New Bill in Congress Aims to Stem the $3 Billion Tide of Elder Financial Exploitation and Abuse
What can be done to stop – or slow – the scourge of financial exploitation of seniors? This type of abuse is a national scandal, costing people tens of thousands of dollars, destroying financial security, and leaving victims permanently damaged. Yet the fraud and crimes continue to grow.
With that in mind, we think it’s encouraging when Congress takes a step – perhaps fairly small, but significant – to stop the flood of financial abuse. We read about it here, on the CNBC website, in an article penned by reporter Sarah O’Brien. She’s writing about the ambitiously-named Financial Exploitation Prevention Act of 2023, a bill that enjoyed unanimous support in our divided House of Representatives and is currently in Senate committee.
Basically, O’Brien explains, the new law gives broad discretion to holders of mutual funds and other similar pooled investments to intervene when they suspect fraud – specifically when it appears that an adult age 65 or older (or a younger person with impairments) is being taken advantage of. By allowing investment houses to put a hold on suspicious transactions pending further investigation, the bill could rip away the cloak of anonymity that allows some assets to be shifted quietly and quickly by those with hostile or illegal intent.
Transactions Could be Postponed Under New Law
“A bill that’s pending in the Senate aims to battle a persistent danger to older adults and other vulnerable individuals: financial exploitation,” says O’Brien. “The title of the bill is straightforward: the Financial Exploitation Prevention Act of 2023.”
Writing for CNBC, O’Brien explains how the law would work. “In a nutshell,” she explains, “the measure would allow so-called registered open-ended investment companies — which can include mutual funds, exchange-traded funds, hedge funds, some annuities and other pooled investments — or their agents to postpone a requested redemption of a security or fund for up to 25 days if it’s believed to be done to exploit the investor.” The new law would apply to people who are at least age 65, or who are younger but have impairments. It would also give courts, regulators, or administrative agencies the power to impose further delays.
O’Brien reached out to John Jennings of the Insured Retirement Institute, who supports the bill. “Bad actors are always finding new ways to exploit existing law,” said Jennings. The bill, he adds, would “provide folks on the front line with the tools necessary to help prevent exploitation.”
O’Brien notes that the bill cleared the House in January in a unanimous bipartisan vote. “It now awaits consideration by the Senate Banking Committee, although it’s uncertain whether or when the bill would be taken up,” she adds. “A nearly identical version of the bill that cleared the House in 2021 ended up languishing in the Senate.”
Average Loss Per Incident Estimated at $120,000
The scope of elder fraud and exploitation is huge, says CNBC. “Among older adults, the yearly cost of financial fraud is estimated to be about $3 billion,” writes O’Brien, “although the number is based on reported events, and not all occurrences are formally documented. The average loss per incident is an estimated $120,000, according to a 2020 study from the AARP Public Policy Institute.” (You can also access the full 20-page report here.)
Fraud and Financial Exploitation are not the same, says the AARP study. According to experts, fraud includes intentional deception, concealment, or misrepresentation of goods and services for the purpose of monetary gain, and it typically perpetrated by a stranger. (Think of the scammer on the telephone.) Financial exploitation actually has a wider scope: it can include “any illegal, unauthorized, or improper act that inappropriately exploits or deprives an older adult of his or her resources for monetary or personal benefit, profit, or gain.” The typical perpetrator is a trusted person or stranger – a caregiver, perhaps, or a grandchild.
“Family members steal twice as much money as strangers, according to the study,” says the article. “Older adults with cognitive challenges are the most vulnerable to exploitation and may have up to twice as much stolen than those without those issues.”
Financial Industry Seems to be Stepping Up
CNBC’s O’Brien spoke with one Ohio-based attorney, Marve Ann Alaimo, who pointed out the importance of being able to slow down a suspicious transaction. “Particularly at a time when a lot of transactions are done online or by phone,” Alaimo said, seniors are in need of greater protection.
Fortunately, she adds, “The financial industry is catching up and catching on that there are a lot of people out there who are vulnerable to financial exploitation in general.”
We’ll keep our ears open for news of this bill as it makes its way through the U.S. Senate.
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(originally reported at www.cnbc.com)