WASHINGTON >> Federal regulators launched an investigation into the financial abuse of the elderly, citing a new report that advisors, planners, family members and others were ripping off seniors more than ever.
Americans over 60 lost at least $2.9 billion in 2010 to financial exploitation – ranging from simple home repair scams to complex insurance swindles. That figure was up 12 percent from 2008, according to a study released Thursday by MetLife Mature Market Institute, the National Committee for Prevention of Elder Abuse and Virginia Tech University.
The rise in abusive tactics led the Consumer Financial Protection Bureau to begin looking into the types of scams affecting older Americans and coming up with the best ways to prevent them. A specific focus will be on the credentials of people who tout themselves as financial advisors.
“The silent crime of financially exploiting the elderly is widespread, and it is devastating. It is critical for us to act,” Richard Cordray, the agency’s director, said at a White House forum Thursday ahead of World Elder Abuse Awareness Day.
“The generation that rebuilt and sustained this nation out of a devastating Depression, the dark hours of World War II and the anxious fears of the Cold War deserve our care now,” Cordray said.
Tougher oversight by regulators is needed to prevent financial predators from preying on vulnerable elderly victims, said Patricia L. McGinnis, executive director of California Advocates for Nursing Home Reform, a San Francisco group that often deals with financial abuse.
“The bottom line is: You need to go after the predators. You need to punish them and you need to convict them,” she said. “Put them in jail and make an example of them, but more importantly, get the money back for that victim. Make them whole again.”
McGinnis described efforts by regulators and advocates to prevent the scamming of older Americans as a game of Whac-A-Mole.
A recent scam enticed senior citizens to put large amounts of savings into deferred annuities, reducing their savings to qualify for a particular federal veterans benefit. The veteran might get $1,000 a month from the benefit, but loses access to the cash for years. Meantime, the annuity salesperson earned a commission of 8 percent to 12 percent, she said.
Victims often are reluctant to fight back.
“I can’t tell you the times I talk to people and they say, ’It was my own fault,’ ” McGinnis said. “They are very embarrassed.”
The scams have increased as the economy has struggled. Survey results released this week by the nonprofit Investor Protection Trust found that 84 percent of experts who deal with financial exploitation of the elderly said the problem has worsened.
But there is a lack of comprehensive information on the problem, which the consumer bureau’s inquiry could help solve, said Elizabeth Costle, director of the consumer and state affairs team at the AARP Public Policy Institute.
Financial predators often target the elderly because they are viewed as gullible, Cordray said.
“Many seniors have routines, and their predictable patterns make them easier targets for predators,” Cordray said. “Abusers often assume that the victim will be too embarrassed or too frail to pursue legal action against them, and unfortunately that assumption is too often proven to be correct.”
The agency’s inquiry seeks comments from the public on several issues. They include detailing the unfair, deceptive and abusive practices targeted at the elderly, finding the types of financial planning resources, and evaluating the credentials of financial advisors. The agency will be accepting public comments until Aug. 13.
Cordray said that some people who tout themselves as experts on elderly financial issues have had only a few hours of inadequate training.
“We need to distinguish between the true experts and those engaged in predatory conduct,” he said.
The qualifications of financial advisors are important as new retirees must decide what to do with lump-sum 401(k) payouts and often must juggle many complex options, Costle said. The ability to understand those options gets more difficult as people age.
“As people get older, particularly up into their 80s . they’re just less able to process financial information,” she said. “They’re more likely to be trusting of people, and they open themselves up to more abuse, which is perpetrated both by strangers and by caregivers and family members who are close to them.”
Congress and the White House have increased their focus on the issue.
Lawmakers included the Elder Justice Act in the 2010 health care reform law to coordinate federal efforts. As part of the law, Health and Human Services Secretary Kathleen Sebelius on Thursday announced $5.5 million in grants to states to “test ways to prevent elder abuse, neglect and exploitation.”