CFPB releases new guidance on care home debt collection | Donelson Baker


The Consumer Financial Protection Bureau (CFPB) recently conducted an analysis of the risks faced by residents of nursing homes and their carers in the admission contracts and debt collection practices of nursing homes. On September 8, 2022, the CFPB summarized its findings in a news issue, circular, and joint letter with the Centers for Medicare & Medicaid Services (CMS) (Guidance Materials), reminding nursing facilities and workers to collection that certain debt collection practices may violate the Nursing Home Reform Act (NHRA) and, in turn, violate the Fair Debt Collection Practices Act and the Fair Credit Reporting Act.

We believe it is unclear how many facilities engage in these practices, but nursing homes are advised to consider this as an area of ​​focus and application.

The NHRA sets federal quality standards that nursing homes are required to meet if they receive Medicare or Medicaid payments. Specifically, the NHRA prohibits facilities from requiring a third party, such as a parent or caregiver of a resident, to accept responsibility for charges incurred by a resident. The ban applies to all residents and potential residents of a nursing care facility, whether eligible for Medicare or Medicaid. The CFPB survey, however, claims that during the nursing home admission process, it is common for caregivers to sign agreements with language that names the caregiver as a “responsible party” for the cost of nursing home care. retirement.

We think it’s important to note that the prohibition on “responsible party” clauses does not apply to cases where a third party has volunteered to pay the costs of a nursing home. It also does not apply to scenarios where a third party has legal access to a resident’s funds and agrees to pay the nursing facility from those funds. Instead, the prohibition applies to contractual language that requires third parties to assume a financial burden that they would not otherwise have assumed. Additionally, while the CFPB discourages the use of boilerplate language to allege that third parties have engaged in a fraudulent transfer, a retirement home may consider a lawsuit when there are sufficient grounds to believe that a third party has defrauded the resident to the detriment of the establishment. . Additionally, the new guidelines are silent on care homes’ ability to report to relevant law enforcement authorities unlawful third-party misconduct involving the handling of residents’ funds.

The CFPB has warned that many responsible party clauses in nursing home admission contracts violate the NHRA when used as a basis for seeking payment from third parties for outstanding nursing home balances. Although the exact contractual language varies from facility to facility, the CFPB found many illegal similarities in responsible party clauses. For example, some admission contracts contain “joint and several liability” clauses which attempt to attribute to third parties the same personal responsibility for payment as the resident. Other contracts may require third parties to “personally guarantee” payment of the resident’s nursing home bills to ensure the resident’s continued stay. The CFPB also found Medicaid eligibility clauses that attempt to hold third parties personally liable for a resident’s expenses if they do not submit an accurate, timely, and complete application for Medicaid.

Violations of the NHRA may subject a nursing facility to enforcement action by CMS and various state agencies, using CMS State Operations Manual guidelines to cite deficiencies. These enforcement actions could include:

  • Civil monetary penalties
  • Termination of supplier contract
  • Denial of payment for all Medicare and/or Medicaid individuals by CMS
  • Denial of payment for all new admissions to Medicare and/or Medicaid
  • Condition monitoring
  • Temporary management
  • Transfer of residents
  • Transfer of residents with closure of the establishment
  • Directed correction plan
  • Directed continuing education
  • Alternative or additional state remedies approved by the CMS

Although the CFPB does not enforce the NHRA, any amount owed or allegedly owed for nursing facility services is a debt under the Fair Debt Collection Practices Act (FDCPA) because it arises from a transaction of consumption. The FDCPA, which is enforced by the CFPB, prohibits the use of “any false, misleading or misleading representation or means in connection with the collection of any debt”. Therefore, bill collectors violate the FDCPA when they rely on contract terms that violate the NHRA to falsely claim that caregivers or liable parties are personally liable for the bills of nursing facility residents.

The CFPB has the power to initiate administrative enforcement proceedings or civil actions after finding violations during regular reviews, targeted reviews (which typically involve a single entity with a large volume of consumer complaints or a specific concern brought to the attention of the CFPB), or Horizontal reviews (which involve the review of several entities). The CFPB may obtain “any appropriate legal or equitable remedy for a breach of [f]federal consumer financial law”, including but not limited to:

  • Termination or reformation of contracts
  • Refund of money or return of real estate
  • Restitution
  • Restitution or compensation for unjust enrichment
  • Payment of damages or other pecuniary relief
  • Public notification regarding the breach
  • Limitations on the activities or duties of the person against whom the action is brought
  • Monetary civil penalties (which can go either to victims or to financial education)

Consumers may also sue debt collectors for violations of the FDCPA in any appropriate U.S. district court or other court of competent jurisdiction. The consumer has one year from the date the infringement occurred to take such action. A debt collector found guilty of violating the FDCPA may be liable for:

  • Any actual damage suffered as a result of this failure
  • In an individual action, punitive damages as authorized by the court, up to $1,000
  • In a class action, up to $1,000 for each named plaintiff and compensation to be apportioned among all class members in the amount of up to $500,000 or 1% of the debt collector’s net worth, depending the lowest value.
  • Reasonable attorneys’ fees and costs in such action

The CFPB also enforces the Fair Credit Reporting Act (FCRA), which prohibits providing inaccurate information to any consumer reporting agency after receiving a notice from a consumer that the information is inaccurate. Collection agents can also violate the FCRA when they rely on illegal responsible party clauses to point out that a third party owes a nursing facility for the cost of a resident’s care. FCRA violations can subject a debt collector to statutory damages of $100 to $1,000 per violation.

Ultimately, the CFPB urges nursing homes to review the wording of their admission contract to ensure compliance with the NHRA and, if necessary, remove illegal responsible party clauses. Collection agents must also ensure that their practices comply with federal laws, including the FDCPA and FCRA.


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