Collections Associated with Nursing Home Bills May Violate FDCPA and FCRA, CFPB Says

nursing home billsLatest policy statements from the bureau explore third-party debt collectors’ role in collecting on behalf of nursing homes and the liability that could occur under laws enforced by the CFPB; however, it is not clear how prevalent the issue is.

09/09/2022 1:15 P.M.

7 minute read

The Consumer Financial Protection Bureau announced a three-prong effort highlighting nursing home bills and debt collection in partnership with the Centers for Medicare and Medicaid Services (CMS) Thursday.

The effort includes:

  • An issue spotlight from the CFPB highlighting “some of the difficulties and experiences heard from caregivers about being pursued over friends’ or family members’ alleged debts from nursing home facilities.”
  • A joint letter from the CFPB and CMS confirming that a nursing care facility may not require that a third-party caregiver personally guarantee payment of a nursing home resident’s bills as a condition of the resident’s admission to the facility.
  • A new Consumer Financial Protection Circular discussing conditions that violate the Nursing Home Reform Act (NHRA) and that subsequent attempts to collect debts from caregivers may violate the Fair Debt Collection Practices Act and the Fair Credit Reporting Act.

It is unclear from the CFPB’s reports the expanse of the issue of FDCPA and FCRA violations related to collecting debts from caregivers.

“ACA International members have strong compliance management systems that take into account contractual and legal obligations when working with reputable creditors,” said CEO Scott Purcell. “We are unaware of a pattern of abuse or problems within nursing home debt collection practices.”

Of note, according to the news release from the CFPB, “while the CFPB does not enforce the Nursing Home Reform Act, contract terms that violate the [a]ct’s ban on requesting or requiring a third-party guarantee of payment are unenforceable. This means that subsequent collection of debts from those contracts may violate the consumer financial protection laws the CFPB does enforce, including the Fair Debt Collection Practices Act and its prohibition of ‘any false, deceptive, or misleading representation or means in connection with the collection of any debt.’”

CFPB Circular on Nursing Home Debts

In May, CFPB Director Rohit Chopra announced the bureau’s new enforcement strategy known as “Consumer Financial Protection Circulars.”

The circulars are “policy statements under the Administrative Procedure Act and will be released publicly to increase transparency for the benefit of the public and regulated entities,” according to the CFPB.

They are published on the CFPB website and in the Federal Register with Director Chopra’s authorization.

The question presented in the CFPB’s latest circular is “Can debt collection and consumer reporting practices relating to nursing home debts that are invalid under the Nursing Home Reform Act violate the FDCPA and FCRA?”

The CFPB says yes.

Under the NHRA, enacted in 1987, a nursing facility may not condition a resident’s admission or continued stay on receiving a guarantee of payment from a third party, such as a relative or friend. Contractual provisions that violate that prohibition are illegal and unenforceable. As detailed in the circular, certain practices related to the collection of nursing home debts that are invalid under the NHRA and its implementing regulation violate the FDCPA and FCRA, according to the CFPB.

The CFPB reports third-party debt collectors working with nursing home clients may be subject to the false representation components of the FDCPA when collecting that debt.

“A debt collector may violate the FDCPA’s prohibition on misrepresentations by making a false, baseless allegation in a lawsuit that a third party engaged in financial wrongdoing as a means to hold them personally liable for a resident’s debts,” the CFPB notes.

The CFPB adds the FCRA into the mix by reminding collectors that those furnishing data based on “illegal contract terms” may be subject to violations of the law.

“Thus, a debt collector who furnishes information about nursing home debts, or a consumer reporting company that includes such information in a consumer report, may violate FCRA and Regulation V if those debts are invalid and unenforceable under the Nursing Home Reform Act, its implementing regulation, or one of its state law analogues. A furnisher or consumer reporting company also violates FCRA or Regulation V if it fails to meet its dispute obligations with respect to information related to such debts,” according to the CFPB.

Issue Spotlight

The Issue Spotlight, “Nursing Home Debt Collection,” explores how contract provisions and debt collection tactics affect caregivers. The report finds that many facilities include clauses in admission contracts that require caregivers to be a “responsible party” for the resident’s costs of care, or that otherwise subject the caregiver to financial liability should the admitted resident incur a debt, according to the CFPB.

The spotlight focuses on the cost of nursing home care, residents’ length of stay, responsible party clauses in nursing home contracts, and a review of some lawsuits for collections showing only possible connection to nursing home debts.

“A majority of the lawsuits against third parties reviewed by the CFPB included claims that either the third party or the resident had intentionally misused, hidden, or stolen the resident’s funds,” the CFPB reports. “Other than the fact that the nursing home bills remain unpaid, these claims typically did not include supporting information. This raises the possibility that some lawsuits could be alleging financial malfeasance without justification for the claim and potentially as a technique of coercion.”

CFPB and CMS Review Collection Practices

In response to the topics identified in the circular and issue spotlight, the CFPB and CMS released a joint letter urging nursing homes and debt collectors to examine their practices for compliance with federal law.

The letter reviews debt collectors and nursing home facilities’ responsibilities under the NHRA, FCRA and FDCPA.

Nursing facilities that violate the NHRA’s requirements may be subject to enforcement action by state agencies and CMS. Debt collectors who violate the FDCPA and FCRA may be subject to enforcement actions by the CFPB and other federal and state government agencies, as well as to private actions brought by consumers, the bureau reports.

ACA Insights

Chopra hosted a virtual discussion to explore challenges around nursing home debt collection practices and the impact they can have on the financial wellbeing of caregivers, their families, and friends on Sept. 8, the same day the issue spotlight, circular and joint letter were released. ACA will provide additional details on the discussion.

Compliance with the FCRA and FDCPA are at the core of ACA members’ compliance policies, and medical debt collections have extra steps for collection and credit reporting.

The prevalence of FCRA and FDCPA violations related to the collection of nursing home medical debts is unclear and the CFPB’s reports today lack specific data showing this trend. It needs additional context and examples of supposed violations and nursing home medical debt collections to inform the industry of compliance best practices it may need to consider.

A Kaiser Family Foundation (KFF) and National Public Radio report in Kaiser Health News on health care debt found that “about one on seven adults who have had health care debt say they’ve been threatened with a lawsuit or arrest.”

KFF studied some local trends on these lawsuits. For example, in Monroe County New York, where Rochester is located, 24 federally licensed nursing homes filed 238 debt collection cases from 2018 to 2021 seeking almost $7.6 million, according to the report. Several nursing homes did not file any lawsuits in that period.

However, nationally, lawsuits against families for nursing home debt are “not a common occurrence,” Beth Martino, a spokesperson for the American Health Care Association, the largest nursing home industry group, told Kaiser Health News.

If you have executive leadership updates or other member news to share with ACA, contact our communications department at [email protected]. View our publications page for more information and our news submission guidelines here.


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