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CFPB and FDIC release enhancements to financial education program for seniors
On July 14, the CFPB and FDIC announced enhancements to Money Smart for Older Adults, the agencies’ financial education program geared toward preventing elder financial exploitation. The enhanced version includes sections to help people avoid romance scams, which, according to data from the FTC, led to $304 million in losses in 2020. In addition, the agencies are also releasing an informational brochure on Covid-19 related scams. FDIC training materials and other resources for older adults are available from the CFPB here.
Securities regulators’ training aims to stop financial exploitation of seniors
On June 15, the SEC, North American Securities Administrators Association (NASAA), and FINRA announced the release of a training program, “Addressing and Reporting Financial Exploitation of Senior and Vulnerable Adult Investors,” to assist securities firms in implementing the training requirements established in the Senior Safe Act. As previously covered by InfoBytes, the Senior Safe Act was included as Section 303 of the Economic Growth, Regulatory Relief, and Consumer Protection Act, which was signed into law in May 2018. The Act addresses barriers financial professionals face in reporting suspected senior financial exploitation or abuse to authorities. The training program may be utilized by firms to instruct associated persons on how to detect, prevent, and report financial exploitation of senior and vulnerable adult investors. The program also acts as a resource for firms enforcing the requirements of the Senior Safe Act and certain state training requirements relating to senior investment protection.
CFPB sues payment processor for fraudulent practices
On March 3, the CFPB filed a complaint 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 Sales Rule. According to the complaint, 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 stated, noting 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. The Bureau noted that the defendants also responded to inquiries from police departments across the country concerning consumer complaints about being defrauded by the defendants. Further, the Bureau cited high return rates experienced by the tech-support clients, including an average unauthorized return rate of 14 percent—a “subset of the overall return rate where the reason for the return provided by the consumer is that the transaction was unauthorized.” The Bureau is seeking an injunction, as well as damages, redress, disgorgement, and civil money penalties.
FinCEN report: SARs help prevent elder financial exploitation
On December 4, FinCEN announced the release of a Financial Trend Analysis titled, “Elders Face Increased Financial Threat from Domestic and Foreign Actors.” In compiling the report, FinCEN reviewed Bank Secrecy Act (BSA) elder financial exploitation suspicious activity reports (SARs) from 2013 to 2019 to detect patterns and trends. Among other things, the study found that (i) elder financial exploitation filings nearly tripled during the study period, from around 2,000 per month in 2013 to nearly 7,500 in 2019, the majority of which were filed by money services businesses (MSBs) and depository institutions; (ii) while the amount of SARs filed by MSBs ebbed and flowed from 2013 to 2019, those of depository institutions steadily increased; (iii) MSBs filed nearly 80 percent of all SARs describing financial scams, while securities and futures firms filed just over 70 percent of all SARs describing theft; (iv) financial theft from elders is most frequently perpetrated by family members or caregivers; (v) SARs indicated that the most common scams included lottery, person-in-need, and romance scams, the majority of which saw elder victims transferring funds through MSBs; and (vi) money transfer scam SARs were most commonly filed by MSBs who transferred money to a receiver located outside the U.S.
CFPB updates advisory on elder financial exploitation
On July 17, the CFPB issued an updated advisory to financial institutions with information on the financial exploitation of older Americans and recommendations on how to prevent and respond to such exploitation. The update urges financial institutions to report to the appropriate authorities whenever they suspect that an older adult is the target or victim of financial exploitation, and recommends that they also file Suspicious Activity Reports (SARs) with the Financial Crimes Enforcement Network (FinCEN). The update builds on an advisory that was previously released by the Bureau in March 2016 (covered by InfoBytes here), which included recommended best practices to help prevent and respond to elder financial exploitation, such as (i) establish protocols for ensuring staff compliance with the Electronic Fund Transfer Act; (ii) train staff to detect the warning signs of financial exploitation and respond appropriately to suspicious events; and (iii) maintain fraud detection systems that provide analyses of the types of products and account activity associated with elder financial exploitation. With the release of the update, Director Kraninger noted that, “[t]he Bureau stands ready to work with federal, state and local authorities and financial institutions to protect older adults from abusive financial practices that rob them of their financial security.”
As previously covered by InfoBytes, in February, the CFPB’s Office of Financial Protection for Older Americans, released a report studying the financial abuse reported in SARs, discussing key facts and trends revealed after the Bureau analyzed 180,000 elder exploitation SARs filed with the FinCEN from 2013 to 2017. Key findings of the report included, (i) SARs filings on elder financial abuse quadrupled from 2013 to 2017, with 63,500 SARs reporting the abuse in 2017; (ii) the average amount of loss to an elder was $34,200, while the average amount of loss to a filer was $16,700; and (iii) more than half of the SARs involved a money transfer.
District Court finds auto dealerships did not violate UTPA or financial elder abuse law
On March 30, the U.S. District Court for the District of Oregon granted a group of car dealerships’ (defendants) summary judgment motion in a putative class action involving claims that the dealership violated Oregon’s Unlawful Trade Practices Act (UTPA) as well as the state’s financial elder-abuse law. The plaintiffs, who all purchased vehicles along with other goods or services from one or more of the defendants, asserted that the defendants allegedly failed to “appropriately disclose [their] specific fees associated with arrangement of financing or the profit margins related to the sale of third-party products and services.” By failing to comply with these disclosure requirements, the plaintiffs alleged that the defendants “wrongfully appropriated money from elderly persons.” Concerning the alleged violations of UTPA, the defendants argued that its section titled “Undisclosed Fee Payments” only applies to referral fees greater than $100 paid to non-employee third-parties and not to other payments made by a dealership to a third party. The court agreed and stated that the defendants’ position was further supported by the state’s official commentary. With regard to the plaintiffs’ other claim concerning deficiencies in the disclosures, the court concluded that “strict recitation of the statute is not required to meet the clear and conspicuous standard,” and that the disclosures in question were clearly visible and easy to understand. Finally, the court granted summary dismissal on the plaintiffs’ claim of elder abuse because the claim was premised on the alleged violations of UTPA, which were dismissed.
Virginia allows institutions to refuse transactions if elder exploitation is suspected
On March 18, the Virginia Governor signed HB 1987, which authorizes staff of financial institutions to refuse a transaction, delay a transaction, or refuse to disburse transaction funds if the staff member (i) has a good faith belief that the transaction may involve the financial exploitation of an aged or incapacitated adult; or (ii) files a report or has knowledge that a report has been filed with the responsible local authority that states in good faith that the transaction may involve financial exploitation of an aged or incapacitated adult. Unless authorized by a court, the bill allows the continued refusal for up to 30 days after the date the transaction was initially requested. The financial institution and its staff are immune from civil or criminal liability under the bill, absent gross negligence or willful misconduct. The bill is effective July 1.
Virginia law allows financial institutions to share documents related to elder exploitation
On March 12, the Virginia governor signed HB 2225, which amends the state’s law relating to financial exploitation of adults, to provide that any financial institution staff who “suspects that an adult has been exploited financially” may now provide supporting information and records to the local department of social services, in addition to simply reporting the suspected exploitation as provided for under current law. The amendment is effective July 1.
FTC announces new action and proposed settlement in DOJ elder abuse sweep
On March 7, the FTC announced a new legal action and a final settlement issued against individuals and their operations for allegedly engaging in schemes that exploit elderly Americans. The actions are part of an enforcement sweep spearheaded by the DOJ in conjunction with, among others, the FBI, the FTC, Immigration and Customs Enforcement’s Homeland Security Investigations, and the Louisiana Attorney General, which—according to a press release issued the same day by the DOJ—is the largest-ever coordinated nationwide elder fraud sweep, involving multiple cases, over 260 defendants, and more than two million allegedly victimized U.S. Citizens, most of whom are elderly.
According to the FTC’s complaint, the company used deceptive tactics to convince consumers, the majority of whom were older, that their computers were infected with viruses in order to sell expensive and unnecessary computer repair services in violation of the FTC Act, the Telemarketing Sales Rule, and the Restore Online Shoppers’ Confidence Act. Specifically, the company allegedly used internet ads to target consumers looking for email password assistance and once they contacted the consumers, the telemarketers would run phony “diagnostic” tests that falsely showed the consumer’s computer was in danger and needed software and services to be fixed. On February 27, the U.S. District Court for the Southern District of Utah, granted a temporary restraining order against the company and its founder.
The FTC also announced a proposed settlement with a sweepstake operation that allegedly bilked consumers out of tens of millions of dollars through personalized mailers that falsely implied that the recipients had won or were likely to win a cash prize if they paid a fee. As previously covered by InfoBytes, the FTC announced the charges against the company in February 2018, alleging that consumers, most of whom were elderly, paid more than $110 million towards the scheme. The final settlement not only requires the operation to turn over $30 million in assets and cash to provide redress to the victims, but also permanently bans the operators from similar prize promotions in the future. The proposed settlement has not yet been approved by the court.
CFPB studies elder financial abuse reported in SARs
On February 27, the CFPB’s Office of Financial Protection for Older Americans released Suspicious Activity Reports on Elder Financial Exploitation: Issues and Trends, which discusses key facts and trends revealed after the Bureau analyzed 180,000 elder exploitation Suspicious Activity Reports (SARs) filed with Financial Crimes Enforcement Network from 2013 to 2017. Key highlights from the report include:
- SARs filings on elder financial abuse quadrupled from 2013 to 2017, with 63,500 SARs reporting the abuse in 2017.
- Nearly 80 percent of the SAR filings involved a financial loss to an elder or to the filing institution. The average amount of loss to an elder was $34,200, while the average amount of loss to a filer was $16,700.
- Financial losses were greater when the elder knew the suspect, with an average loss of $50,000 when the elder knew the suspect compared to $17,000 with a stranger.
- More than half of the SARs involved a money transfer.
- Less than one-third of elder abuse SARs acknowledge that the financial institution reported the activity to a local, state, or federal authority.