Is your credit union addressing elder financial abuse?

Government agencies are pressing the issue

Your membership is aging.  As more of your membership shifts to retirement age, new opportunities and new challenges will be presented to your credit union.  One challenge for all financial institutions will be properly addressing elder financial abuse.

Elder abuse is on the rise and now has the attention of lawmakers. A number of state and federal agencies are weighing in on elder financial abuse.   Financial institutions are expected to minimize the likelihood of financial abuse occurring against their elderly members.

The CFPB issued a 62 page report and an 8 page advisory calling on banks and credit unions to do their part to prevent, recognize,  report and respond to elder abuse.

NCUA Chairman Debbie Matz in a letter to credit unions (13-CU-08) strongly encouraged credit unions to ensure staff members are “trained on the potential signs that might trigger a report of elder abuse or financial exploitation”.  Ms. Matz’s letter follows the Interagency Guidance on Privacy Laws and Reporting Financial Abuse of Older Adults which states:

“Employees of depository institutions and other financial service providers that constitute financial institutions for purposes of the GLBA (Gramm-Leach-Biley Act) may observe signs of possible financial exploitation of an older adult.  Various federal and state authorities either require or encourage reporting of this type of information to the appropriate agency.  This guidance clarifies that reporting suspected financial abuse of older adults to appropriate local, state, or federal agencies does not in general, violate the privacy provisions of the GLBA or its implementing regulations.

In fact, specific provisions of the GLBA and its implementing regulations permit the sharing of this type of information under appropriate circumstances without complying with notice and opt-out requirements.”

From these statements, we see that federal agencies expect financial institutions to report elder financial abuse even in circumstances that otherwise would require following the privacy provisions of the GLBA.  Clearly, elder abuse is becoming a front burner issue for federal and state agencies.  Federal regulations are presently being considered that will further clarify the expectations of financial institutions regarding elder abuse.  Twenty six states require financial institutions to report suspected elder abuse to Adult Protective Services.

Regulations are not the only reason credit unions should be working to prevent elder abuse.  Other reasons to pursue taking action to minimize elder abuse include:

  •    Public relations: A credit union’s membership, community and local press look positively on institutions that actively watch out for people who would otherwise be exploited.
  •    Reducing losses in deposit and loan portfolios: Whatever adverse financial events members experience eventually comes back to haunt the credit union.  Losses due to fraud will impact how a member can repay a loan.  Losses in an elderly member’s deposit account due to fraud could also negatively impact a credit union if it can be argued that the credit union could have in some way been more active in helping to prevent the loss.
  •    Liability issues: More and more financial institutions are being found liable in instances where they did not appear to take reasonable steps to prevent fraudulent losses to members on an individual basis or collectively.  Taking reasonable steps to minimize elder financial abuse will help go a long way toward convincing courts and arbitrators that the credit union should not be held liable when an older member faces a financial loss due to a fraudulent act.   

To properly address elder abuse, financial institutions need to pursue a multi-prong plan of action.  Three areas that need to be addressed in a properly vetted elder abuse plan of action include:

  •       Making sure that policies are in place that addresses elder abuse in credit union operations, management, and staff expectations.
  •       After implementing polices, create procedures that assure policies are always followed.
  •       After policies and procedures are in place, create and follow a program of on-going staff training.

Policies are the foundation of regulatory compliance.  Polices reflect the level of board and management commitment to any objective.  At a minimum, elder financial abuse policies should address these issues:

  •    The purpose of the Elder Abuse policy
  •    Establishing and maintaining a Procedures Manual and a Training Manual
  •    “Hold Harmless” statements protecting staff and officers who act in good faith
  •    Reference to, and description of,  the tools in place to identify elder abuse
  •    Description of the appropriate actions to be taken when elder abuse is suspected
  •    References to applicable regulations (federal and state)
  •    References to insurance carriers:   liability, bonding, etc.  (purpose and amount)
  •    Reference to the importance of relationships and “duty of care” (legal obligation to avoid causing harm)
  •       General descriptions of how  information will be provided to older members regarding their rights and services available

Regulators will be watching financial institutions and critiquing actions they have taken to minimize elder abuse.  Credit union boards and managers should be aggressively pursuing this issue.  Establishing effective policies is one of the first steps.

Dennis Child

Dennis Child

Dennis Child is a 40 year veteran credit union CEO recently retired. He has been associated with TCT for 25 years. Today, Dennis enjoys providing solutions and training for credit ... Web: tctconsult.com Details