High Court decides admin fee payable by consumers is lawful
Posted on in Company & Commercial
In Competition and Markets Authority v Care UK Health & Social Holdings Ltd and another [2021] EWHC 2088 (Ch), the High Court held that an admission fee for new residents of care homes was not unfair and that the care homes were neither misleading nor aggressive concerning it.
Investigation into admin fee charges
For five years Care UK, the fourth largest provider of care homes for the elderly, had been charging new residents an admin fee at the point of admission equating to two weeks' residential fees. It did not mention this fee on its websites or in response to initial telephone enquiries; instead, it gave indicative weekly residential fees.
In 2017 the Competition and Markets Authority (CMA) started an investigation into whether care home providers were breaching consumer protection law, and in 2019 it announced it was taking legal action against Care UK in a bid to make them refund the admin fee to over 1,600 residents.
Care UK's admin fee case
The judge found that the administration fee was lawful because it paid for a distinct service - assessment and care planning - as opposed to the accommodation and care services chargeable by the weekly fees.
Furthermore, there had been few complaints about the fee, and the judge rejected the CMA's argument that the fee was not challenged because it was not understood. Here, Care UK's evidence of the steps it took to explain the contract was persuasive. Care UK took steps to explain the contract to residents - it had training materials and internal policies that its staff understood and implemented.
The CMA alleged that Care UK's omission of the admin fee on its website and in initial telephone enquiries was misleading under consumer regulations. The judge held that the pricing was illustrative and that no reasonably well-informed, reasonably observant, and circumspect average consumer could have believed it would be all-inclusive.
Lessons for admin fee charges
Whilst the judgment may seem like welcome news for businesses that charge (or are thinking of charging) an admin fee to their consumer customers, businesses should still make sure any admin fee is a proper charge for a service separate from the main one it is providing (and for which the business will make additional charges). Moreover, businesses should put in place internal training and policies for their staff on explaining contract terms to customers, and make sure they carefully label prices as merely indicative if that is the case.
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