CFPB Issues Guidance on Nursing Home Debt

By: Zisl Edelson1

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Zisl Edelson summarizes the policy statement about debt collection practices for unpaid nursing home bills issued on September 8, 2022 by the Consumer Financial Protection Bureau.

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Deciding to admit an elderly loved one, parent, spouse or partner to a nursing home is an intense and agonizing process. Sometimes there is just no choice, especially when there are insufficient funds for full-time at home care, and when a loved one has suffered a serious illness such as stroke, a disabling fall, or rapid cognitive decline. At the nursing home, in crises mode and faced with numerous documents and forms, family members are overwhelmed and in weak position to negotiate with the facility and do not know the right questions to ask.

Fortunately, the Consumer Financial Protection Bureau (CFPB) has made a priority of helping seniors protect themselves financially. Recently, the CFPB issued a policy statement clarifying the interplay between the Federal Nursing Home Reform Home Act (FNHRA), the Fair Debt Collection Practices Act (FDCPA) and the Fair Credit Reporting Act (FCRA), with respect to nursing home contracts and debt collection practices for unpaid nursing home bills. See, CFPB Circular 2022-05 (Sept. 8, 2022).

The policy statement focuses on two main points:

1. No Third-Party Guarantee. Under the FNHRA2, a nursing home cannot require a third party (such as an adult child, or friend) to guarantee payment of nursing home bills, as a condition of admission or continued stay at the facility. Despite this rule, nursing home form contracts often include boilerplate provisions requiring third party guaranties and signature by a “responsible party.” Family members and friends who have signed such contracts may mistakenly believe they have liability for nursing home bills, when they actually do not.

Practical Takeaway:

• Nursing home contracts should be signed only by the patient (including as “responsible party”), if the patient has capacity, or by the patient’s legal guardian, or agent under powers of attorney, specifically in such capacity and not personally. A family member or friend should never sign as “responsible party” with any personally liability for payment. However, any third-party signer should understand that the FNHRA allows nursing homes to require a third party who has access and control of the patient’s income and assets (such as an agent under financial powers of attorney or a guardian) to use the patient’s funds to pay the facility, without obligating the third party to pay from their own resources. Third parties with financial control of a patient’s resources should be careful to keep detailed written records of all financial transactions and to only use resources for the patient’s benefit.3

• The CFPB policy statement specifically does not include discussion of a spouse’s potential liability for nursing home debt under state filial support laws.4 Under the Illinois Family Expense Act, a spouse may be liable for nursing home debt.5

2. Unfair Debt Collection. Any nursing home contract provision that requires payment by third parties as a condition of admission or continued stay violates the FNHRA and is illegal and unenforceable. Therefore, nursing home debts under such contracts are not valid. Nevertheless, it is not uncommon for nursing homes to try to collect against third parties (most often family members such as adult children) for amounts owed by patients, especially after the patient has been discharged or has died. Collection of this invalid debt violates the FDCPA and the FCRA, because it is unlawful to mischaracterize a nursing home debt as collectable, when the debt is based on an invalid nursing home contract provision. Trying to collect such debt is false, deceptive, and misleading in violation of consumer debt collection laws.

Practical Takeaway:

If faced with collection letters for nursing home bills, third parties should immediately dispute the debt in writing (including a reference to CFPB Circular 2022-05) and reach out to local government regulatory agencies and the CFPB. Law firms and collection agencies may be liable for damages under consumer debt collection laws if they pursue collection of invalid nursing home debt.

Endnotes

1. Zisl Edelson is an attorney focused on elder law at Edelson Law LLC in Skokie, Illinois.

2. The Illinois State Bar Association originally published this article. (ISBA Trusts & Estates Newsletter, Vol. 69, No. 4 (Oct. 2022)).

3. The Illinois Nursing Home Care Act generally mirrors the FNHRA. See, 210 ILCS 45/).

4. For an interesting recent case relating to potential limits on the scope of third-party obligations under nursing home contracts, see Wedgewood Care v. Eric Kravitz, NY App. No. 5545/14 (Jan. 5, 2021).

5. See, Circular 2022-05 (footnote twenty-one at p. 4)

6. See, 750 ILCS 65/15.

FALL 2022 eReport