China Imposes Rules on Elderly Care Facilities to Prevent Fraud and Mismanagement

China has introduced stricter regulations for elderly care facilities, particularly concerning financial transactions and prepayments. The new guidelines, issued by multiple government departments including the Ministry of Civil Affairs and the Ministry of Public Security, prohibit these facilities from collecting more than 12 months' payment in advance. This decision aims to address the issues of illegal fundraising and fraud that have arisen due to the common practice among elderly care providers of charging fees upfront to mitigate funding challenges [para. 1][para. 2].

The rules specifically cap down payments at no more than twelve times the monthly cost, directly addressing excessive prepayment demands [para. 3]. This regulatory change follows incidents such as one reported by Caixin, where a senior care apartment operator in Hunan Province absconded with nearly 100 million yuan collected from 1,800 seniors [para. 4]. Such cases underscore the vulnerabilities faced by the elderly population in these financial arrangements.

Further detailing financial practices, the guidelines outline permissible charges including service fees, deposits, and membership fees while setting clear boundaries on their collection duration [para. 5]. Elderly care facilities are also required to publicly display their fee structures and report them to local civil affairs departments ensuring transparency and governmental oversight [para. 6].

Moreover, certain types of institutions are specifically barred from charging membership fees. These include facilities not yet operational or completed, public institutions or those under government-private partnerships, and any institution whose owners have previously violated trust or legal standards related to financial dealings within this sector [para. 7].

To safeguard collected funds, the guidelines mandate that all deposits and membership fees be held in third-party custodian accounts. These accounts must also reserve at least 10% of total membership fees collected over the past three years as a risk reserve fund, providing a financial buffer to protect against potential mismanagement or fraud [para. 8].

These measures reflect a concerted effort by Chinese authorities to enhance the security and reliability of financial practices in elderly care facilities while protecting a vulnerable segment of the population from exploitation.