CFPB: Low Reverse Mortgage Presence Among Elder Financial Abuse Reports

Elder financial exploitation (EFE) occurs due to a wide range of perpetrators, from close family members to offshore scammers. Only one in 44 EFE incidents are actually reported to authorities, and annual dollar losses range from $2.9 billion to $36 billion. However, less than one percent of reported EFE between 2013 and 2017 involved reverse mortgage borrowers.

This is according to a webinar conducted last week by members of the Consumer Financial Protection Bureau’s (CFPB) Office of Financial Protection for Older Americans.

Arriving on the heels of a February report in which the Bureau announced an alarming increase in the rates of elder financial abuse, this webinar related findings made by analyzing full data from a random sample of EFE Suspicious Activity Reports (SARs) between April 2013 and December 2017.

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Monetary losses to older Americans

A clear trend of increasing total monetary losses to both older adults and filing institutions was observed by the CFPB, rising from $0.6 billion in recorded losses in 2013 to $1.7 billion in 2017. Hardest hit by perpetrators of EFE were adults aged 70-79, with that age group experiencing an average monetary loss of approximately $45,000.

That age group was followed in prominence by Americans aged 80 and older, with monetary losses for these people averaging out to $39,000 between 2013 and 2017. In terms of identifying common perpetrators, half of EFE SARs identify a stranger, either from inside or outside of the United States as a suspect. 36% of recorded cases observed that the primary EFE suspect was a person known to the victim.

The most common suspected family member is an adult child of the victim. While strangers involved are from outside the United States in 52% of cases involving a perpetrator not previously known to the victim, the amount of monetary loss is typically greater when the perpetrator has some kind of prior relationship with the victim of the abuse.

Identified patterns

The CFPB determined that there are four common prototypical activity patterns common in many of the observed scams against older Americans. The most common identified scam type is a “romance scam,” which typically begin online, and consists of the scam target believing they, “have a love interest who needs money to travel to a rendezvous,” a CFPB presenter said.

Not all forms of EFE come in the form of scams, however. Non-scam instances of EFE involve exploitation by family members or theft by caregivers. Perpetrators often use money transfers as the most common type of transaction to carry out their instances of abuse, and checking or savings accounts had the highest amount of recorded monetary loss by victims.

In terms of activity that can serve as a warning sign to financial institutions, family members or caregivers that an instance of EFE is being attempted, uncharacteristic attempts to wire large sums of money was the most frequent red flag described in SARs by occurring at a rate of 38% in the pool of SARs. Other red flags include frequent large withdrawals (at a rate of 21%), and debit transactions described as “inconsistent with the elder” (10%).

The average length of time observed for an instance of EFE in the pool of recorded SARs is 120 days, though the duration of abuse can last longer than average in cases where a joint bank account is involved (230 days), a family member is the suspect (197 days) or the targeted person has “diminished capacity” to handle their financial affairs (158 days).

Many instances of EFE also go unreported, as the data determined that fewer than one-third (33%) of related SARs showed that the filer actually reported suspicious activity to local, state or federal authorities, either in the form of law enforcement or Adult Protective Services (APS).

When RMD asked how many of the recorded SARs involved reverse mortgage borrowers in the presentation’s Q&A portion, senior policy analysts Naomi Karp and Hector Ortiz responded by saying, “Both virtual currency and reverse mortgages accounted for less than 1 percent of EFE SARs we examined.”

Implications and next steps

“These SARs indicate that elder financial exploitation is widespread and damaging,” said the CFPB presenter. “This highlights the need for strong interventions by financial institutions, law enforcement, social services as well as the involvement of policymakers.”

While the Bureau finds it encouraging that financial institutions are filing more EFE SARs, the institutions themselves are not indicating whether or not they’re reporting instances of identified EFE to either law enforcement or APS.

“EFE SARs are a useful and largely untapped resource for monitoring and measuring EFE,” the presenter said. “Law enforcement can mine the database of EFE SARs to be more proactive in investigating cases and bringing more prosecutions.”

Those who may know a victim or potential victim of elder financial abuse are encouraged to report the incident to a local office of Adult Protective Services (APS), which can be found through the organization’s website. Scams or fraud should be reported to the Federal Trade Commission (FTC) using that agency’s complaint form.

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