Employees of financial institutions, who are in good position to spot exploitation of their older customers, are being given the green light by federal regulators to report their concerns.
Eight federal regulatory agencies recently came together on a policy to clarify that privacy provisions of the Gramm-Leach-Bliley Act generally permit financial institutions to report suspected elder financial abuse.
The act requires that an institution notify consumers and give them an opportunity to opt out before providing nonpublic personal information to a third party. However, it is “generally acceptable,” the agencies said, to report abuse to appropriate local, state and federal agencies, without getting that prior approval — especially when the victim’s welfare is at stake.
Understandably, banks may be “reluctant to share” customer information, said Nora Dowd Eisenhower, assistant director of the Consumer Financial Protection Bureau’s Office for Older Americans in Washington, D.C. “We do want financial institutions to honor consumers’ privacy, but we want them to know that the Gramm-Leach-Bliley Act does not prohibit them from spotting this (trouble) and reporting it.”
Older people have long been considered the most vulnerable when it comes to being bilked. Now there are greater numbers of them than ever — some 10,000 people a day turn 65 in America, she said.
Banks and savings and loans frequently see irregular transactions or suspicious account activity reflective of fraud, she said.
Sophistication of technology, early dementia and the growing ability to scam people are all contributing factors to the concern. The biggest problem, though, continues to be “personal,” one family member taking advantage of another’s finances, she said.
Aligning on the regulatory guidance policy were:
- The Board of Governors of the Federal Reserve System
- Consumer Financial Protection Bureau
- Commodities Futures Trading Commission
- Federal Deposit Insurance Corporation
- Federal Trade Commission
- National Credit Union Administration
- Office of the Comptroller of the Currency; and
- The Securities and Exchange Commission
Eisenhower said the policy came about as a result of meetings around the country with older adult advocacy groups and others, concerned that the law was posing a stumbling block to the fight against financial exploitation of the elderly.
The new guidance clarifies that reporting suspected financial abuse to appropriate local, state or federal agencies does not, in general, violate the privacy provisions of the Gramm-Leach-Bliley Act.
In fact, specific privacy provisions of the act permit sharing such information under appropriate circumstances without complying with notice and opt-out requirements.
While the guidance discusses when reporting is allowed under the Gramm-Leach-Bliley Act, it does not address any other federal or state laws that may regulate such reporting. Also, the guidance does not specifically address risk management expectations for financial institutions related to the reporting of elder abuse.
Various federal and state authorities either require or encourage reporting of this type of information to the appropriate agency.
Illinois has moved in recent years to address the concern by passing laws dealing with bank training and reporting of concerns.
Illinois Department of Aging spokeswoman Kimberly Parker said state law requires employees of financial institutions who have direct contact with customers to undergo training to identify the indicators of financial exploitation, as well as how to report exploitation.
The department designed and administered the training, and compliance with the training standards is part of the Illinois Department of Financial and Professional Regulation’s examination checklist.
Elder abuse includes the illegal or improper use of an older adult’s funds, property, or assets. Some observers fear that only a small fraction of incidents are reported.
“People are always trying to take advantage of elderly people. It’s usually somebody in their own family. It makes your gut hurt,” said Bret Mayberry, vice president of retail banking at Liberty Bank in Alton.
Older adults can be exploited by caregivers, scam artists, financial advisers, home repair contractors and “fiduciaries” (such as agents under power of attorney and guardians).
Older adults are attractive targets because they may have significant assets or equity in their homes. They may be especially vulnerable due to isolation, physical or mental decline or the loss of a partner or family member.
Mayberry said the bank has managed to protect its client’s financial matters and also move forward on addressing concerns by calling the State of Illinois Adult Protective Services hotline, (866) 800-1409. The calls are confidential and the public can make them as well.
“We usually will say who we are in making those reports,” Mayberry said. “Something like: ‘I think we may have a case of one of our elderly customers being financially abused.’ We’ll divulge the situation but not account numbers. They don’t need to know the amounts; they need to know the generalities.”
State investigators can then look into the matter, he said.
Banks often face such sticky situations. Elderly people will come in to a facility, in the company of someone who is suspicious in nature.
“Basically we try to get the elderly person apart from that other person, address them separately. Sometimes that’s challenging. Obviously, the goal is to protect people’s money.
“We try to stop it at our door. Unless that senior says something should be done, that’s where we have to stop (probing). In our world, the police won’t act unless there’s something there,” Mayberry said.
A financial institution’s familiarity with older adult customers puts it in a good position to spot irregular transactions, account activity or behavior. Mayberry used the example of an elderly woman who has never used a debit card suddenly applying for one with somebody else as a second signer.
Prompt reporting of suspected financial exploitation to adult protective services, law enforcement, and/or long-term care ombudsmen can trigger appropriate intervention, prevention of financial losses and other remedies
The Gramm-Leach-Bliley Act establishes a general rule that a financial institution may not disclose any nonpublic personal information to any nonaffiliated third party unless the financial institution first provides the consumer with a notice that describes the disclosure and a reasonable opportunity to opt out of the disclosure, and the consumer does not opt out.
However, section 502(e) of the act provides a variety of exceptions that permit a financial institution to disclose information to nonaffiliated third parties without first complying with notice and opt-out requirements.
The following are specific exceptions to the notice and opt-out requirement that, to the extent applicable, would permit sharing of nonpublic personal information about consumers with local, state or federal agencies for the purpose of reporting suspected financial abuse of older adults without the consumer’s authorization and without violating the Gramm Act:
• A financial institution may disclose nonpublic personal information to comply with federal, state, or local laws, rules and other applicable legal requirements, such as state laws that require reporting of suspected abuse.
• An institution may disclose nonpublic personal information to respond to a properly authorized civil, criminal, or regulatory investigation or subpoena or summons by federal, state, or local authorities.
• A financial institution may disclose nonpublic personal information to protect against or prevent actual or potential fraud, unauthorized transactions, claims, or other liability.
For example, this exception generally would allow a financial institution to disclose to appropriate authorities nonpublic personal information in order to:
• report incidents that result in taking an older adult’s funds without actual consent, or
• report incidents of obtaining an older adult’s consent to sign over assets through misrepresentation of the intent of the transaction.
Under the federal Older Americans Act, each state has an Office of the State Long-Term Care Ombudsman that addresses complaints and advocates for improvement s in the long-term care system
To find a local ombudsman program, search by location at www.eldercare.gov.