Student Contracts - A Fair Deal?
On 22 July 2016, the Competition and Markets Authority (CMA) published its consumer law compliance review report into the Higher Education (HE) undergraduate sector
It concluded that considerable efforts have been made by many HE providers to review and amend practices, terms and policies following the OFT call for information in 2013.
Despite the positive signs, the CMA believes there is still scope for improvement. More could be done to improve the accessibility and adequacy of information, particularly in relation to course costs and content variation. Some providers still use terms that give them wide discretion to vary fees or course content or to withdraw courses altogether. Others have policies that could hinder or prevent a student from making or progressing a complaint. The application of academic sanctions for non-academic debt also continues, despite high profile criticism of this practice. Enforcement action has now been taken against three HE providers, requiring the provision of formal undertakings to discontinue particular practices.
The CMA's review of the more than 900 providers in the HE sector is not yet complete and further enforcement action may still follow. In order to help avoid this, an open letter has been issued, encouraging proactive reform by all HE institutions, reiterating the expectation that providers will make any necessary changes to their terms and practices and follow CMA advice.
Notwithstanding the widespread use of student charters, there seems to be a general reluctance to embrace the sort of formal, standardised contracts which are commonplace in most service situations. The precise reasons for this are unclear. Such a document would undoubtedly be complex and some believe that having a discrete written contract could create more problems than it solves. Others worry that a single contractual document would not be able to reflect the nuances of their institution's history and way of doing things. Others are in favour of maintaining the status quo, not least to follow the sector norm.
On the face of it, the collation of terms and conditions into a single document, a student contract, which links through to relevant policies and procedures for clarity and ease of accessibility is an obvious way of addressing concerns about a lack of transparency, but it is not without risk. Many students are consumers and wider material can be given contractual merit under the new Consumer Rights Act 2015.
We consider the issues below.
Student Charters
There has been a widespread implementation of student charters in the sector, which are perhaps best regarded as statements of intent - declarations of recognised best practice and mutual regard. In other words, they are lists of reasonable expectations set out by and for parties with common interests. They are valuable if prepared properly because they represent the outcome of consultation and dialogue between the institution, its students' union and its students and help evidence a sense of accountability and a relationship of mutual trust and confidence. They are unlikely to have sufficient certainty to render them in themselves legally binding.
The fact that most universities now have student charters in place but contracts remain rare shows that there is little reluctance to acknowledge important mutual rights and obligations but perhaps a fear of making them legally binding. Charters and contracts might ostensibly address similar issues but they are far from being interchangeable documents.
Contracts - why reconsider?
Changes to the HE sector, including further increases in tuition fees, rising numbers of complaints, and ongoing scrutiny of anti-consumer practices have renewed interest in student contracts. The uncertainty created by the EU referendum and the anticipated impact of the Higher Education and Research Act 2016 provide new reasons to revisit the issue.
Support in principle for the implementation of contracts on a sector-wide basis is not hard to find, particularly since the Consumer Rights Act 2015 made specific reference to the HE sector when confirming which services are covered by the legislation.
Which? has made a direct call to the HE sector for ‘a standard format for higher education contracts’ in order to ensure that ‘students and their representative bodies can easily find and compare terms’ in a manner analogous to utility contracts. This is in part to promote consumer protection and in part to encourage greater transparency and competition between institutions.
The CMA has adopted a similar position, and also drawn attention to the advantages during the application process if terms can be ‘easily located and accessed’ as well as being fair, with prospective students having ‘the opportunity to review them before they accept an offer’ and with universities taking care to ‘highlight any important or surprising terms’. Emphasis has also been placed on contract terms being grounded in ‘good faith’ as a key general ‘principle of fair and open dealing’ by the supplier with the consumer.
The OIA has recommended that contractual information is consolidated as far as possible, to promote clarity and the management of expectation, which in turn should reduce the scope and frequency of disputes.
Other, practical, advantages have long been clear. Having a discrete contract means reviewing and updating one document, rather than a multitude of disparate elements, which is more efficient and helps to prevent the development of inconsistencies. Consolidating the terms of an agreement into a single document also enhances transparency in an area subject to external scrutiny, which should inspire student confidence. Implementation of a comprehensive and balanced contract may also reinforce institutional identity by helping to demonstrate that the university is progressive and open.
Rights enshrined in contracts do not necessarily have to be enforced. There is always a choice; contracts can identify and reserve rights without there being an automatic compulsion to exercise them. Many valid contractual claims are never actually pursued, either because the issue is not sufficiently important to the parties to justify the time and costs associated with doing so, or because a commercial settlement is reached - settlements that are less likely to have been agreed without a contract being in place.
This is not the first time that the sector has considered student contracts and models have been prepared, but previous discussions have not gained universal traction. There will be a number of reasons for this. Nevertheless, we consider that it is time to dust off these discussions and consider the advantages of a student contract.
Yes there will be complexities. Not all student contracts will be consumer ones, so obligations and remedies will vary. Nevertheless, just as student charters are designed to apply to all types of student, we consider that both parties would benefit from clarity of obligations, regardless of the status of the relationship. This should cover both those obligations which are clear and those which fall outside the university's responsibility and could introduce management controls over the wider risk issues imposed by the CRA.
We consider that the time is right and that the now established sector preoccupation with consumer law compliance will continue following the creation of the Office for Students. As a consumer-focused market regulator for England, the OfS will continue the work undertaken by the QAA in prioritising the integration of consumer law compliance into the baseline requirements for quality compliance, a process that already involves consideration of the content of Student Charters when appraising the student learning opportunity.
The impasse previously reached in relation to a sector-wide student contract did not include the uncertainty created by Brexit, the regulatory effects of the impending Higher Education and Research Act, the ongoing rises in tuition fees or the proposals to limit cost recovery in litigation. The HE sector is at another significant cross roads and there may now be justification for the important mutual sentiments already contained in widespread student charters to be given discrete contractual form and effect.
This article was first published in the September issue of University Business.