The competition watchdog is investigating concerns that some care homes for the elderly could be breaking consumer law, it has announced.
The Competition and Markets Authority (CMA) said it had opened a consumer protection case focusing on concerns that certain care homes are charging families for extended periods after a resident has died and large upfront fees.
The CMA announced the investigation halfway through its market study into the sector, launched in December, following concerns over people potentially being faced with shock bills and "hidden" charges.
It said its initial findings highlighted wider concerns about the sector and, while many care homes offered a good service, "there are concerns that some might not be treating residents fairly and that certain practices and contract terms might break consumer law".
As well as its investigation into large upfront fees and fees charged after death, the CMA said it was concerned about other consumer protection issues such as a lack of information about prices on care home websites and contracts giving homes wide-ranging discretion to ask residents to leave at short notice.
Early findings suggested that many people found it difficult to get the information they needed, were confused by the social care system and funding options, and did not know how to find and choose between homes.
Redress systems often did not work well, and residents could find it "very challenging" to make complaints, and short-term public funding pressures and uncertainty meant the sector was not incentivised to undertake the investment necessary to meet future demand, the CMA said.
The CMA's acting chief executive, Andrea Coscelli, said: "Some of the most vulnerable people in our society use care homes, often moving to them under extremely difficult circumstances.
"It's therefore essential they are able to make informed choices, understand how services will be paid for, and be confident they will be fairly treated and able to complain effectively if they have any concerns.
"We also have particular concerns that some care homes might be breaking consumer law and have opened a consumer protection case to investigate further.
"Demand for care home places is expected to surge over the next two decades. To make sure the additional capacity this requires is available, it needs to be built in good time. At present, short term funding pressures and uncertainty mean that the sector is not attracting investment.
"We will be focusing on finding ways to deal with these, and other concerns identified."
Citizens Advice chief executive Gillian Guy said: "Older people and their families are suffering unnecessary distress and financial pressure due to gaps in consumer protection in the care home market.
"It's good that the CMA has identified the need for improvements in how complaints are handled in the care home market and that people need better information and support when making decisions.
"The CMA is right to look at consumer protections and should seek to strengthen these where existing rules are not providing the right cover, including the notice period for fee increases and protections for people's deposits."
Simon Bottery, director of policy at the charity Independent Age, said: "The CMA has highlighted market failures in social care that bring the crisis in the sector into sharp focus.
"Older people and their families are bearing the brunt of these failures, with many people struggling to find and pay for the help they need.
"Whilst clearly there are many homes that offer a good service, in some parts of the country as many as two in three homes are under-performing.
"We have to aspire to so much better in a care homes market valued at £15.7 billion, so it's absolutely right that the CMA is shining a light on the poor practices that need to be stamped out.
"But their report provides another timely reminder that there are big funding problems, and the care homes market faces uncertainty at the very moment it also faces greater demands.
"There are challenges for care providers and local authorities but the Government mustn't pretend they don't also bear some responsibility for fixing social care, irrespective of the election result.
"A cross-party approach is now needed."