If you’re collecting debt for nursing home care, you might want to double check who is responsible for payment. Last week, in conjunction with a field hearing, the CFPB issued a new Consumer Financial Protection Circular and an Issue Spotlight on Fair Debt Collection Practices Act (FDCPA) and Fair Credit Reporting Act (FCRA) violations in connection with nursing home debt. The CFPB also released a letter sent jointly with the Centers for Medicare & Medicaid Services (CMS) on third-party guarantees of nursing home debt.
Motivated by concern about the increasing cost of nursing home care and the financial challenges faced by consumers in paying for such care, the report discusses efforts by nursing facilities to obtain payment from non-residents. The Nursing Home Reform Act (NHRA) prohibits a nursing facility that participates in Medicaid or Medicare from requesting or requiring a third-party guarantee of payment as a condition of admission, expedited admission, or continued stay in the facility. Provided a resident’s representative does not incur personal liability, the NHRA does permit a nursing facility to require a representative with legal access to a resident’s available income or resources to sign a contract to provide payment to the facility from the resident’s income or resources.
The report finds that some nursing facilities include terms in their admission contracts that try to hold a third party financially liable for the resident’s nursing home costs and discusses different forms that such terms may take. The report states that many third parties are unaware that there are legal restrictions on nursing home admission contracts and may also lack the resources to properly respond to a lawsuit seeking to collect a resident’s costs based on such contract terms. As a result, courts may enter default judgments, thereby enabling debt collection firms to use wage garnishment or foreclosure to collect residents’ costs from third parties. The report also states that nursing homes and debt collectors may also report a resident’s debts to credit reporting companies as a third party’s personal debt as a way of creating pressure on the third party to pay such debts.
The report also discusses claims made in debt collection lawsuits that a third party engaged in financial wrongdoing, such having intentionally misused, hidden, or stolen the resident’s funds. As an example, the report references boilerplate language used in many New York lawsuits alleging that a third party had engaged in fraudulent conveyances.