Multiple U.S. agencies recently sounded alarms about a growing problem that has had serious impact on the financial health of America’s seniors: elder financial fraud.
The Consumer Financial Protection Bureau (CFPB) released a report last month – the first ever public analysis of the topic – that said that elder financial fraud victims suffer an average loss of $34,200.
Who is the Victim and Who is the Perpetrator?
The age group most affected were people between ages 70 and 79. People between ages 80 and older were the second-most affected, followed by those between ages 60 and 69. People between 50 and 59 were least affected.
Many times, elder financial fraud goes unreported because the perpetrator is someone who is close to the victim – typically a family member or someone else in a position of trust, such as a caregiver. According to the report, the victim knew the perpetrator in 36% of cases, though strangers were responsible for fraud in slightly over 50% of cases.
Victims who knew the perpetrators suffered larger losses. The average loss was $57,800 if the perpetrator was a non-family caregiver, family members who defrauded their elderly relatives were responsible for an average loss of $42,700, while strangers were responsible for an average loss of $17,000.
According to the CFPB, Suspicious Activity Report (SAR) filings by institutions (such as banks, credit unions, money transfer businesses and casinos) with the Financial Crimes Enforcement Network related to elder financial exploitation quadrupled between 2013 and 2017.
How to Avoid Becoming a Victim of Elder Fraud
- Talk about your finances early and often with your adult children. While conversations about your finances may be initially awkward, it is important for your children to see that you’re staying on top of your financial matters. Such conversations may also help them identify whether there are any new or unusual developments that may affect your financial health.
- Destroy or shred all financial account statements and financial product offers (credit cards, loans, etc) before disposing of them.
- Appoint a trusted person as an agent for all of your financial accounts. This may include granting power of attorney (POA) healthcare POA, drafting a will, HIPAA authorizations, and durable power of attorney. This person will be able to take responsibility for your finances in the event you can no longer do so yourself.
- Never share sensitive personal information over the phone or via the internet unless you initiated the contact and you trust the person or people you’re communicating with. This includes your Social Security Number, driver’s license or ID number, account numbers, and online account login credentials.
- Order a copy of your credit report at least once per year to check for identity theft.
- Be wary of any notifications that you’ve won prizes, sweepstakes or a lottery – and never pay a fee to collect winnings.
- Don’t be strong-armed into making any financial decisions. Ask for all details in writing before making changes to accounts.
- Be suspicious of any new friends who want to know all about your finances.
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Beefing Up the Law
By the year 2035, there will be more Americans over age 65 than children under 18, so regulators and policymakers have already started taking steps to pass laws and initiatives to help seniors avoid becoming victims of elder fraud.
FINRA, the Financial Industry Regulatory Authority that oversees the U.S. brokerage industry, passed two new rules in 2018 to protect older investors.
The first rule requires financial advisors to make reasonable effort to obtain the contact information of a trusted person from their clients in the event their client exhibits red-flag behavior—such as a retiree emptying their life savings to buy speculative investments.
The second rule allows advisors to put a temporary freeze on their clients’ accounts if the advisor has reasonable belief of possible fraud. The advisor may then reach out to the client, the client’s trusted contact, the police or adult protective services before making any disbursements from the client’s account.
In addition, 13 states have passed laws over the last year that permit financial institutions to put a hold on disbursements from certain clients’ accounts if financial exploitation is suspected.
The Senior Safe Act went into effect in May 2018. This law encourages financial professionals to receive special training to help them identify potential elder financial abuse involving their clients.
Financial Professionals Can Help
Having good retirement plan and a trusted professional with a fiduciary responsibility on your side can help protect you from elder fraud.
Request a free, no-obligation consultation with a financial advisor today to find out how they can help protect your finances and help you enjoy financial peace of mind in retirement.