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Recently, China Consumers‘ Association (CCA) released the “Analysis of Complaints Received by National Consumers” Association Organisations in 2024’, which shows that the number of complaints about education and training services has exceeded 70,000, with disputes arising from the ‘pre-payment’ mode becoming a major problem in this area. In this context, how to effectively protect consumer rights and interests, and ensure that the regulatory authorities and legal channels can effectively provide solid protection for the rights and interests of consumers has become an important issue that needs to be resolved.

Accordingly, China University of Political Science and Law, Intellectual Property Research Centre, a special researcher, JIA LAWYER law firm partner Zhao ZhanLiang lawyers accepted the ‘China Business News’ interview, and the events of this type of in-depth interpretation.

01 Difficulty in refunding fees: from ‘low price carnival’ to ‘rights dilemma’.

Some art education and training organisations used ‘ultra-low discounts’ to attract parents to renew their fees before closing down, resulting in many parents still having a balance of several thousand to tens of thousands of yuan and facing difficulties in refunding their fees. The data of an art complex shows that as of July 2024, it had received 59,471 students, and the amount of unconsumed hours of the original institution corresponding to the students received amounted to $668 million; as of 7 March 2025, it had received students from 13 institutions. Poor operation and broken capital chain are the direct reasons for the closure of these institutions.

The arts education and training organisation had attempted multiple assistance to attract capital injection on favourable terms to resume operations, but gave up due to high debt. The organisation also negotiated mergers and acquisitions with a number of education and training institutions, but was ultimately unsuccessful due to differences in business form or scale. With the support of relevant government departments and the Beijing Municipal Bureau of Culture and Tourism, an arts complex and the institution signed a formal support agreement on 9 June 2023.

As a matter of fact, it is not uncommon to see cases of ‘low-priced promotions’ and ‘empty buildings’. Once the organisation closes, the tuition fees are basically lost. Why is it so difficult to get a refund?

Zhao ZhanLiang lawyer said, the so-called education institutions ‘run away’ is usually divided into two categories: one is the education institutions due to poor operation led to the capital chain break after contact; two is the actual controller rolled money to run away. The former is a civil dispute, parents can sue for refunds, but if the institution has no assets, even if the lawsuit is difficult to implement, which makes it difficult for parents to get refunds. The latter may be involved in contract fraud, embezzlement and other criminal offences, need to be through the public security organs to recover the stolen goods.

Zhao ZhanLiang lawyer pointed out that in the teaching training institutions due to the financial chain break difficult to continue to operate, there will be some institutions to find other training institutions to undertake, continue to provide the appropriate services. Institutions that are still able to offer this kind of programme may still have some assets or resources, essentially speaking. Consumers who want refunds should sue as soon as possible to freeze the property of the original training organisation, and some consumers may be able to recover all or part of the funds.

02 difficult to transfer courses: ‘takeover agreement’ or ‘secondary harvest’?

With no way to get a refund, switching courses has become a ‘compromise’ offered by many institutions. However, many parents believe that this process is actually a hidden ‘new pit’.

After the closure of an art education training institution, students were transferred to ‘an art complex’ to continue to take classes, but parents previously paid the remaining class fees can not be used in full at once, and can only be partially offset as a coupon. At the same time, the amount of money given by the original organisation has to be paid as compensation before it can be activated and used to pay for offline courses. For example, a parent enrolled in the Spring 2025 Children's Street Dance Initiation Class, purchased 15 classes and received 9 classes as a gift, at a total cost of $4,451.50, and after transferring the classes the card balance could be credited $3,515.62, and an additional $1,458.88 had to be paid. Parents indicated that the exact amount of credit varied from course to course, and parents with larger card balances might need to enrol in more than one course to absorb the balance, but would still need an additional subsidy. Parents are concerned about this type of transfer, worried about falling from one predicament into another, but want their children to continue attending classes.

In this regard, Zhao ZhanLiang lawyer said, according to the law, parents in the original organisation recharge, which belongs to the prepaid consumption, ‘expired not refund’, ‘mandatory consumption’ and so on are illegal. The original organisation through the consumer and the new agency signed an agreement, the original contract project of the original agency and the consumer's rights and obligations transferred to the new contract, corresponding to the amount of non-consumption if the expiry date, you can negotiate with the new agency to re-activate.

03Regulatory challenges: prepaid model becomes a hotbed of risk

In recent years, the prepaid model has caused a lot of concern about the problems of organisations running out of business and difficulties in refunding fees. In order to regulate the market order and protect consumers' rights and interests, the state and local governments have issued a number of relevant policies to regulate the prepaid mode from the aspects of fund supervision, contract specification and risk warning.

In 2021, the Ministry of Education, together with five departments, issued the Notice on Strengthening the Supervision of Prepaid Fees of Off-Campus Training Institutions, which mentions the full implementation of the supervision of funds for prepaid fees of off-campus training organisations, and requires the use of bank custodianship or risk guarantee. A number of off-campus training institutions across the country have fully implemented the ‘elimination and allocation synchronisation - one lesson, one elimination’ regulatory model, whereby funds are allocated to the institution according to the progress of the lesson. The aim is to prevent institutions from misappropriating advance payments through a dynamic fund allocation mechanism. The Regulations for the Implementation of the Law on the Protection of Consumer Rights and Interests stipulate that operators providing services by way of advance payment shall clearly agree with consumers on the responsibilities, rules for refund, etc. It emphasises that when an operator ceases or closes business or changes its place of business, it is required to inform consumers 30 days in advance and refund the balance of the prepayment.

Despite the gradual improvement of the policy framework, but Zhao ZhanLiang lawyer said, about the prepaid consumption related policies really face a lot of practical difficulties. Institutions to circumvent a variety of means, for example, the state requires a one-time charge shall not exceed 3 months or 60 hours, but the institution can be ‘buy one get one free’ and other promotional name disguised as overcharging. In addition, before the closure of the organisation is still carrying out sales, due to information asymmetry, consumers and even regulators are also difficult to judge whether there is a situation in which they can no longer provide services.

‘Legally speaking, if the teaching and training institution has been clear that it is difficult to continue to operate or even internally has made the decision to shut down the business and no longer continue to operate, but still in the course sale, after the sale also no longer provide the relevant services, in this case the institution may be suspected of constituting a criminal offence of contract fraud.’ Zhao Zhanling lawyer pointed out.

How to avoid the risk of prepaid mode in advance? Zhao Zhanling lawyer said, first of all, it is recommended that consumers choose the stronger operating strength of the organisation, followed by as far as possible to choose a lower amount of prepaid, in a relatively short period of time to be able to complete the consumption. In addition, consumers in the signing of the contract, we must pay attention to check the contract terms and conditions of the consumer can be refunded, if the consumer unilaterally terminate the contract to request refunds whether to charge a certain handling fee or breach of contract.