With terrorist attacks, shootings in schools, partisan gridlock in Washington and natural disasters worldwide all vying for headline space, it is difficult to select "the most serious" problems confronting us. But there is no question that the financial abuse of elders belongs on the list.
A study by Metropolitan Life estimated that older Americans lose more than $2 billion annually to frauds committed by people they know or scams perpetrated by third parties unknown to them. And that almost certainly underestimates the problem. Law enforcement officials estimate that only about 25% of these abuses are ever reported.
Elder financial abuse is not exclusively a credit union problem, to be sure, but it is a problem credit unions are uniquely positioned to address, not only because many credit union members are seniors, but also and more importantly, because credit unions have a reputation, usually deserved, for knowing and caring about the members they serve.
The teller who sees Mrs. Jones two or three times a month, because Mrs. Jones likes her and seeks her out, will probably notice if Mrs. Jones suddenly starts withdrawing large sums, is accompanied regularly by a relative or "new friend" the teller has never seen before, or starts sending this new friend to handle financial transactions for her — all indicators that something may be amiss.
No Privacy Barriers
Employees who have noticed these red flags in the past may have felt an obligation to report them, but until recently, they have had an even more compelling reason to remain silent: The privacy provisions of the Gramm-Leach-Bliley financial reform legislation prohibit disclosing a customer's personal financial information to third parties without the customer's permission, and impose stiff penalties on institutions and individuals for violating that rule.
Under the privacy rules, as financial institutions generally interpreted them, it seemed that contacting law enforcement authorities or even family members to report suspicions of financial abuse would be prohibited.
Aware of that reporting obstacle and concerned about the growing threat to vulnerable seniors, regulators published new guidance in September clarifying that the privacy rules do not prohibit FIs from reporting suspicions that elderly customers are being exploited.
The CFPB spearheaded the guidance, noting in an industrywide directive: "There was a misimpression among many credit unions and banks that if they reported a suspected case of elder abuse without the elder's consent, they were violating Gramm-Leach-Bliley. That is wrong," CFPB Assistant Director Nora Eisenhower stated.
Not only is reporting allowed and actually "encouraged," as this guidance makes clear, it is specifically required by Bank Secrecy Act regulations directing FIs to report all suspicious financial transactions, including suspicions of elder financial abuse, to the Financial Crime Enforcement Network (FinCEN). Some states have enacted legislation requiring financial institutions that suspect the financial abuse of older or disabled clients to report their suspicions to local law enforcement authorities.
Failure to report could subject institutions to regulatory action, not to mention the bad publicity that would result from resulting news reports.
But it isn't just concerns about compliance and adverse publicity that should motivate credit unions to make prevention of elder abuse a priority; it is their commitment to the financial welfare of their members. That's why many members join credit unions and why they trust them to provide good service, quality products, and honest advice.
What Credit Unions Can Do
The trust factor is often strongest with older members, whose relationships with the credit union may be long-standing, and who may not have relatives or close friends nearby on whom they can, or should, rely. For many of these members, credit unions may be the first and best line of defense against financial abuse.
There are many things credit unions can do to protect seniors and help them protect themselves, most important among them:
- Establish policies requiring credit union employees to watch for and report evidence of potential abuse. These policies should include specific instructions on how and to whom employees should report their suspicions.
- Provide training for employees on how to recognize and report evidence of abuse. The training should include detailed information on the "red flags" representing cause for concern. FinCEN guidance cites a number of examples, including:
- Frequent large withdrawals, including daily maximum currency withdrawals from an ATM;
- Sudden non-sufficient fund activity;
- Uncharacteristic nonpayment for services, which may indicate a loss of funds or access to funds;
- Debit transactions that are inconsistent for the older adult;
- Uncharacteristic attempts to wire large sums of money; or
- Closing of CDs or accounts without regard to penalties.
- Provide information to older members explaining how they can recognize financial abuse and obtain help if they need it. Some credit unions sponsor educational seminars on the topic; others post notices in their lobbies or on account statements listing resources to contact to obtain information or to report abuse.
Walking The Walk
All are good ideas and responsive to the message implicit in a recent CFPB report noting a disparity between the amount financial institutions spend on advertising to consumers and the amount spent on educating them. The CFPB put that ratio at about 25-1, suggesting that consumers would be better served if the weighting were considerably less lopsided. That message should resonate strongly with credit unions. Serving members is what they do and, arguably, what they do best; education is one of the most important services they can provide.
When it comes to protecting older members from financial abuse, credit unions must "walk the walk" in addition to "talking the talk." That means in addition to watching for evidence that others might be taking financial advantage of seniors, credit unions must not offer themselves or promote products or services offered by others that could put members at risk.
For example, industry regulators have recently initiated enforcement actions against several mortgage lenders for using misleading advertising suggesting that their reverse mortgages were actually government programs (endorsed by the VA or HUD), or implying through the clever use of language and logos that the lenders themselves were affiliated with those government agencies.
Credit unions that would never think of misleading their members in that way must be wary of affiliating with mortgage lenders or other entities that don't share either their ethical standards or their commitment to their members.
Members who trust their CUs will also trust the affiliates whose products or services credit unions offer or endorse. It may be XYZ Lender's reverse mortgage the member is getting, but it is the credit union's reputation and the welfare of its members that are on the line.
Joe Zampitella is the president and founder of Members Mortgage in Woburn, Mass.
