CFPB Warns Collectors Working Nursing Home Accounts About Potential FDCPA Violations

The Consumer Financial Protection Bureau wants debt collectors to know that if they are collecting or attempting to collect debts on behalf of nursing home clients that require caregivers to personally guarantee payment of a resident’s bills — which violates federal law — the collector may be in violation of the Fair Debt Collection Practices Act and the Fair Credit Reporting Act.

Why This Matters: The Nursing Home Reform Act prohibits facilities participating in Medicare and Medicaid from requiring third-party caregivers to personally guarantee the payment of a resident’s bills or debts as a condition of admission to live in the facility. In some cases, caregivers have been subject to wage garnishment or even lost their homes after personally guaranteeing payment and then not being able to pay.

• The CFPB published guidance indicating that attempting to collect on these types of debts may violate the FDCPA because the attempt to collect misrepresents that the consumer must pay because the personal guarantee provision of a contract is illegal and unenforceable under federal or state law.
• “Thus, a debt collector, including a law firm in litigation, that represents that a third party must personally pay a nursing facility resident’s debt may violate the prohibition on misrepresentations where the debt is invalid under the Nursing Home Reform Act, its implementing regulation, or one of its state law analogues.”

The Last Word: From CFPB Director Rohit Chopra:

• “Over the years, I have heard from those in both the debt collection industry and the nursing home industry that law-abiding actors that treat patients and consumers with respect and dignity are routinely disadvantaged by having to compete with those who engage in exploitative tactics or otherwise break the law.
• “Debt collection firms are a key part of the consumer finance ecosystem, and nursing homes are a major sector within our health care industry. It is up to all of us to make sure that we protect patients, their caregivers, and honest businesses.”