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                                                 CFPB issues Advisory to Financial Institutions

                                        for Preventing and Responding to Elder Financial Exploitation

 

                                                           By: Reynold Berry, Partner and Scott Frissell, Law Clerk                                 

 

Protection of elderly and disabled customers from the risk of financial exploitation is quickly becoming a major compliance concern for financial institutions. “Elder financial exploitation has been called the crime of the 21st century.” Due to the rapid growth in elder financial exploitation, the Consumer Financial Protection Bureau (CFPB) recently issued an Advisory[1] which identified “best practice” recommendations to help financial institutions assess and strengthen their practices for preventing, detecting, and responding to the financial exploitation of older and disabled customers.

 

While judicial decisions appear to generally be protective of banks sued by customers for reimbursement, the risk of litigation always remains. Therefore, financial institutions should consider exploring opportunities to protect its customers from financial exploitation and itself from litigation.

 

The CFPB Advisory lists six “best practices” that banks and credit unions should consider implementing in order to deter financial exploitation of elderly and disabled customers. These best practices include:

 

  1. Develop, implement and maintain internal protocols and procedures for protecting account holders from elder financial exploitation.

     

  2. Train management and staff to prevent, detect, and respond to elder financial exploitation.

    Key topics for training include:

  3. Clear and nuanced definition of elder financial exploitation.

  4. Warning signs that may signal financial exploitation, including behavioral and transactional indicators of risk, and

  5. Action steps to prevent exploitation and respond to suspicious events, including actionable tips for interacting with account holders, steps for reporting to authorities, and communication with trusted third parties.

     

  6. Detect elder financial exploitation by harnessing technology.

    Encourages financial institutions to ensure their fraud detections systems include analyses of the types of products and account activities that may be associated with financial exploitation risk for the elderly and disabled.

     

  7. Report all cases of suspected exploitation to relevant federal, state and local authorities.

  8. Be aware of state reporting mandates. Know whom and when to report.

  9. File Suspicious Activity Reports (SARs).

  10. Understand that the Gramm-Leach-Bliley Act (GLBA) is not a barrier to reporting suspected elder financial exploitation.

  11. Understand the roles of first responders. Understand how Adult Protective Services (APS), law enforcement and the long-term care ombudsmen work, and the actions that they will and will not take.

  12. Include core components in reports to state and local authorities.

  13. Expedite document requests.  

  14. The Advisory was accompanied by CFPB “Recommendations and report for financial institutions on preventing and responding to elder financial exploitation”[2]

     

  15. Protect older account holders.

  16. Comply with EFTA and Regulation E. Under EFTA and Regulation E, financial institutions are obligated to:

  17. Follow rules for extending time limits for consumers for extenuating circumstances such as extended travel or hospitalization.

  18. Follow rules for accepting notices of unauthorized EFTs. These rules specify consumer rights regarding the method of providing notice, who provides notice, and the specificity of the notice.

  19. Confirm that all relevant conditions are met before implementing any liability on a consumer for unauthorized EFT. For example, older consumers with cognitive challenges may write PINs on or near debit cards. Under Regulation E, such behavior may not be used as a basis for imposing greater liability on a consumer.

  20. Offer account holders the opportunity to consent to disclosure of account information to trusted third parties when the financial institution suspects financial exploitation. CFPB recommends establishing procedures for enabling consumers to provide advance consent to sharing account information with a designated trusted third party when the financial institution reasonably believes that elder financial exploitation is occurring, has occurred, has been attempted or will be attempted. The CFPB recommends developing a plain language consent form as well as procedures for offering consumers the opportunity to consent at account opening and periodically thereafter.

  21. Offer age-friendly services that can enhance protections against financial exploitation. CFPB recommends that financial institutions:

    • Provide information about planning for incapacity.

    • Honor powers of attorney.

    • Offer protective opt-in account features which could reduce the risk of elder financial exploitation such as cash withdrawal limits, alerts for specified account activity, third-party monitoring features, and read-only access to accounts for authorized third parties.

    • Offer convenience accounts as an alternative to traditional joint accounts.

       

  22. Collaborate with other stakeholders. The CFPB recommends that financial institutions:

  23. Work with law enforcement and ASP. Financial institutions should share policies and procedures for detecting, assessing and reporting cases; develop relationships with specific personnel to facilitate timely response to reports and have a point of contact when questions arise; and provide expert consultation and document review to assist law enforcement and ASP with case investigations.

  24. Participate in and support coordinated efforts to educate older account holders, caregivers and the public.

  25. Participate in and support local or regional multidisciplinary network initiatives.

     

    DISCLAIMER: These materials are intended for general informational purposes only.  Accordingly, they should not be construed as legal advice or legal opinion on any specific facts or circumstances.  Instead, you are urged to consult counsel on any specific legal questions you may have concerning your situation.

     

 


[1] March, 2016, http://files.consumerfinance.gov/f/201603_cfpb_advisory-for-financial-institutions-on-preventing-and-responding-to-elder-financial-exploitation.pdf. The Advisory opinion issued by the CFPB is not binding on the Bureau or on financial institutions.

[2] March 2016 http://files.consumerfinance.gov/f/201603_cfpb_recommendations-and-report-for-financial-institutions-on-preventing-and-responding-to-elder-financial-exploitation.pdf

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