Bates News,Bates Research - 10-31-18

Federal Trade Commission Reports on Senior Consumer Fraud

In a new report to Congress, the Federal Trade Commission (“FTC”) compiled its latest data on the widespread problem of financial fraud perpetrated against elderly consumers. The agency also highlighted 2017-2018 enforcement actions and described its outreach and education initiatives to combat senior financial abuse.

The FTC report, titled “Protecting Older Consumers, 2017-2018,” was prepared as required by the 2017 Elder Abuse Prevention and Prosecution Act (see Bates coverage here.) The FTC is mandated to gather that information under the agency’s consumer protection authority. By statute, the agency is empowered to (i) prevent unfair or deceptive acts affecting commerce; (ii) seek relief for conduct injurious to consumers; (iii) establish rules designed to prevent unfair or deceptive acts or practices; (iv) compile information and conduct investigations, and (v) prepare reports and recommendations to Congress. The report attempted to parse out effects on seniors from its consumer data. This article highlights the findings in the latest FTC report.

Data and Analysis

The information used in the report was collected primarily through the FTC’s Consumer Sentinel Network (“Sentinel Network,”) an online database that provides law enforcement agencies with secure access to consumer reports on fraud. The FTC report states that law enforcement agencies use the network to help identify patterns and trends and problematic business practices of targets under investigation.

Of the nearly 1.14 million submissions to the database in 2017 that related to fraud, almost half included age-related information from which the FTC conducted its analysis. According to the data provided by that portion of the information, total fraud loss reported by consumers ages 60 and older was $252 million. (Note, the FTC’s figure represents consumer fraud and represents a fraction of losses reported by the Department of Justice and SIFMA.)

The primary conclusions from the FTC analysis is that (i) seniors were more likely to report fraud than younger people (over 60-year-old consumers were twice as likely to report fraud as compared to those aged 20-29), (ii) seniors were less likely to indicate that they had lost money (over 60-year-olds indicated a monetary loss 18-20% of the time as compared to 40% for those aged 20-29,) and (iii) the dollar amounts lost for seniors were much higher than the dollar amounts lost for younger people (see chart below.)

MEDIAN INDIVIDUAL MONETARY LOSS REPORTED BY AGE

Source: “Protecting Older Consumers, 2017-2018,” report to Congress, Federal Trade Commission.

There was no conclusion drawn on the causes for these disparities. The report did suggest that seniors may be more willing to help fight fraud and therefore to report more, that younger consumers may be more inclined to file fraud reports only in instances where they suffered a financial loss, and that the size of the losses reflect older adults having access to more assets through retirement accounts, home equity, social security or pension benefits.

Other Observations on the Sentinel Network Data

The FTC also provided analysis of the Sentinel Network complaints based on types of schemes. The agency concluded that seniors were five times more likely to be defrauded by technical support scams, prizes/sweepstakes/lottery scams, family and friend imposter frauds, and real estate and timeshare resale offers than younger consumers. In contrast, the FTC concluded that seniors were less likely than young consumers to lose money in shop-at-home or catalog sales and government imposter scams and counterfeit check scams.

The FTC reported that seniors lost far more money than young consumers in phone scams. Average losses exceed $1000 for seniors over 60 that were contacted by phone.

MEDIAN LOSS REPORTS BY AGE AND METHOD OF CONTACT

Source: “Protecting Older Consumers, 2017-2018,” report to Congress, Federal Trade Commission.

Finally, the report analyzed the data as a function of payment method. The report concluded that credit cards and wire transfers were the transaction methods of choice and that wire transfers accounted for an overwhelming amount of the losses incurred by seniors.

TOP PAYMENT METHODS AND TOTAL AMOUNT PAID (Ages 60+)

Source: “Protecting Older Consumers, 2017-2018,” report to Congress, Federal Trade Commission.

Law Enforcement

The Elder Abuse Prevention and Prosecution Act requires the FTC to report on enforcement actions “over the preceding year in each case in which not less than one victim was an elder or that involved a financial scheme or scam that was either targeted directly toward or largely affected elders.” Though the 63 cases cited in the report were not exclusively about seniors, the agency listed scams (in an appendix) that the agency stated include older adults.

The FTC highlighted cases involving (i) marketers who sold phony debt relief services in Florida); (ii) a tech support scam in Alabama; (iii) misleading claims about pain and memory enhancement supplements; (iv) massive fraud payments through a money transfer system over many years; (v) deceptive prize promotion mass mailings, and (vi) telemarketing fraud related to credit card fraud protection insurance.

Outreach and Education

Finally, the FTC report outlined its outreach and education initiatives in an effort to demonstrate compliance with its senior protection responsibilities under the law. Specifically, the agency highlighted its Every Community Videos Program, which disseminates individual stories and tutorials about financial fraud, and its Pass It On Campaign, a program designed to encourage passing on tips on recognizing and reporting fraudulent schemes.

Conclusion

This new report reinforces common understandings about the threats posed to seniors by consumer fraud. The report is somewhat compromised by the limitations on the data and the parceling out of seniors from the rest of the sample. That said, the FTC asserts that the data from the Sentinel Network informs law enforcement strategy on how to direct resources. Based on the FTC report, therefore, greater scrutiny related to wire transfer agents and credit card fraud may occur. As to protecting seniors against specific types of fraudulent schemes, more accessible information and educating seniors to identify and report scams is the message.

Bates Group closely follows the regulatory and enforcement developments on senior financial fraud. For Bates’ most recent view of the changing federal and state legislative and regulatory landscape on senior investors, download our complimentary white paper. For more information concerning financial issues related to vulnerable and senior investors, including senior investor expert witnesses, damages analysis, and compliance, please contact Bates.

Financial institutions may also be interested in Bates Investor Risk Assessment to protect your vulnerable and elder investors while meeting regulatory expectations.

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