The care homes group Sunrise Senior Living has agreed to pay £2m in compensation to former residents for charging upfront fees without making it clear what the money would be spent on.
Residents who have paid the fees since 1 October 2015 and left one of the company’s homes within two years will be eligible to receive an average payout of £3,000, after an investigation by the competition watchdog.
Sunrise has also agreed to drop the one-off charge for all future residents.
The Competition and Markets Authority said about 97% of former residents, or 685 people, would be in line to receive compensation. A further 775 current residents were likely to receive the payment in the future. Where a resident had died, family members would receive the money.
One of the CMA’s main criticisms was that Sunrise was not clear about what the upfront money – running to thousands of pounds per resident – would be used for, such as the upkeep of communal areas.
The watchdog was also concerned that prospective residents were being charged the one-off fee before they had secured a place at one of the group’s 25 UK homes, and that the fee was non-refundable once someone had lived in the home for more than 30 days.
“Care home residents shouldn’t be required to pay out thousands of pounds without being clear what they’re getting for their money,” said George Lusty, the regulator’s senior director for consumer protection.
“So it’s only right that residents at Sunrise care homes will now receive compensation if they’ve paid these fees, and that future residents won’t have to make such payments at all.”
He said the CMA would take action against other care home providers where evidence was found that they were breaking consumer law.
Natalie-Jane Macdonald, the UK chief executive of Sunrise, said the company had worked closely with the CMA to review the way it organised its charges.
She added: “We previously charged an upfront community fee, which helped maintain the outstanding facilities and communal areas that our residents expect and enjoy.
“However, we have agreed with the CMA that residents who stayed with us for shorter than average periods were not able to enjoy as much of the benefit of our facilities as residents who are with us for a longer time, which is why we are voluntarily embarking on this reimbursement programme.”
It follows a year-long study of the residential care home market by the watchdog, which made several recommendations to help prospective residents and their families better understand the options available to them.
The CMA said two years was the average period a resident lived in a Sunrise home, and 1 October 2015 was the date from which it acquired powers to secure financial redress.
