Compliance Center: CFPB’s Advisory on Preventing Elder Financial Exploitation

The Consumer Financial Protection Bureau (CFPB) released an Advisory for financial institutions on preventing and responding to elder financial exploitation.

In 2013, the CFPB joined seven other financial regulators to clarify that financial institutions are generally able to report suspected elder financial abuse to the appropriate authorities without violating privacy provisions in federal banking laws. Older consumers are attractive targets for financial abuse because they may have significant assets or equity in their homes and usually have a regular source of income such as Social Security or a pension. They may also be especially vulnerable due to isolation, cognitive decline, physical disability, or other health problems. In recent studies, about 17 percent of seniors reported that they have been the victim of financial exploitation, but few cases ever come to the attention of protective services.

With their opportunities for face-to-face transactions, banks and credit unions are well-situated to protect older Americans from financial exploitation. The great majority of older adults have checking or savings accounts and many rely on tellers as their primary form of banking. Financial institutions are also uniquely suited to detect and act when an elder account holder has been targeted or victimized, and are mandated to report suspected elder financial exploitation under many states’ laws.

The Bureau’s actions represent the first time a federal regulator has provided an extensive set of voluntary best practices to help banks and credit unions fight this pervasive problem. Along with the advisory, the CFPB issued a report that provides an in-depth look at financial exploitation, case scenarios, and detailed recommendations to prevent and respond quickly to abuse. Recommendations for financial institutions to consider include:

  • Training staff to recognize abuse: Financial institutions should train employees to prevent, detect, and respond to abuse. Training should cover the warning signs of financial exploitation and appropriate responses to suspicious events.
  • Using fraud detection technologies: Financial institutions should ensure that their fraud detection systems spot suspicious account activity and products associated with elder fraud risk. This includes using predictive analytics to review account holders’ patterns and explore additional risk factors that may be associated with elder financial exploitation. Some signs of elder fraud risk may not match conventionally accepted patterns of suspicious activity, but nevertheless may be unusual given a particular account holder’s regular behavior.
  • Offering age-friendly services: Banks and credit unions should enhance protections for seniors, such as encouraging consumers to plan for incapacity. They can also offer age-friendly account features such as opt-in limits on cash withdrawals or geographic transactions, alerts for specific account activity, and offer view-only access for authorized third parties. And they can enable older consumers to provide advance consent to share account information with a trusted relative or friend when the consumer appears to be at risk.
  • Reporting suspicious activity to authorities: Financial institutions should promptly report suspected exploitation to relevant federal, state, and local authorities, regardless of whether reporting is mandatory or voluntary under state or federal law. Banks and credit unions can work closely with local Adult Protective Services and law enforcement to enhance prevention and response efforts, including expediting document requests and providing them at no charge.

Compliance Question of the Week

How is “financial exploitation” defined in Washington State?

As defined in the Washington State Vulnerable Adult Abuse Act: “Financial exploitation means the illegal or improper use of the property, income, resources, or trust funds of the vulnerable adult by any person for any person’s profit or advantage other than for the vulnerable adult’s profit or advantage.”

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Posted in Compliance, Federal, NCUA.