March 7, 2019. By Matt Okaty:
According to the U.S. Census Bureau, the year 2030 will mark a pivotal demographic turning point, as seniors are projected to outnumber children for the first time in U.S. history. As the fastest growing segment of the population, seniors are expected to make up a full 20% of the population by the end of the next decade, up from 16% currently. Ten years ago, that figure stood at around 13%. This population shift presents a number of challenges for society, the most obvious perhaps being social security and healthcare. Another significant challenge, though often overlooked, is the rising rate of elder financial abuse (fraud or financial exploitation of seniors) in this country, which is costing seniors billions of dollars every year.
While everyone can potentially fall victim to fraud, seniors are particularly susceptible for a number of reasons. Diminished mental capacity, which is estimated to affect roughly 50% of Americans in their lifetime, makes seniors attractive targets for scams. Many elderly individuals also live alone and suffer from loneliness and social isolation which creates favorable conditions for exploitation. Additionally, seniors are more likely to have a sizable amount of savings to draw from as they have spent a lifetime accumulating assets for retirement. These are some of the biggest factors that place seniors in a heightened risk category.
The statistics are staggering. Financial firms filed 63,000 reports of suspected cases of financial exploitation with the Treasury Department in 2017, which was three times the levels reported in 2014. Financial damages in 2017 totaled $1.7 billion according to the Consumer Financial Protection Bureau (CFPB), and seniors lost an average of $34,200 whenever a monetary loss occurred (in 7% of the cases, the losses exceeded $100,000). However, this is only the tip of the iceberg, as the CFPB estimates that fewer than 2% of incidents actually get reported. Many victims are too embarrassed to come forward, may not realize they have been defrauded, or worse – if the perpetrator is a family member or caregiver, the victim may either fear retaliation or may not want to get the person in trouble. Some studies estimate that actual losses each year are closer to $36.5 billion.
The United States Senate Special Committee on Aging has published a report identifying the top 10 scams targeting our nation’s seniors based on information collected from the committee’s Fraud Hotline (1-855-303-9470). The list includes IRS scams, lottery scams, romance scams, computer tech support scams, as well as grandparent scams in which an impersonator calls claiming to be a grandchild in trouble. Other common scams include charity scams and home repair scams (“We’re in your area and can coat your driveway cheaply…”). Sadly, however, the majority of elder financial abuse is committed by someone known to the individual such as a family member, caretaker, or trusted professional (the National Adult Protective Services Association estimates that it could be as high as 90%). Examples of such exploitation by a family member or trusted individual may include misusing a power of attorney, withdrawing money from a joint bank account, stealing checks or using credit cards without authorization, transferring property deeds, etc.
In recognition of this growing problem, the SEC and FINRA have recently passed regulations to encourage and make it easier for financial institutions to intervene, as financial advisors and broker-dealers may be the first to spot signs of financial abuse, exploitation, or fraud. The “Senior Safe Act” signed into law in May of 2018 allows financial firms to report suspected cases of elder fraud to authorities without being liable for breaching privacy laws as long as certain conditions are met, such as developing employee training programs for detecting signs of fraud and exploitation. A new FINRA rule also allows broker-dealers to place temporary holds on disbursements of funds from accounts where there is a reasonable belief of financial exploitation. Broker-Dealers are also now required to make reasonable efforts to obtain the name and contact information for a trusted contact for customer accounts.
It is important for seniors to become educated as there is only so much the government can do to combat the problem. Awareness of common scams is a good starting point, and the U.S. Senate Special Committee on Aging recommends keeping the following scam prevention tip card by your phone to better protect yourself against the deceptive means scammers use to try to get your money and personal information:
Family members such as adult children need to also become more engaged as the senior person ages. Financial capacity is one of the first abilities to decline as cognitive impairment encroaches, and so getting involved in the senior person’s finances can be especially helpful, such as monitoring accounts, bills, credit cards, etc. This is oftentimes a delicate subject to broach as trust, privacy, and autonomy concerns come into play. Therefore, be respectful of boundaries and don’t expect for the elder to agree right away. Make it a gradual process beginning with a simple conversation until the person becomes more comfortable with the idea. Wellness checks on a regular basis are also important, ideally in person but by phone if necessary. Ask questions even if nothing seems out of the ordinary, such as if they might have spoken to anyone new recently, received any visitors, whether they bought anything new or signed up for any new services, etc. Additionally, since family members are oftentimes the ones committing the abuse, more than one family member should be involved if possible so that there can be some checks and balances.
Every state in the country should have some department or office devoted to serving and protecting the elderly. In Massachusetts, there is the Executive Office of Elder Affairs and elder abuse reports can be filed 24 hours a day either online or by phone at (800) 922-2275.