[Federal Register Volume 87, Number 181 (Tuesday, September 20, 2022)]
[Rules and Regulations]
[Pages 57375-57377]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-20324]



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 Rules and Regulations
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  Federal Register / Vol. 87, No. 181 / Tuesday, September 20, 2022 / 
Rules and Regulations  

[[Page 57375]]



BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Chapter X


Consumer Financial Protection Circular 2022-05: Debt Collection 
and Consumer Reporting Practices Involving Invalid Nursing Home Debts

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Consumer financial protection circular.

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SUMMARY: The Consumer Financial Protection Bureau (Bureau or CFPB) has 
issued Consumer Financial Protection Circular 2022-05, titled, ``Debt 
collection and consumer reporting practices involving invalid nursing 
home debts.'' In this circular, the Bureau responds to the question, 
``Can debt collection and consumer reporting practices relating to 
nursing home debts that are invalid under the Nursing Home Reform Act 
violate the Fair Debt Collection Practices Act (FDCPA) and Fair Credit 
Reporting Act (FCRA)?''

DATES: The Bureau released this circular on its website on September 8, 
2022.

ADDRESSES: Enforcers, and the broader public, can provide feedback and 
comments to [email protected].

FOR FURTHER INFORMATION CONTACT: Colin Reardon or Joshua Johnson, 
Senior Counsels, Office of Law & Policy, at (202) 435-7700. If you 
require this document in an alternative electronic format, please 
contact [email protected].

SUPPLEMENTARY INFORMATION: 

Question Presented

    Can debt collection and consumer reporting practices relating to 
nursing home debts that are invalid under the Nursing Home Reform Act 
violate the Fair Debt Collection Practices Act (FDCPA) and Fair Credit 
Reporting Act (FCRA)?

Response

    Yes. Under the Nursing Home Reform Act, 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 this Circular, certain practices related 
to the collection of nursing home debts that are invalid under the 
Nursing Home Reform Act and its implementing regulation violate the 
FDCPA and FCRA.

Background on the Nursing Home Reform Act

    Enacted in 1987, the Nursing Home Reform Act establishes a 
comprehensive set of requirements that protect the health, safety, 
welfare, and rights of residents of nursing facilities that participate 
in Medicaid and Medicare.\1\ The Centers for Medicare & Medicaid 
Services (``CMS'') and the Department of Health and Human Services 
(``HHS'') have issued rules implementing the Nursing Home Reform 
Act.\2\ State agencies are responsible for surveying nursing facilities 
for compliance with the Nursing Home Reform Act's requirements 
concerning admissions agreements, and HHS and CMS are responsible for 
the enforcement of those requirements.\3\
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    \1\ See Public Law 100-203, tit. IV, subtit. C, 101 Stat. 1330 
(1987). The Nursing Home Reform Act imposes requirements for nursing 
facilities that participate in Medicaid, see 42 U.S.C. 1396r, and 
for skilled nursing facilities that participate in Medicare, see 42 
U.S.C. 1395i-3. For simplicity, and because the distinction is not 
relevant to the Bureau's analysis, this Circular refers to both 
nursing facilities and skilled nursing facilities as ``nursing 
facilities.''
    \2\ See 42 CFR 483.1 et seq.
    \3\ See 42 U.S.C. 1395i-3(f)(1), (g)(1)(A), (h); 42 U.S.C. 
1396r(f)(1), (g)(1)(A), (h).
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    Among other protections, the Nursing Home Reform Act and its 
implementing regulation prohibit 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.\4\ As HHS has explained, this 
prohibition prevents a nursing facility ``from requiring a person other 
than the resident to assume personal responsibility for any cost of the 
resident's care.'' \5\ The prohibition applies to all residents and 
prospective residents of a nursing facility, regardless of whether they 
are eligible for Medicare or Medicaid.\6\ The Nursing Home Reform Act 
further provides that a nursing facility may require a resident's 
representative who has legal access to a resident's available income or 
resources to sign a contract to provide the facility payment from the 
resident's income or resources, so long as the representative does not 
incur personal financial liability.\7\
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    \4\ 42 U.S.C. 1395i-3(c)(5)(A)(ii), 1396r(c)(5)(A)(ii); 42 CFR 
483.1(b), 483.15(a)(3).
    \5\ 56 FR 48826, 48841 (Sept. 26, 1991).
    \6\ See id.; see also Centers for Medicare & Medicaid Services, 
State Operations Manual, Appendix PP, Guidance to Sec.  483.15(a)(3) 
(Nov. 22, 2017), available at https://www.cms.gov/files/document/appendix-pp-guidance-surveyor-long-term-care-facilities.pdf.
    \7\ 42 U.S.C. 1395i-3(c)(5)(B)(ii), 1396r(c)(5)(B)(ii); see also 
42 CFR 483.15(a)(3).
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    Through these provisions, Congress sought to prohibit nursing 
facilities ``from requiring a person, such as a relative, to accept 
responsibility for the charges incurred by a resident, unless that 
person is authorized by law to disburse the income or assets of the 
resident.'' \8\ A nursing facility's admissions agreement may not 
contain terms that conflict with the Nursing Home Reform Act and its 
implementing regulation,\9\ and courts have recognized that contract 
terms that conflict with the Nursing Home Reform Act and its 
implementing regulation are unenforceable.\10\
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    \8\ 56 FR 48826, 48841 (Sept. 26, 1991).
    \9\ 42 CFR 483.10(g)(18)(v).
    \10\ See, e.g., Manor of Lake City, Inc. v. Hinners, 548 NW2d 
573, 576 (Iowa 1996); Village at the Greene v. Smith, 2020-Ohio-
4088, ] 25 (Ohio Ct. App. 2020); Knight v. John Knox Manor, Inc., 92 
So. 3d 111, 120 (Ala. Civ. App. 2012).
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    Some States have adopted State law analogues of the Nursing Home 
Reform Act that prohibit nursing facilities from requiring third-party 
guarantees, and admissions agreements can also be unenforceable if they 
violate those State law prohibitions.\11\
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    \11\ See, e.g., Ala. Admin. Code r. 560-X-10-.02(9); 410 Ind. 
Admin. Code 16.2-3.1-16(b); see also DC Mun. Regs. tit. 22, Sec.  
B3200.1 (incorporating requirements of Federal regulations 
implementing Nursing Home Reform Act).
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Violations of the FDCPA and FCRA

    While the CFPB does not enforce compliance with the Nursing Home 
Reform Act and is generally not responsible for overseeing the 
activities of nursing facilities, the CFPB is

[[Page 57376]]

responsible for issuing rules regarding and enforcing compliance with 
the FDCPA and FCRA.\12\ The FDCPA and FCRA can also be enforced by 
other Federal government agencies and States,\13\ and through private 
actions brought by consumers.\14\ The CFPB is issuing this Circular to 
emphasize that certain practices involving the collection of nursing 
home debts can violate the FDCPA and FCRA.\15\
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    \12\ See, e.g., 12 U.S.C. 5481(12)(F), (H), 5512(b), 5514(c); 15 
U.S.C. 1681s(b)(1)(H), (e) (FCRA); 15 U.S.C. 1692l(b)(6), (d) 
(FDCPA).
    \13\ 15 U.S.C. 1681s (FCRA); 15 U.S.C. 1692l (FDCPA). States can 
directly bring actions under FCRA, see 12 U.S.C. 1681s(c), and can 
also bring actions under the Consumer Financial Protection Act 
(CFPA) against ``covered persons'' and ``service providers'' based 
upon violations of Federal consumer financial laws, including the 
FDCPA and FCRA, see Authority of States to Enforce the Consumer 
Financial Protection Act of 2010, 87 FR 31940 (May 26, 2022).
    \14\ 15 U.S.C. 1681n, 1681o (FCRA); 15 U.S.C. 1692k (FDCPA).
    \15\ The Bureau notes that practices involving the collection of 
invalid nursing home debts may violate other laws not discussed in 
this Circular. For example, the collection of invalid nursing home 
debt may violate State law analogues of the FDCPA and State laws 
prohibiting unfair, deceptive, or abusive acts or practices. In 
addition, to the extent that persons collecting nursing home debts 
are ``covered persons'' or ``service providers'' under the CFPA, see 
12 U.S.C. 5481(6), (15)(A)(i), (iv), (x), (26), the collection of 
invalid nursing home debts would typically violate the CFPA's 
prohibition on engaging in any unfair, deceptive, or abusive act or 
practice. 12 U.S.C. 5531(a), 5536(a)(1)(B); see also CFPB v. 
CashCall, Inc., 35 F.4th 734, 746 (9th Cir. 2022) (affirming ruling 
that defendant ``engaged in a deceptive practice by collecting 
payments on loans that were invalid''). Furthermore, actions taken 
with respect to nursing home debts may violate other provisions of 
the FDCPA and FCRA not specifically addressed in this Circular.
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    Nursing facilities and their third-party debt collectors at times 
seek to collect residents' debts from relatives and other third parties 
when the resident cannot afford to pay. The nursing facilities 
reportedly collect unpaid balances, often after the resident's 
discharge or death, directly from third parties. If the third-party 
refuses to pay the arrears, some nursing facilities hire debt 
collectors to demand payment, report the debt to consumer reporting 
companies as the third party's personal debt, and sue the third party 
in court.
    An amount that is owed or allegedly owed for nursing facility 
services is a ``debt'' under the FDCPA because it arises out of a 
consumer transaction.\16\ When a nursing facility claims that a 
resident's bill has not been paid, it may engage a third-party debt 
collector subject to the FDCPA and Regulation F to collect the 
resident's debt,\17\ including when the facility claims that a third 
party is personally financially responsible for the debt. Among other 
things, the FDCPA and Regulation F prohibit the use of ``any false, 
deceptive, or misleading representation or means in connection with the 
collection of any debt.'' \18\ That prohibition includes, for example, 
using a false representation of the ``character, amount, or legal 
status of any debt''; a ``threat to take any action that cannot legally 
be taken or that is not intended to be taken''; and ``any false 
representation or deceptive means to collect or attempt to collect any 
debt or to obtain information concerning a consumer.'' \19\
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    \16\ See 15 U.S.C. 1692a(5) (defining ``debt'' as ``any 
obligation or alleged obligation of a consumer to pay money arising 
out of a transaction in which the money, property, insurance, or 
services which are the subject of the transaction are primarily for 
personal, family, or household purposes, whether or not such 
obligation has been reduced to judgment''); see also Eades v. 
Kennedy, PC Law Offices, 799 F.3d 161, 170 (2d Cir. 2015).
    \17\ 15 U.S.C. 1692a(6) (defining ``debt collector''); 12 CFR 
1006.2(i) (same).
    \18\ 15 U.S.C. 1692e; 12 CFR 1006.18(a).
    \19\ 15 U.S.C. 1692e(2), (5), (10); accord 12 CFR 
1006.18(b)(2)(i), (c)(1), (d).
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    The prohibition on misrepresentations includes misrepresenting that 
a consumer must pay a debt that arises from a contract provision that 
is illegal and unenforceable under Federal or State law. Thus, a debt 
collector, including a law firm in litigation,\20\ 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.\21\
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    \20\ Attorneys who regularly engage in collecting consumer 
debts, including through litigation, are ``debt collectors'' under 
the FDCPA. See Heintz v. Jenkins, 514 U.S. 291 (1995).
    \21\ Some nursing facilities may claim that family members are 
responsible for residents' costs under State filial support or 
necessaries statutes. See Katherine C. Pearson, Filial Support Laws 
in the Modern Era: Domestic and International Comparison of 
Enforcement Practices for Laws Requiring Adult Children to Support 
Indigent Parents, 20 Elder L.J. 269 (2013), https://elibrary.law.psu.edu/cgi/viewcontent.cgi?article=1034&context=fac_works. This Circular does 
not address such claims made under State law.
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    The CFPB is also aware that debt collectors sometimes claim that a 
third party, such as a relative of the resident, is personally liable 
for the resident's debt because the third party engaged in financial 
wrongdoing in relation to the resident's resources. In some cases, debt 
collectors make such allegations in debt collection lawsuits without 
having any factual basis for the allegations, and the allegations prove 
to be false. 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.\22\
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    \22\ Attorneys collecting debts on behalf of nursing facilities 
may also independently violate the FDCPA's prohibition on 
misrepresentations if their law firm alleges that a third party owes 
the debt in pleadings or other communications that the firm's 
attorneys were not ``meaningfully involved'' in preparing. Nielsen 
v. Dickerson, 307 F.3d 623, 635 (7th Cir. 2002); see also Miller v. 
Wolpoff & Abramson, L.L.P., 321 F.3d 292, 300-07 (2d Cir. 2003); 
CFPB v. Frederick J. Hanna & Assocs., 114 F. Supp. 3d 1342, 1362-69 
(N.D. Ga. 2015).
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    The FCRA and its implementing Regulation V impose obligations on 
consumer reporting companies and on debt collectors who furnish 
information to consumer reporting companies, including obligations 
relating to the accuracy of information in consumer reports. For 
example, a furnisher must ``establish and implement reasonable written 
policies and procedures regarding the accuracy and integrity of the 
information relating to consumers that it furnishes to a consumer 
reporting agency.'' \23\ Furnishers must also investigate consumer 
disputes concerning the accuracy of the information furnished,\24\ and 
are prohibited from furnishing inaccurate information to any consumer 
reporting company after receiving notice from a consumer that 
particular information is inaccurate.\25\ In addition, consumer 
reporting companies ``shall follow reasonable procedures to assure 
maximum possible accuracy of the information concerning the individual 
about whom the report relates'' \26\ and must investigate consumer 
disputes.\27\
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    \23\ 12 CFR 1022.42(a).
    \24\ 15 U.S.C. 1681s-2(a)(8), (b); 12 CFR 1022.43(a).
    \25\ 15 U.S.C. 1681s-2(a)(1)(B). The consumer must send the 
notice to the address specified by the furnisher for such notices. 
Id. If the furnisher has not specified such an address, then the 
furnisher is subject to FCRA's general prohibition against 
``furnish[ing] any information relating to a consumer to any 
consumer reporting agency if the person knows or has reasonable 
cause to believe that the information is inaccurate.'' 15 U.S.C. 
1681s-2(a)(1)(A).
    \26\ 15 U.S.C. 1681e(b).
    \27\ 15 U.S.C. 1681i.
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    It is inaccurate to report that a consumer owes a debt when the 
debt is based on an illegal contract term. 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.

[[Page 57377]]

About Consumer Financial Protection Circulars

    Consumer Financial Protection Circulars are issued to all parties 
with authority to enforce Federal consumer financial law. The CFPB is 
the principal Federal regulator responsible for administering Federal 
consumer financial law, see 12 U.S.C. 5511, including the Consumer 
Financial Protection Act's prohibition on unfair, deceptive, and 
abusive acts or practices, 12 U.S.C. 5536(a)(1)(B), and 18 other 
``enumerated consumer laws,'' 12 U.S.C. 5481(12). However, these laws 
are also enforced by State attorneys general and State regulators, 12 
U.S.C. 5552, and prudential regulators including the Federal Deposit 
Insurance Corporation, the Office of the Comptroller of the Currency, 
the Board of Governors of the Federal Reserve System, and the National 
Credit Union Administration. See, e.g., 12 U.S.C. 5516(d), 5581(c)(2) 
(exclusive enforcement authority for banks and credit unions with $10 
billion or less in assets). Some Federal consumer financial laws are 
also enforceable by other Federal agencies, including the Department of 
Justice and the Federal Trade Commission, the Farm Credit 
Administration, the Department of Transportation, and the Department of 
Agriculture. In addition, some of these laws provide for private 
enforcement.
    Consumer Financial Protection Circulars are intended to promote 
consistency in approach across the various enforcement agencies and 
parties, pursuant to the CFPB's statutory objective to ensure Federal 
consumer financial law is enforced consistently. 12 U.S.C. 5511(b)(4).
    Consumer Financial Protection Circulars are also intended to 
provide transparency to partner agencies regarding the CFPB's intended 
approach when cooperating in enforcement actions. See, e.g., 12 U.S.C. 
5552(b) (consultation with CFPB by State attorneys general and 
regulators); 12 U.S.C. 5562(a) (joint investigatory work between CFPB 
and other agencies).
    Consumer Financial Protection Circulars are general statements of 
policy under the Administrative Procedure Act. 5 U.S.C. 553(b). They 
provide background information about applicable law, articulate 
considerations relevant to the Bureau's exercise of its authorities, 
and, in the interest of maintaining consistency, advise other parties 
with authority to enforce Federal consumer financial law. They do not 
restrict the Bureau's exercise of its authorities, impose any legal 
requirements on external parties, or create or confer any rights on 
external parties that could be enforceable in any administrative or 
civil proceeding. The CFPB Director is instructing CFPB staff as 
described herein, and the CFPB will then make final decisions on 
individual matters based on an assessment of the factual record, 
applicable law, and factors relevant to prosecutorial discretion.

Rohit Chopra,
Director, Consumer Financial Protection Bureau.
[FR Doc. 2022-20324 Filed 9-19-22; 8:45 am]
BILLING CODE 4810-AM-P