The Financial Industry can do more to help elders avoid becoming victims of financial fraud.
Combining Forces to Combat Elder Financial Victimization, a discussion paper recently released by the Payment Card Center of the Federal Reserve Bank of Philadelphia, provided a roadmap of what consumers and the financial industry can do to help elders to avoid the “financial pitfalls” that may occur as consumers, after years of financial independence, age and may no longer be able to manage their own financial affairs.
The paper notes that crimes that prey on seniors are “vastly underreported” which is why we believe the paper merits a post by The Lobster. Since The Lobster often covers financial industry issues and is well-read by members of the financial industry, this post will focus on what the industry, including banks, security firms, regulators, and policy makers can do to address the problem.
The authors outline six questions that financial institutions should be able to answer for consumers. They are:
▪ Is the institution’s staff trained to recognize financial vulnerability
▪ Does the institution use software to monitor potential vulnerably
▪ Whether the institution has monitoring tools for account holders and their financial caregivers
▪ Does the institution offer a emergency contact form and have guidelines for when to use the form to reach out to the emergency contact
▪ Does the institution have a way to prevent power-of-attorney abuse
▪ When it suspects financial fraud is the institution’s policy to report that fraud to law enforcement.
Although the industry has done much to combat fraud, there is much more that can be done. The authors point out that regulators and policy makers have not been proactive in regulating protections against senior financial abuse.
Several factors contribute to the problem. Among these are that seniors are taking on more debt. According to the paper, during one recent 12-year period, borrowing by seniors increased by 60 percent. Seniors may have trouble managing all that debt.The paper cites a 2012 study saying that bankruptcy filing grew fastest among consumers 65 and older. All that debt creates opportunity for late fees, foreclosure and bankruptcy.
Secondly, the shift from defined benefit plans for retirement to defined contribution plans, such as 401(k) plans places the burden of determining how much to save for retirement on the shoulders of the senior consumers, which creates more chances of debt accumulation with its attendant problems such as foreclosure or bankruptcy.
Medical researchers have found a nexus between age-related decline in cognitive abilities even without the presence of disease and financial vulnerability. According to the authors, a first sign of cognitive aging is diminished financial capacity. Evidence of this diminution may be infrequent at first but become more noticeable through time. Eventually the bank may detect a suspicious transaction.
A 1981 report by the House Select Committee on Aging concluded that financial abuse was the second most prevalent form of elder abuse. The report also concluded that financial abuse often was paired with another type of abuse like psychological pressure.
Seniors can be prepared to mitigate the effects of financial abuse that is abetted by age-induced cognitive impairment.
The authors provide seven actions that seniors can take to help prevent financial abuse. They are:
• Assign a trusted advisor to all financial accounts.
• Have a durable financial power-of-attorney
• Draw up a will
• Be aware of current financial scams preying on the elderly.
• Monitor your credit and identity
• Hire a money manager
• Think about hiring a financial account monitoring service.
You can find the complete paper on the website of the Federal Reserve Bank of Philadelphia’ Payment Card Center. https://www.philadelphiafed.org/PCC.
The authors of the discussion paper are Jeanne Rantezelas and Larry Santucci
Combining Forces to Combat Elder Financial Victimization, a discussion paper recently released by the Payment Card Center of the Federal Reserve Bank of Philadelphia, provided a roadmap of what consumers and the financial industry can do to help elders to avoid the “financial pitfalls” that may occur as consumers, after years of financial independence, age and may no longer be able to manage their own financial affairs.
The paper notes that crimes that prey on seniors are “vastly underreported” which is why we believe the paper merits a post by The Lobster. Since The Lobster often covers financial industry issues and is well-read by members of the financial industry, this post will focus on what the industry, including banks, security firms, regulators, and policy makers can do to address the problem.
The authors outline six questions that financial institutions should be able to answer for consumers. They are:
▪ Is the institution’s staff trained to recognize financial vulnerability
▪ Does the institution use software to monitor potential vulnerably
▪ Whether the institution has monitoring tools for account holders and their financial caregivers
▪ Does the institution offer a emergency contact form and have guidelines for when to use the form to reach out to the emergency contact
▪ Does the institution have a way to prevent power-of-attorney abuse
▪ When it suspects financial fraud is the institution’s policy to report that fraud to law enforcement.
Although the industry has done much to combat fraud, there is much more that can be done. The authors point out that regulators and policy makers have not been proactive in regulating protections against senior financial abuse.
Several factors contribute to the problem. Among these are that seniors are taking on more debt. According to the paper, during one recent 12-year period, borrowing by seniors increased by 60 percent. Seniors may have trouble managing all that debt.The paper cites a 2012 study saying that bankruptcy filing grew fastest among consumers 65 and older. All that debt creates opportunity for late fees, foreclosure and bankruptcy.
Secondly, the shift from defined benefit plans for retirement to defined contribution plans, such as 401(k) plans places the burden of determining how much to save for retirement on the shoulders of the senior consumers, which creates more chances of debt accumulation with its attendant problems such as foreclosure or bankruptcy.
Medical researchers have found a nexus between age-related decline in cognitive abilities even without the presence of disease and financial vulnerability. According to the authors, a first sign of cognitive aging is diminished financial capacity. Evidence of this diminution may be infrequent at first but become more noticeable through time. Eventually the bank may detect a suspicious transaction.
A 1981 report by the House Select Committee on Aging concluded that financial abuse was the second most prevalent form of elder abuse. The report also concluded that financial abuse often was paired with another type of abuse like psychological pressure.
Seniors can be prepared to mitigate the effects of financial abuse that is abetted by age-induced cognitive impairment.
The authors provide seven actions that seniors can take to help prevent financial abuse. They are:
• Assign a trusted advisor to all financial accounts.
• Have a durable financial power-of-attorney
• Draw up a will
• Be aware of current financial scams preying on the elderly.
• Monitor your credit and identity
• Hire a money manager
• Think about hiring a financial account monitoring service.
You can find the complete paper on the website of the Federal Reserve Bank of Philadelphia’ Payment Card Center. https://www.philadelphiafed.org/PCC.
The authors of the discussion paper are Jeanne Rantezelas and Larry Santucci