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January 29
06:44 2020

Public Policy Analysis & Opinion

By Kevin P. Hennosy


Opposition to Elder Financial Exploitation (EFE) intensifies as problem grows

Every once in a while, the National Association of Insurance Commissioners (NAIC) shows a faint sign of life—like the final leg twitch of highway roadkill—that reminds us of its public interest charge. Now is such a time; we will notice, however, that money is involved.

For example, on October 30, 2019, the NAIC sent a letter to the chair and ranking member of the House Financial Services Committee, Rep. Maxine Waters (D-Calif.) and Patrick McHenry (R-N.C.), respectively. The letter communicated the scope of the problem of financial fraud against elderly citizens.

Senior financial exploitation continues to be a growing problem in this country. It is estimated that roughly one in five older Americans have been victimized by financial fraud and have consequently lost an estimated $2.9 billion per year. Aging seniors cannot afford to lose these valuable funds that are critical to ensuring a secure retirement.

Elderly people provide the proverbial low-hanging fruit to con artists. Even persons of modest means often wield access to liquid capital in the form of a retirement nest egg, which attracts fraudsters like moths to a flame.

The NAIC representatives endorsed draft legislation titled “The Empowering States to Protect Seniors from Bad Actors Act.” Among regulatory reforms designed to combat predatory financial schemes that target elderly citizens, the legislation contains a provision to give federal grant money to the states to fund outreach and enforcement.

Then, and here is where money comes into the story, the NAIC letter pivots to focus on the promise of federal money to state jurisdictions: “Section 989(A) authorizes the creation of a grant program by the CFPB [Consumer Financial Protection Bureau] to assist states with protecting seniors against financial exploitation.”

The NAIC’s support echoes a rare expression of general agreement in policymaking circles. In a time of philosophical division and political strife, most policymakers have special contempt for “bad actors” who defraud elderly consumers.

FBI warnings

The Federal Bureau of Investigation maintains a webpage dedicated to combating financial scams against elderly persons. At times, FBI observations tend toward stereotypes, which is just the way Director Hoover liked it.

Nevertheless, the page devoted to financial scams against the elderly raises awareness of the problem. In the United States, any recognition from the FBI comes with gravitas—at least, more gravitas than the NAIC.

Elderly people provide the proverbial low-hanging fruit to con artists. Even persons of modest means often wield access to liquid capital in the form of a retirement nest egg, which attracts fraudsters like moths to a flame.

Furthermore, the FBI observes that it might be easy to trick an elderly person into providing account information or even funds transfers. Generational differences in the understanding of technology might result in an older American not fully grasping the value of pieces of information requested on the phone or in an email.

Once taken advantage of, an elderly person who suffers from memory loss or confusion may not be able to provide useful information to investigators or prosecutors. In addition, sometimes the elderly “mark” does not want to testify against family members and caregivers.

And, in a consideration closely related to the proposed federal funding for state-based outreach, consumers—elderly and young—often have no idea where to complain about financial fraud.


Federal interest in instances of EFE expanded after the financial panic of 2007-2008. Both during the inflation of the bubble and in the years after the bubble burst, financial regulators noted how bad actors targeted elderly consumers.

These and other concerns ledCongress and the Obama Adminis-tration to include a provision in the Dodd-Frank Act of 2010 that established a grant program to the states like the now proposed Empowering States to Protect Seniors from Bad Actors Act. Congress never funded the provision.

The October 2019 NAIC letter to the House committee observed: “[The Empowering States to Protect Seniors from Bad Actors Act] will remove those impediments and make clear that the CFPB has an ongoing obligation to establish and fund these grants.”

Back on February 22, 2011, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN)issued a warning concerning financial crimes that target elderly persons. The warning recognized that jurisdiction to punish these activities usually rests with local officials.

“Elder abuse, including financial exploitation, is generally reported and investigated at the local level, with Adult Protective Services, District Attorney’s offices, sheriff’s offices, and police departments taking a key role,” observed the FinCEN warning.

The FinCEN adopted a policy of encouraging financial institutions to report odd transactions for further review in the form of Suspicious Activity Reports (SAR). The data drawn from those reports formed a basis for statistical review.

In February 2017, CFPB published a statement that urged financial institutions to file SARs to report observed activities that suggest EFEs.

In September 2018, the CFPB published a consumer guide that tells elderly Americans what they should look for—and look out for—when making financial transactions. Yet no regular system exists to ensure the affirmative distribution of that report. The report rests on the web, waiting for curious people to find it.

In February 2019, a CFPB report observed that persons over age 80 make up one-third of the victims of EFE. Usually these frauds involve the theft of checking or savings accounts.

In 2018, Congress passed a law providing immunity from civil litigation or administrative action for individuals who report activities that defraud persons over age 65. This immunity protects two broad categories of individuals:

  • A registered representative, investment advisor representative, or insurance producer affiliated or associated with a covered financial institution
  • An employee who serves as a supervisor or in a compliance or legal function (including as a Bank Secrecy Act officer) for a covered financial institution

With passage of the act, federal officials sought to facilitate participation in oversight by financial professionals and institutions by removing the threat of revenge lawsuits against whistleblowers.

In short, policymakers believe that golf-course conversations about competitors can be just as vital to effective market regulation as complaint databases.

Jurisdiction vs. regulation

As noted in the FinCEN warning quoted above, state and local officials usually hold jurisdiction over financial exploitation of elderly people. Possessing jurisdiction does not necessarily equate with wielding the resources, motivation, or expertise to conduct successful enforcement actions.

For example, police and sheriff’s departments tend to direct more effort toward writing grant proposals to secure military surplus personnel carriers than training personnel to investigate financial crimes.

This means that local prosecutors/district attorneys receive few referrals. In many jurisdictions, prosecutors do not have the experience or motivation to bring cases as the result of such referrals. Local prosecutors may find it more politically advantageous to allocate staff time and resources to murders, gun violence, child abuse, or other reprehensible crimes.

In theory, insurance regulation should step in where prosecutors fear to tread; however, many people who call an insurance department complaint line come away underwhelmed—if not angry.

Under the McCarran-Ferguson Act, a system of affirmative regulation of the business of insurance should exist at the state level. Each jurisdiction maintains an office with authority over insurance, but these offices offer only a pretense of regulation.

Too often, complaint lines serve as a firewall, offering explanations as to why the regulatory office cannot respond to the aggrieved consumer. In recognition of the states’ pretense of regulation, any grant money sent to the state insurance departments will require an active application of oversight from the CFPB.

Send money

In the October 2019 NAIC letter to the House Financial Services Committee leadership, the association leadership opined: “This problem is particularly troubling considering the aging of the baby boom generation and that millions of Americans have not saved enough for retirement. Combating senior financial exploitation is critical to ensuring that the retirement crisis is not further exacerbated.”

Of course, one may ask why state legislatures and chief executives have not found local funding for an important regulatory action. The NAIC pleads poverty.

“Such a program will provide additional resources to state insurance departments and other state agencies to combat fraud against seniors, provided the states receiving such funds have implemented rules that conform to minimum requirements set forth in model laws and regulations developed by the NAIC and the North American Securities Administrators Association (NASAA).”

But could it be lack of commitment?

Insurance is a business based on trust, so any breach of trust damages the business of insurance across the board. Con artists, bad actors, and fraudsters not only steal from their “marks”; they often steal sales from ethical producers and inhibit future purchases from consumers who no longer place trust in insurance products.

Ethical professionals must defend the public trust in insurance.

The author

Kevin P. Hennosy is an insurance writer who specializes in the history and politics of insurance regulation. He began his insurance career in the regulatory compliance office of Nationwide and then served as public affairs manager for the National Association of Insurance Commissioners (NAIC). Since leaving the NAIC staff, he has written extensively on insurance regulation and has testified before the NAIC as a consumer advocate.

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