The CFPB has issued an advisory and a report with recommendations for banks and credit unions on how to prevent, recognize, report, and respond to financial exploitation of older Americans.  The CFPB’s press release describes the recommendations as “an extensive set of voluntary best practices” and, in his prepared remarks, Director Cordray stated that the recommendations “are not binding regulations; they are simply suggestions we urge institutions to consider in serving their customers.”

On May 6, 2016, from 12:00 PM to 1:00 PM ET, Ballard Spahr attorneys will conduct a webinar on the advisory and report.  A link to register is available here.

While the CFPB’s recommendations are not issued as “guidance” or otherwise framed as requirements, because they represent the CFPB’s expectations for “best practices,” banks and credit unions should carefully consider the recommendations in creating and implementing programs to detect and report elder financial abuse.  Elder financial abuse prevention can be viewed to fall within a financial institution’s general obligation to limit unauthorized use of customer accounts as well as its general privacy and data security responsibilities.  As a result, a financial institution that fails to implement a robust elder financial abuse prevention program could be targeted by the CFPB for engaging in unfair, deceptive, or abusive acts or practices.  In addition, a bank or credit union subject to CFPB supervision should expect CFPB examiners to look at its program for preventing elder financial abuse.

The advisory provides a summary of six general recommendations that are described in the report with greater detail.  The report includes case scenarios illustrating various ways in which older consumers can be financially exploited and an extensive list of warning signs or risk indicators of elder financial exploitation.

The CFPB’s recommendations address the following areas:

  • Development, implementation, and maintenance of internal protocols and procedures for protecting account holders from elder financial abuse
  • Training of management and staff to prevent, detect, and respond to financial abuse
  • Use of technology to flag transactions or account activity that may signal financial abuse  (The report notes that the internal controls that financial institutions have implemented in furtherance of Bank Secrecy Act and Anti-Money Laundering compliance “include effective detection capabilities that can recognize distinct risk indicators for elder fraud.”)
  • Reporting of suspected financial abuse to relevant federal, state and local authorities  (The report notes that numerous states require financial institutions to report suspected abuse and that, in 2013, the CFPB and seven other financial regulators issued guidance to clarify that financial institutions are generally able to report suspected elder financial abuse to the appropriate authorities without violating federal privacy laws. )
  • Protection of older account holders through compliance with the Electronic Fund Transfer Act and Regulation E requirements for extending time limits and unauthorized electronic fund transfers, establishing procedures for providing advance consent to sharing of account information with trusted third parties, and offering  age-friendly services such as providing information about planning for incapacity, honoring powers of attorney, and offering protective opt-in account features.
  • Collaboration with organizations on the local, regional and state level, such as developing relationships with law enforcement and Adult Protective Services and participating in and supporting educational efforts.