If you are one of the many parents who is a governor at their child's school, or has a child at an independent school, you may be aware that independent schools have started to recognise that the traditional system of making payments for school fees once a term is leaving many families struggling.  Parents are now asking for more flexible payment methods, often to fit in with the monthly paydays that most parents have.

Although a school might want to try to be helpful, they must take care.  Most governors and parents won’t be aware that if parents are offered the right to pay fees in instalments then such arrangements can fall within the Consumer Credit Act 1974 and all of the legal and practical requirements associated with that.

If the Act applies, the arrangement will be a regulated consumer credit agreement and the school must then hold a Consumer Credit Licence.  It is a criminal offence to operate such  agreements without a valid Licence and agreements will be unenforceable against parents unless a lengthy court process is followed.  Obtaining a Licence can be an onerous and expensive matter, and so some schools have been outsourcing the arrangements with parents to third party credit providers in order to avoid this problem.

An alternative is to agree repayments and conditions in such a way that they fall within exemptions to the Act.

A perfectly possible example is where the school uses a carefully drafted agreement so that sums are repaid within 12 months in four or fewer repayments.  However, the school must not charge interest or any administration or arrangement fee.    A second exemption is available to schools but only in respect of fees that have already fallen due for payment, so the school may agree a plan for the previous term’s fees over any agreed period of time.

With meticulous drafting and expert advice a fees instalment agreement can work for both parties, allowing your children to stay at a school with their friends, easing your financial worries and giving the school certainty of receiving the fees without fear of getting into difficulty with complex legislation.