.’
As expenses would still continue during closure Suzanne says she wrote to parents asking for two weeks full fees followed by four weeks half fees.
‘We did say if we don’t receive fees, we may not be able to take your child back when we reopen.
‘This was not a threat, it was the truth and we were completely honest about that.
‘We sat and cried as they one [parent] after another told us they would support us, save us.
‘Some said they would pay full fees, which we didn’t accept. They didn’t have to, it isn’t right to pay for something you don’t use but we had no choice. The Government should have saved us, but they didn’t.
‘The Government changed the rules for childcare providers, and this meant we were not able to fully furlough our staff, we had to contribute a proportion of this ourselves.
‘I can’t express how grateful I am to our families; they saved our business and we will spend all our energies trying to repay them by providing the best for their children until they move on from us.’
Little Flowers nursery owned by Suzanne Fowler in the borough of Kingston was at risk of closure if it didn’t get financial support from parents
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