Consumer Financial Protection Circular 2022-05: Debt Collection and Consumer Reporting Practices Involving Invalid Nursing Home Debts, 57375-57377 [2022-20324]

Download as PDF 57375 Rules and Regulations Federal Register Vol. 87, No. 181 Tuesday, September 20, 2022 This section of the FEDERAL REGISTER contains regulatory documents having general applicability and legal effect, most of which are keyed to and codified in the Code of Federal Regulations, which is published under 50 titles pursuant to 44 U.S.C. 1510. The Code of Federal Regulations is sold by the Superintendent of Documents. 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 Bureau of Consumer Financial Protection. AGENCY: Consumer financial protection circular. ACTION: 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)?’’ The Bureau released this circular on its website on September 8, 2022. DATES: Enforcers, and the broader public, can provide feedback and comments to Circulars@cfpb.gov. 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 CFPB_Accessibility@cfpb.gov. ADDRESSES: SUPPLEMENTARY INFORMATION: lotter on DSK11XQN23PROD with RULES1 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)? VerDate Sep<11>2014 16:25 Sep 19, 2022 Jkt 256001 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 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 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). 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). PO 00000 Frm 00001 Fmt 4700 Sfmt 4700 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 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 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 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 5 56 FR 48826, 48841 (Sept. 26, 1991). id.; see also Centers for Medicare & Medicaid Services, State Operations Manual, Appendix PP, Guidance to § 483.15(a)(3) (Nov. 22, 2017), available at https://www.cms.gov/files/ document/appendix-pp-guidance-surveyor-longterm-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). 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). 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, § B3200.1 (incorporating requirements of Federal regulations implementing Nursing Home Reform Act). 6 See E:\FR\FM\20SER1.SGM 20SER1 57376 Federal Register / Vol. 87, No. 181 / Tuesday, September 20, 2022 / Rules and Regulations lotter on DSK11XQN23PROD with RULES1 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 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 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. 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). VerDate Sep<11>2014 16:25 Sep 19, 2022 Jkt 256001 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 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 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 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). 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. PO 00000 Frm 00002 Fmt 4700 Sfmt 4700 them personally liable for a resident’s debts.22 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 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. 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). 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. E:\FR\FM\20SER1.SGM 20SER1 lotter on DSK11XQN23PROD with RULES1 Federal Register / Vol. 87, No. 181 / Tuesday, September 20, 2022 / Rules and Regulations 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 VerDate Sep<11>2014 16:25 Sep 19, 2022 Jkt 256001 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 DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 39 [Docket No. FAA–2022–0587; Project Identifier AD–2022–00394–E; Amendment 39–22170; AD 2022–19–01] RIN 2120–AA64 Airworthiness Directives; General Electric Company Turbofan Engines Federal Aviation Administration (FAA), DOT. ACTION: Final rule. AGENCY: SUMMARY: The FAA is adopting a new airworthiness directive (AD) for certain General Electric Company (GE) GEnx2B67/P model turbofan engines. This AD was prompted by the detection of an iron inclusion in a forging, which may reduce the fatigue life of certain lowpressure turbine rotor (LPTR) stage 4 disks and LPTR stage 6 disks. This AD requires the removal of certain LPTR stage 4 disks and LPTR stage 6 disks from service and replacement with parts eligible for installation. The FAA is issuing this AD to address the unsafe condition on these products. DATES: This AD is effective October 25, 2022. ADDRESSES: AD Docket: You may examine the AD docket at regulations.gov by searching for and locating Docket No. FAA–2022–0587; or in person at Docket Operations between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this final rule, any comments received, and other information. The address for Docket Operations is U.S. Department of Transportation, Docket Operations, M– 30, West Building Ground Floor, Room W12–140, 1200 New Jersey Avenue SE, Washington, DC 20590. FOR FURTHER INFORMATION CONTACT: Alexei Marqueen, Aviation Safety PO 00000 Frm 00003 Fmt 4700 Sfmt 4700 57377 Engineer, ECO Branch, FAA, 1200 District Avenue, Burlington, MA 01803; phone: (781) 238–7178; email: Alexei.T.Marqueen@faa.gov. SUPPLEMENTARY INFORMATION: Background The FAA issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to certain GE GEnx-2B67/P model turbofan engines with an affected LPTR stage 4 disk or LPTR stage 6 disk installed, identified by part number and serial number. The NPRM published in the Federal Register on June 22, 2022 (87 FR 37247). The NPRM was prompted by the engine manufacturer notifying the FAA of the detection of an iron inclusion in a forging, which may reduce the fatigue life of certain LPTR stage 4 disks and LPTR stage 6 disks. The manufacturer’s investigation determined that the inclusion is a meltrelated defect and that, as a result of the inclusion forming in the forging, certain LPTR stage 4 disks and LPTR stage 6 disks may have reduced material properties and a lower fatigue life capability. Reduced material properties may cause premature LPTR stage 4 disk and LPTR stage 6 disk fracture, which could result in uncontained debris release. As a result of its investigation, the manufacturer published service information that specifies procedures for the removal and replacement of certain LPTR stage 4 disks and LPTR stage 6 disks installed on GEnx-2B67/P model turbofan engines. This condition, if not addressed, could result in uncontained debris release, damage to the engine, and damage to the airplane. In the NPRM, the FAA proposed to require the removal of certain LPTR stage 4 disks and LPTR stage 6 disks from service and replacement with parts eligible for installation. The FAA is issuing this AD to address the unsafe condition on these products. Discussion of Final Airworthiness Directive Comments The FAA received one comment, from The Boeing Company (Boeing). Boeing concurred with the contents of the NPRM. Conclusion The FAA reviewed the relevant data, considered the comment received, and determined that air safety requires adopting the AD as proposed. Accordingly, the FAA is issuing this AD to address the unsafe condition on these products. Except for minor editorial E:\FR\FM\20SER1.SGM 20SER1

Agencies

[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]



========================================================================
Rules and Regulations
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains regulatory documents 
having general applicability and legal effect, most of which are keyed 
to and codified in the Code of Federal Regulations, which is published 
under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents. 

========================================================================


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).
---------------------------------------------------------------------------

    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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    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
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