Caixin
Oct 28, 2020 08:00 PM
SOCIETY & CULTURE

Private Tutors to Get a Lesson on Their Own Dodgy Contracts

Thousands of people descended on Yousheng Education’s nearly deserted headquarters in Beijing on Oct. 19 to demand refunds or unpaid salaries amid rumors the tutoring company was on the verge of bankruptcy. Photo: Cai Yingli/Caixin
Thousands of people descended on Yousheng Education’s nearly deserted headquarters in Beijing on Oct. 19 to demand refunds or unpaid salaries amid rumors the tutoring company was on the verge of bankruptcy. Photo: Cai Yingli/Caixin

China’s government has announced a yearlong cleanup of the after-school tutoring industry amid a consumer outcry against companies using unfair terms in their contracts.

Businesses selling out-of-school training for primary and secondary school students will undergo “centralized rectification” if they are found to have included unreasonable terms in the contracts parents sign, according to a joint notice (link in Chinese) published Thursday by the education ministry and market supervision bureau.

The clampdown targets out-of-school training institutions that “use standard terms to abdicate their own responsibilities, increase the responsibilities of consumers and eliminate consumers’ statutory rights,” the announcement states.

It comes after thousands of people crowded the Beijing headquarters of private tutoring company Yousheng Education earlier this month to demand refunds amid fears that the firm was about to go bankrupt, claiming they were not getting value for money.

China’s contract law states that standard terms — the parts of a contract set by one party with little or no negotiation room for the other — are invalid if they disproportionately raise the legal burden on one party or violate their rights.

But many of the country’s private education firms are thought to include such terms in so-called “take-it-or-leave-it” contracts, leading to disputes when parents later demand refunds or assert other consumer rights.

A parent in the central city of Wuhan told Caixin in a recent interview that they paid Yousheng more than 20,000 yuan ($2,980) after signing an after-school tuition contract in July, but were refused a refund in September unless they signed a separate agreement giving the company 60 days to pay them back.

Many consumers also complain that efforts to hold tuition companies legally accountable for standard terms often fall flat, with courts and arbitrators rarely ruling in their favor.

A rare exception in 2017 saw a court in the capital order a tuition company to refund a customer surnamed Zhang whose daughter’s classes had been suspended after the teacher was replaced with another whom Zhang deemed unsatisfactory. The court ruled invalid a standard term prohibiting customers from claiming refunds “for any reason” from seven days after the signing of the contract, “regardless of whether the course is ongoing.”

According to the notice, the cleanup campaign aims to “standardize the contractual behavior of out-of-school training institutions,” resolve contractual disputes and “earnestly safeguard consumers’ legal rights and interests.”

The campaign will be divided into three phases, the notice says. Between now and December, local education and market regulation departments will draw up regional work plans to “collect and review” examples of unfair standard terms, before “rectifying” illegal behavior between January and August. The departments will then provide written summaries of their work to the central government before the end of 2021.

The notice builds on previous government attempts to better regulate the private education industry. In 2018, the General Office of the State Council, China’s cabinet, began requiring training institutions not to charge fees for a period of more than three months at a time. Since last year, several provinces have also introduced plans aimed at strengthening supervision over the sector.

Private tuition is a fast-growing industry in China. Prior to the coronavirus pandemic, the market for out-of -school tutoring was growing at around 10% per year, generating total annual revenue of 393 billion yuan in 2017, according to a report by audit and advisory firm Deloitte.

Contact reporter Matthew Walsh (matthewwalsh@caixin.com) and editor Joshua Dummer (joshuadummer@caixin.com)

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