By, Trevor York, Elder & Disability Law Clinic Student, Fall 2023
Elder fraud is a well-documented issue that many elderly people and their families have either directly experienced or know close friends who have[1]. Indeed, the numbers themselves paint a stark picture. According to a report by The Motley Fool, elderly victims lost nearly $1.7 billion in 2021, nearly doubling the amount that was lost in 2019.[2] To put this in perspective, these scams cost the average victim $50,000[3]. Moreover, elder fraud—particularly scams targeting those on fixed income—has seen an alarming rise in recent years[4]. From 2017-2019, elder fraud losses increased by 391%[5]. Considering that people 85 years or older are the fastest growing segment of the population—expected to double in population size over the next 20 years—one can see how elder fraud is a significant area of concern, not just for the victims themselves but for family members who often have to assist with their older relatives who fall victim to such schemes[6]. With these statistics in mind, it is clear that elder fraud must be addressed by the government. Both the federal government and the state of Virginia are making efforts attempting to tackle the problem, though a complete solution is likely yet to come.
Federally, Congress and other executive agencies have addressed elder fraud in two main respects. First, in 2018 the Financial Industry Regulatory Authority (FINRA) required broker-dealers to adopt certain measures that empower employees to take action when they observe suspicious activity. Such actions include freezing accounts, investigating suspicious activity, and inviting clients to have a “trusted contact” for their accounts, allowing broker-dealers to reach out to the trusted contract in addition to the account holder if they have concerns with the account[7]. Overall, FINRA’s regulation appears to be a step in the right direction. While the regulation has not had eye-popping results, researchers have found that such protections have reduced suspected fraud cases and personal bankruptcies by roughly 5%[8]. Second, Congresswoman Ann Wagner has proposed a bill called “The Financial Exploitation Prevention Act” that specifically seeks to address elder fraud. Unfortunately, the bill is still sitting on the Senate floor as of October 2023, after passing through the House in January 2023. However, the bill did pass unanimously in the House, a promising sign for the bill’s future in the Senate given the difficulty of passing any legislation, let alone unanimously, in the current political climate. Among other things, the bill “would require some financial services firms to delay their responses to redemption requests from older customers if they believe the person is making the request because they’re being financially exploited.”[9] While the bill’s passage isn’t certain, it would give more teeth and enforcement power to FINRA’s current regulations because the bill specifically addresses elder fraud and imposes mandates on financial institutions to report suspicious activity on elder accounts.
Virginia, like many other states, has adopted its own version of the federal “Financial Exploitation Prevention Act”. In 2022, Virginia legislators amended an already existing statute that prevented fraud against “vulnerable adults” to include fraud against elderly adults[10]. The statute protects against elder fraud by imposing the crime of larceny on those who commit elder fraud. Additionally, the statute allows for some accountability for financial agents who “intentionally engage in financial exploitation of a vulnerable adult”[11]. Although, the language in this statute goes far short of actually requiring financial institutions to take measures to report fraud when they believe suspicious activity has occurred. As a result, the Virginia legislature could provide more pointed legislation that require financial institutions to make reports after suspicious activity.
Both federal and state legislation is moving in the right direction as people are becoming more aware of the urgency that elder fraud presents in America. However, more actions should be taken to better address the issue, particularly legislation that requires financial institutions to report suspected fraud on the elderly. Lastly, it should be noted that family members of the defrauded elderly often represent a vast majority of elder fraud offenders. In fact, family members are 2.5 times more likely to commit elder fraud than a stranger is[12]. Thus, while legislation is very important, it is equally as important for elder people and their families to have honest discussions amongst each other regarding their finances, in addition to proper estate planning.
[1] See e.g. M.T. Connolly, How Older People Get Scammed, The Atlantic, July 22, 2023.
[2] Lyle Daly, Elder Fraud and Financial Abuse Statistics for 2022, The Motley Fool (Nov. 28, 2022, 1:18 P.M.), https://www.fool.com/research/elder-fraud-financial-abuse-statistics/ (According to an annual fraud report from the Federal Bureau of Investigation).
[3] Id.
[4] Id.
[5] Id
[6] See Lyle Daly, Elder Fraud and Financial Abuse Statistics for 2022, The Motley Fool (Nov. 28, 2022, 1:18 P.M.), https://www.fool.com/research/elder-fraud-financial-abuse-statistics/ (According to an annual fraud report from the Federal Bureau of Investigation); M.T. Connolly, How Older People Get Scammed, The Atlantic, July 22, 2023.
[7] M.T. Connolly, How Older People Get Scammed, The Atlantic, July 22, 2023.
[8] Id.
[9] Beth Braverman, Congress Bill Designed to Help Prevent Elder Financial Fraud, U.S. News & World Report, (Apr. 12, 2023, 12:21 P.M.), https://money.usnews.com/money/personal-finance/family-finance/articles/congress-bill-designed-to-help-prevent-elder-financial-fraud
[10] VA Code Ann. § 18.2-178.1 (West 2023).
[11] VA Code Ann. § 18.2-178.2(B) (West 2023).
[12] M.T. Connolly, How Older People Get Scammed, The Atlantic, July 22, 2023.