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Financial Services Law Insights and Observations


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  • FTC reports on actions to protect seniors

    Federal Issues

    On October 18, the FTC issued a report titled Protecting Older Consumers, 2021-2022, A Report of the Federal Trade Commission on measures taken to protect older adults from scams. Using data from the FTC’s Consumer Sentinel Network, which is a secure online database that provides law enforcement agencies with access to reports from consumers about fraud and other consumer problems, the report generally found that older adults reported significantly higher losses to investment, business impersonation, and government impersonation scams in 2021 as compared to 2020. Among other things, the report noted that: (i) the FTC sent thirty-one cease and desist demand letters regarding potentially false or deceptive advertising or marketing actions related to the Covid-19 pandemic; (ii) FTC enforcement actions have resulted in relief of more than $462 million to consumers of all ages in the last fiscal year; and (iii) scams where older adults were contacted on social media are increasing. In addition to describing three rulemakings that focused on key actions that the FTC has taken to protect older consumers, the report mentioned enforcement actions impacting older consumers. The report also provided details about the FTC’s outreach and education efforts through such programs as the Pass it On campaign, which focuses on providing fraud prevention resources to older adults so they can help protect their communities by sharing information and materials with family and friends.

    Federal Issues FTC Elder Financial Exploitation Covid-19 Consumer Finance

  • CFPB releases report on elder financial exploitation

    Federal Issues

    On September 28, the CFPB published a report examining recovery from elder financial exploitation (EFE). In the report, the Bureau presents a framework for financial recovery derived from insights gathered through interviews with older adults, caregivers, and professionals, as well as existing research and literature across a range of disciplines. The EFE financial recovery framework consists of a series of hypotheses regarding the key factors that could make recovery more or less likely at four stages: (i) identification that EFE has occurred; (ii) reporting of suspected EFE to authorities; (iii) investigation of suspected EFE; and (iv) return of funds to the victim. According to the report, these stages represent a logical sequence of steps that are often necessary, if not individually sufficient, for achieving financial recovery. The Bureau also found that there are “eight cross-cutting factors that can be influential throughout the four stages of the recovery process, and thus may play an important role in more cases.” The factors include, among other things, a prior relationship between the perpetrator and victim, cognitive decline, physical health factors, social support networks, and the method and number of transactions. The report also noted important implications for policy, research, and practice regarding EFE as a result of the study, such as increasing public awareness of successful prosecutions and enforcement actions resulting in financial recovery.

    Federal Issues Elder Financial Exploitation CFPB Consumer Finance

  • Senate Democrats urge CFPB for guidance on P2P apps

    Federal Issues

    On September 1, five Senate Democrats sent a letter to CFPB Director Rohit Chopra urging the Bureau to issue guidance to provide better tools to protect older Americans and their families from the increased prevalence of P2P fraud. The letter discussed that, according to the FTC, P2P apps are used by scammers because “the ease with which consumers may make payments to individuals they have never met on P2P platforms facilitates quick purchasing decisions.” The FTC also found that older adults are increasingly using payment apps or services, noting that P2P-related complaints received by the FTC tripled from 2019 to 2020, and older adults reported $10 million in losses associated with complaints related to payment apps and services in 2020 alone. The letter concluded that the CFPB should “move forward with the guidance under consideration, keeping in mind the disproportionate effect that frauds and scams have on communities of color and people with Limited English Proficiency.”

    Federal Issues U.S. Senate CFPB Elder Financial Exploitation Peer-to-Peer Electronic Payments Consumer Finance

  • CFPB reports on nursing home debt collection

    Federal Issues

    On September 8, the CFPB released an Issue Spotlight on nursing home debt collection, which focuses on the risk of financial harm that nursing homes and their debt collectors cause by attempting to collect invalid debts. The report, conducted by the Bureau’s Office of Financial Protection for Older Americans, analyzes consumer complaints, nursing home admission contracts, and debt collection lawsuits to assess risks to nursing home residents and their caregivers. In particular, the report found that many facilities include clauses in admission contracts that require caregivers to be a “responsible party” for the resident’s costs of care, or that otherwise subject the caregiver to financial liability should the admitted resident incur a debt. The report also found that nursing home residents stay for significant amounts of time, the average nursing home stay among residents being 1 year and 4 months, and that most older adults are not insured against the costs of long-term care. According to a statement by CFPB Director Rohit Chopra, he expects the "Office for Older Americans will emerge as a key pillar within the policymaking and law enforcement community on financial issues faced by older adults and their caregivers."

    The same day, the CFPB released Circular 2022-05, which asks the question: “Can debt collection and consumer reporting practices relating to nursing home debts that are invalid under the Nursing Home Reform Act [(NHRA)] violate the Fair Debt Collection Practices Act (FDCPA) and Fair Credit Reporting Act (FCRA)?” The Circular explained, though the Bureau does not enforce the NHRA, that the NHRA prohibits a nursing facility from conditioning a resident’s admission or continued stay on receiving a guarantee of payment from a third party, such as a relative or friend. The Circular also highlighted certain practices related to the collection of nursing home debts that are invalid under the NHRA and its implementing regulation that also violate the FDCPA and FCRA. The Bureau also issued a joint letter with the Centers for Medicare & Medicaid Services to nursing facilities and debt collectors reminding them of their responsibilities under the NHRA, FDCPA, and FCRA.

    Federal Issues Elder Financial Exploitation Debt Collection CFPB Consumer Finance FCRA FDCPA

  • SEC files charges against investment scheme targeting seniors


    On August 17, the SEC filed a complaint against an consulting company and its owner (collectively, “defendants”) in the U.S. District Court for the District of New Jersey for allegedly making materially false and misleading statements and omitting material facts regarding a fraudulent investment scheme. According to the SEC, between February 2017 to May 2022, the owner offered and sold securities in the form of promissory notes issued by the company to at least eleven investors, ages 64 to 82, raising at least $1.2 million while promising interest rates ranging from 50 percent to 175 percent. The owner allegedly “falsely represented to at least certain of the investors that, among other things, the money they invested in the [company] would be used to make loans to other businesses, which would generate the profits used to repay the [company].” As part of the scheme, the owner is alleged to have provided conflicting explanations of the company’s business and convinced investors “to roll-over their notes into new notes combining unpaid amounts with new investments.” The SEC further alleged that instead the owner withdrew over $486,000 from the company’s bank account and used it to fund his lifestyle and pay for personal expenses. The SEC’s complaint alleges violations of the antifraud provisions of the federal securities laws, specifically, the Securities Act of 1933 and the Securities Exchange Act of 1934. The complaint seeks a permanent injunction against the defendants, disgorgement of ill-gotten gains, plus interest, penalties, bars, and other equitable relief.

    Securities Enforcement SEC Elder Financial Exploitation Securities Act Securities Exchange Act

  • FinCEN issues warning on elder financial exploitation

    Federal Issues

    On June 15, FinCEN issued an advisory alerting financial institutions about the increase of elder financial exploitation (EFE). EFE involves the illegal or improper use of an older adult’s funds, among other things, and is often perpetrated either through theft or scams. According to the advisory, financial institutions filed 72,000 suspicious activity reports in 2021 related to EFE—an increase of 10,000 reports from 2020. The advisory provides updated typologies since FinCEN issued its first advisory on the issue in 2011, and highlights behavioral and financial red flags to aid financial institutions with identifying, preventing, and reporting suspected EFE. The announcement also refers to the risk-based approach to compliance under the Bank Secrecy Act, which provides that “[f]inancial institutions should perform additional due diligence where appropriate and remain alert to any suspicious activity that could indicate that their customers are perpetrators, facilitators, or victims of EFE.”

    Federal Issues Financial Crimes FinCEN Elder Financial Exploitation SARs Bank Secrecy Act

  • Agencies file lawsuit in scheme targeting the elderly

    Federal Issues

    On February 1, the California Department of Financial Protection and Innovation (DFPI), along with the CFTC and 26 other state regulators, announced a complaint against a precious metals dealer and its owner (collectively, “defendants”) for allegedly perpetrating a $68 million fraudulent scheme against more than 450 individuals nationwide, specifically against the elderly. According to the complaint, the defendants allegedly utilized false statements on its website regarding the risk and safety of their traditional retirement accounts and used fear tactics to convince senior citizens to purchase the precious metals. The complaint alleged that the company violated the federal Commodity Exchange Act by targeting the elderly and advising them to dissolve their savings and traditional retirement accounts in order to purchase their highly inflated and overpriced products, and that defendants had misrepresented their credentials and advised customers that the products were “a safe and conservative investment.” The complaint seeks disgorgement, civil monetary penalties, restitution, permanent registration and trading bans, and a permanent injunction against further violations of the Commodity Exchange Act, state regulatory laws, and CFTC regulations.

    The same day, the SEC filed a complaint against the defendants in the U.S. District Court for the Central District of California for allegedly violating the antifraud provisions of the federal securities laws. The complaint seeks permanent injunctions, disgorgement, plus interest, and civil penalties.

    Federal Issues DFPI CFTC SEC Elder Financial Exploitation State Regulators Enforcement State Issues Courts Commodity Exchange Act

  • CFPB bans payment processor for alleged fraud

    Federal Issues

    On January 18, the CFPB filed a proposed stipulated judgment and order to resolve a complaint filed last year against an Illinois-based third-party payment processor and its founder and former CEO (collectively, “defendants”) for allegedly engaging in unfair practices in violation of the CFPA and deceptive telemarketing practices in violation of the Telemarketing Act and its implementing rule, the Telemarketing Sales Rule. As previously covered by InfoBytes, the CFPB alleged that the defendants knowingly processed remotely created check (RCC) payments totaling millions of dollars for over 100 merchant-clients claiming to offer technical-support services and products, but that actually deceived consumers—mostly older Americans—into purchasing expensive and unnecessary antivirus software or services. The tech-support clients allegedly used telemarketing to sell their products and services and received payment through RCCs, the Bureau claimed, stating that the defendants continued to process the clients’ RCC payments despite being “aware of nearly a thousand consumer complaints” about the tech-support clients. According to the Bureau, roughly 25 percent of the complaints specifically alleged that the transactions were fraudulent or unauthorized. 

    If approved by the court, the defendants would be required to pay a $500,000 civil penalty, and would be permanently banned from participating in or assisting others engaging in payment processing, consumer lending, deposit-taking, debt collection, telemarketing, and financial-advisory services. The proposed order also imposes $54 million in redress (representing the total amount of payments processed by the defendants that have not yet been refunded). However, full payment of this amount is suspended due to the defendants’ inability to pay.

    Federal Issues CFPB Enforcement Telemarketing Elder Financial Exploitation Payment Processors CFPA Unfair Telemarketing Sales Rule Deceptive UDAAP Consumer Finance

  • Chopra concerned about PE investment in nursing homes

    Federal Issues

    On December 7, CFPB Director Rohit Chopra spoke before the Elder Justice Coordinating Council Meeting and raised concerns regarding worsening fraud, neglect, and financial exploitation in nursing homes and other for-profit facilities. Chopra discussed that financial straits due to the pandemic would continue leading to increased nursing home closures or takeovers of nursing homes by private equity investors. He noted that typically, private equity investors purchase assets, often using significant amounts of debt financing, to increase profits prior to selling the asset in a short amount of time, and warned that, due to the short investment and need to escalate profitability, “this investment approach invites aggressive strategies that warrant regulatory scrutiny.”

    Citing to a recent NYU study that found private equity investments in U.S. healthcare to be on the rise, Chopra inquired whether for-profit incentives are misaligned with serving seniors well. He specifically warned that for-profit nursing homes “disproportionately lag behind their nonprofit counterparts across a broad array of measures for quality” and that “private equity owners may also have the incentive to drain financial assets from residents or increase risks of other financial exploitation.”

    In conclusion, Chopra noted that he had asked the Bureau’s Office of Financial Protection for Older Americans to “identify cross-cutting consumer protection issues, including when it comes to housing, as many older Americans with substantial financial assets are a target for bad actors,” and will be working “to find systemic fixes to emerging risks, such as the encroachment of private equity into facilities serving and housing America’s older adults.”

    Federal Issues CFPB Elder Financial Exploitation Consumer Finance Covid-19

  • FTC reports on older adult fraud

    Federal Issues

    On October 18, the FTC issued its annual report to Congress on protecting older adults. Among other things, the report, Protecting Older Consumers, 2020-2021, A Report of the Federal Trade Commission, evaluates fraud trends impacting older adults and provides details on enforcement actions and efforts to combat scams related to the Covid-19 pandemic. According to the report, there were more than 334,000 fraud reports filed by consumers age 60 or older totaling more than $600 million in losses. While the FTC found that older adults were the least likely of any age group to report fraud monetary losses, older adults tended to report losing substantially more money than younger age groups. Older adults were also more likely to report financial losses related to tech support scams, prize, lottery or sweepstake scams, friend or family impersonation, and romance scams. Additionally, as online shopping has increased, the report noted that losses attributed to online shopping fraud among older adults rose sharply during the second quarter of 2020 and remained far higher than pre-pandemic levels in early 2021. The report also discussed significant FTC enforcement actions taken to protect older adults, as well as outreach and education efforts focusing on fraud prevention.

    Federal Issues FTC Consumer Finance Congress Covid-19 Elder Financial Exploitation Enforcement


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