Care UK, one of the UK’s largest care home providers, is refusing to pay £3 million in compensation over claims it ripped off customers.
The competition watchdog the Competition and Markets Authority (CMA) has told Care UK that it will face legal action unless it refunds 1,600 residents who were charged a compulsory upfront ‘administration’ fee of up to £3,000.
The CMA believes Care UK – which has more than 110 care homes across the Britain - was breaking the law by charging this fee for which residents received no services or products in return.
It also believes that the company’s description of the charge was misleading.
The CMA has given Care UK until 10 January 2019 to respond.
Care UK says that without the administration charge weekly fees would have been higher for residents and that it will defend any action taken by the CMA.
A statement on its website says: “We do not believe there is any evidence whatsoever to suggest residents have been disadvantaged or that our historic fee structures were in breach of consumer law.
“We simplified our fee structure for residents funding their own care earlier this year to incorporate all one-off assessment and admission costs and adjusted our weekly fees accordingly. This approach is in line with the CMA’s final guidance, which was published last month.
“Our admission processes ensure prospective residents are aware of key terms in our contracts, including our fee structure, very early in their discussions with us and well before they finalise their choice of care home.”
Following intervention by the CMA, Care UK has stopped charging this fee.
The CMA’s investigation into care homes has already led to changes in the sector. The CMA secured more than £2 million in compensation from another large care home provider, Sunrise Senior Living.
It says other providers have also ditched contract terms relating to after-death fees as a result of the investigation.
Last month, the CMA issued guidance to care homes to help them understand their responsibilities under consumer protection law, as well as an open letter urging them to review their practices in light of the guidance immediately.