Protecting Seniors Against Financial Fraud

By Dave Lucas

Albany, NY – Senator Kirsten Gillibrand is out with a plan to crack down on financial fraud against senior citizens, as changes to New York's Estate Planning Law are put in place to curb Senior Fraud and Abuse. Capital District Bureau Chief Dave Lucas reports.

Gillibrand held a conference call Tuesday afternoon to announce a five-point legislative initiative to protect seniors from falling victim to financial fraud. A new report from the Senator estimates that approximately half a million New York Seniors have lost about $180 million due to scams and loopholes

Gillibrand's plan calls for a halt to abusive mail, telemarketing and internet fraud against seniors; increased penalties for those who commit such fraud, a crackdown on "Senior Advisor" scams, and a move to protect Social Security and Veterans Benefits from debt collectors:

1. Increase Penalties for People who Commit Fraud Against Seniors Americans over the age of 65 control nearly $15 trillion in assets. Once they've retired, seniors face the challenge of making their savings last their entire retirement. Since a large portion of their assets are investable, seniors are often offered complicated investment products, such as reverse mortgages and various annuity products. While these products can be valuable to certain senior investors, they are often sold and offered by corrupt and dishonest would-be criminals.

Research shows that senior citizens face serious risks from fraudulent salesmen. A MetLife study found that seniors lose an estimated $2.6 billion from financial abuse each year. Seniors account for more than half of all investor complaints received by state securities regulators.

To protect more seniors from fraud, Senator Gillibrand is introducing the Senior Investor Protections Enhancement Act - legislation that would:

Target those who commit securities violations against seniors, including selling products unsuitable for their age, failing to disclose fees, charging large penalty fees, or switching the investment product actually sold from the one that was marketed;

Charge an additional $50,000 civil fine for each violation that is targeted or is committed against a senior.

The legislation would not interfere with legitimate investment advisors who recommend products and investments appropriate for their customers.

2. Crack Down on "Senior Advisor" Scams Seniors often fall victim to misleading financial advisors touting "senior designations," who use their misleading and easy to achieve status to lure seniors into fraudulent investment opportunities.

To combat these scams, Senator Gillibrand is introducing the Senior Investor Protection Act - legislation that would create a national grant program for states to protect seniors from misleading financial advisors claiming to specialize in seniors.

The North American Securities Administrators Association (NASAA) and the National Association of Insurance Commissioners (NAIC) have created new model rules for states to protect seniors from these types of scams. However, like most states, New York State has yet to adopt these rules - leaving New York seniors at risk to falling victim to scams.

The Senior Investor Protection Act grant program would incentivize states to adopt these new regulations by giving them the resources they need to hire staff or acquire technology to prosecute fraudulent investment advisors, train regulators and law enforcement officers to prevent these scams, and create and distribute educational materials for seniors so they can avoid being lured into bad, fraudulent deals.

3. Protect Social Security and Veterans Benefits from Debt Collectors Federal law protects social security and veterans' benefits from seizure by debt collectors. But many seniors or veterans who receive their benefits directly deposited into their bank accounts are not protected by this law because of a loophole being exploited by creditors.

More than 80 percent of the 51 million social security beneficiaries in the U.S. receive their payments through direct deposit. This loophole allows debt collectors to get court orders to freeze and garnish the bank accounts of seniors who owe them debts. In fact from 2006 to 2007, nearly $180 million was collected from bank accounts that included social security deposits, according to the Social Security Administration's Inspector General. Nationwide, one-third of seniors depend exclusively on social security for retirement income - leaving seniors and veterans with nothing if their benefits are taken by debt collectors.

While New York State has passed state laws to help protect social security and veterans' benefits, the absence of federal protections means that many New York seniors are still at risk. To ensure all New York seniors are protected, Senator Gillibrand is co-sponsoring the Illegal Garnishment Prevention Act, which would end promoting direct deposit for social security and veterans' checks until the Treasury Department institutes new regulations to protect consumers. These rules would prevent banks from enforcing collection orders on accounts with protected benefits so that these funds cannot be illegally seized.

4. Stop Abusive Mail, Telemarketing and Internet Fraud Against Seniors. Seniors are often targeted for fraud through the mail or over the phone - where seniors may be more inclined to trust a salesperson. In fact in 2007 alone, postal inspectors investigated nearly 3,000 mail fraud cases in the U.S. and arrested more than 1,200 mail fraud suspects. And as more seniors use e-mail and the Internet, criminals are preying on seniors online as well - using "phishing," e-mail spamming and other Internet tactics to lure seniors into fraud. To stop abusive mail, telemarketing and Internet fraud against seniors, Senator Gillibrand will introduce the Senior Financial Empowerment Act - legislation to raise awareness of these abuse tactics on seniors and help bring them to an end. The legislation would:

Direct the FTC to establish a one-stop-shop for consumer education on mail, telemarketing and Internet fraud against seniors;

Establish a grant program to give states and local organizations the resources they need to initiate local mail, telemarketing and Internet fraud prevention and education programs for seniors;

Declare a "National Senior Fraud Awareness Week" in May - coordinated with Elder Abuse Awareness Month - to increase public awareness of the enormous impact that mail, telemarketing and Internet fraud have on senior citizens in the U.S.

5. Workshops on Financial Literacy to Empower and Protect More Seniors Starting this month, Senator Gillibrand will be joining with various advocacy organizations and community groups, such as AARP, the Council of Senior Centers and Services, Inc., Credit Where Credit is Due and the Puerto Rican/Hispanic Elderly, to hold workshops across New York between now and the end of the year on financial literacy to help empower and protect more seniors.

Violators would face hefty fines. The cost of implementing the 5-year, 5-point program is pegged at 28 Million dollars.

Earlier this month, New York State established sweeping changes to end acts of fraud and abuse against seniors by changing the rules for administering powers-of-attorney. The power of attorney changes became effective on September 1st.