Elder Financial Abuse-How CUs Can Protect Members

FORT SMITH, Ark.-Fort Smith Dixie Cup FCU staff pay attention to their membership and the transactions that flow through their office for signs of elder financial abuse.

And when they suspect an elderly member is being exploited, they take immediate steps to stop the crime.

In fact, CEO Vicki Newton has been known to head to the parking lot to talk to grandma when her grandkids say she's in the car, but she authorized the check to withdraw a chunk of money from her account.

"I say, 'Go bring her in, or I will go out and see her.' And I do," said Newton. "I don't hesitate to call someone's bluff. I have seen too much of this over the years."

Newton and her team-along with CUs and banks across the nation-received help from NCUA in the fight against elder financial abuse last month when the agency issued direction on reporting suspected cases of financial exploitation of elderly members.

NCUA clarified that financial institutions can report suspected cases of financial elder abuse to local law enforcement or an agency of their state's adult protective services without worrying about violating the elder member's privacy under Gramm-Leach-Bliley-a 1998 bank law that repealed the Glass-Steagall Act. "This makes things a lot easier for us," said Newton. "It's good to know that neither the employee doing the reporting nor the credit union could be considered to be violating a member's privacy, and then subject to legal action."

Among other provisions, Gramm-Leach-Bliley requires institutions to notify consumers to give them a chance to opt-out before they share information with third parties. That often complicates matters for sharing information with outside fraud investigators, third-party caregivers and social service agencies, say industry insiders, leaving credit union and bank executives often hesitant to report their suspicions for fear they will run afoul of the federal law.

The move by NCUA, and mirrored by banking regulators, resulted from direction provided by the Consumer Financial Protection Bureau. "We heard from the field, and colleagues from adult protective services offices across the country, there was a misimpression among many credit unions and banks that if they reported a suspected case of elder financial abuse without the elder's consent they were violating Gramm-Leach-Bliley," said Nora Dowd Eisenhower, CFPB assistant director, Office for Older Americans. "That is wrong. The law's privacy provisions do not bar credit unions and other financial institutions from reporting suspected financial exploitation."


An Under-Reported Crime

Melanie Stern, senior program officer at the National Federation of Community Development CUs, New York, said statistics indicate about 25% of elder financial abuse cases are reported. "So many cases are not reported and hopefully this clarification by the regulatory agencies gives financial institutions the comfort level they need to report any suspected case of elder abuse," she said.

Marie Betti, CEO at the $39 million Western New York FCU in West Seneca, said she and her staff now feel more confident to address elder financial abuse when they suspect it is happening to a member.

"I was at a panel meeting last month on elder abuse and the one pressing question I wanted answered was whether the credit union is protected if we report an instance of elder abuse," she said. "It's clear now that we are. We are all breathing a little easier at the credit union."

The concerns about reporting of elder financial abuse come at a time when the aging of America and a still-recovering economy are leading to near-epidemic numbers of cases of elder financial exploitation. According to a MetLife study, about $3 billion is lost annually by older Americans to the problem and the losses went up during the financial crisis.

The abuse comes from many directions-Internet scams, home repairmen taking advantage of elders whose cognitive skills have diminished, and very often from family members, a close friend, or a caregiver committing the crime against someone who can't fight back or does not want to.

"We know our credit union colleagues are in close contact with their members," said CFPB's Eisenhower. "We really want them to use their use their best judgment in helping their elder members avoid financial exploitation."

Steven Van Beek, attorney at Howard & Howard, Royal Oak, Mich., believes it will. "The CFPB certainly noticed this gray area with banks and credit unions and some reluctance to report these suspected crimes. This is a very good step."

Many CU executives were concerned about federal privacy laws, said Van Beek, who previously served as VP-regulatory compliance and senior federal counsel at NAFCU. "Now they know they are not violating federal law."


On The Front Lines

Eisenhower said FIs can often be more effective than family members at identifying elder abuse. "They see the large or unusual withdrawals, they see the account activity that's out of the ordinary, and when the financial institution reports a suspected crime, it carries a great deal of authority with law enforcement and adult protective services."

Fort Dixie Cup's Newton agrees. The $13 million credit union has one office and 1,300 members, many of whom are senior citizens.

Newton, who has been with the CU for more than 30 years, said she has grown up with many of her members and their families.

"I know my members and their banking habits. If someone is going to try to take advantage of one of our elderly members, they need to know I am in the office all the time-and that these suspicious actions have to come by me."