Croydon Council ordered to repay £75,000 after wrongly charging care fees

Croydon Council has been ordered to repay £75,000 in care fees after wrongly charging a resident who was entitled to free aftercare under the Mental Health Act. The Local Government and Social Care Ombudsman published its decision on 29 June, ruling that the council’s failure to apply Section 117 rules forced the family to sell the woman’s home to cover costs.

Mrs X, whose name was withheld in the report, was detained under Section 3 of the Mental Health Act in 2020. Under Section 117, she was entitled to free aftercare following her discharge, regardless of her financial circumstances. The council placed her in a care home in March 2024 but did not record her eligibility on her care file.

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Council misinformed family over funding

In April 2024, the council stopped funding Mrs X’s placement and told her family she would have to pay privately. A welfare officer confirmed in an email that the financial assessment team had classified her as a “full cost privately funded client” because she owned her home. The family sold the property to pay the bills.

The error was only identified in March 2025 by a new social worker, who found that Mrs X should not have been charged. When the family complained, the council initially argued that Section 117 funding covered only her mental health needs, not the “older adult frailty” care she received. The Ombudsman rejected this, calling the response “unhelpful” and “limited”.

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Mrs X died in April 2025. The Ombudsman concluded that the financial injustice to her estate could not be fully remedied but ordered the council to repay the £75,000 in fees, plus interest at the base rate. A separate £500 payment was required for Mr K, her grandson and attorney, for the distress caused by the council’s mistakes.

Training and paperwork changes promised

The Ombudsman’s report highlighted wider failures in the council’s handling of Section 117 cases. It found no documented evidence of Mrs X’s aftercare needs between 2020 and 2025, which contributed to the oversight. The council admitted that staff lacked sufficient knowledge of the rules and that its funding panel was unaware of her eligibility.

To prevent future errors, the council has committed to mandatory in-person training for social care and finance staff. It will also redesign paperwork to make Section 117 eligibility more prominent. A council spokesperson said: “We are very sorry that we failed to apply the Section 117 process correctly and for the impact this had on her family.”

We are very sorry that we failed to apply the Section 117 process correctly as part of the financial assessment and needs review of our resident, and for the impact that this had on her family.

Croydon Council spokesperson

What happens next

The council must repay the £75,000 plus interest to Mrs X’s estate and the £500 compensation to Mr K. The training for staff is expected to begin within the next three months. No date has been set for the redesign of the paperwork, but the council has confirmed it will prioritise the changes.