Over 50 million Americans aged 62 or older are prime targets for financial exploitation or outright scams both by persons they know and by strangers.
These consumers lose an estimated $2.9 billion annually to financial exploitation, and it’s estimated that for each case that is reported, 43 others go unrecognized, according to a blog post Thursday by the Consumer Financial Protection Bureau.
“With 50 million older people in this country, and 10,000 more reaching retirement age every day, we cannot afford financial predators or practices that victimize our elder citizens,” writes the CFPB’s Jenefer Duane.
In honor of World Elder Abuse Awareness Day on June 15, the CFPB is teaming up with the Federal Deposit Insurance Corporation (FDIC) to launch Money Smart for Older Adults – Prevent Financial Exploitation, a program to educate the public on common scams.
Threats to older Americans’ financial security can come from financial products that are risky, expensive and inappropriate for their needs.
For example, the CFPB said there are companies that target retirees who may need access to cash by offering them lump sum “advances” on their pension payments. These so-called advances can carry interest rates from 27 to 106 percent, jeopardizing many older borrowers’ safe retirement.
Pension advance firms have been targeting military veterans, and reportedly have recently begun targeting teachers, firefighters, and police officers.
In the case of veterans, federal law generally prohibits assigning military pensions to a third party. Reports indicate that many firms may try to get around this by calling the lump sum payment a loan or an advance and by urging veterans to deposit their monthly retiree payments in a newly created bank account controlled by the firms, which is then debited to pay back the lenders.
Whatever the name, these transactions generally are not a good deal for veterans or other retirees.
Here’s what to do if you are offered a pension advance loan:
- Say no to arrangements that allow a creditor to access the account where you get your benefits.
- Get advice from a trusted financial expert if you need emergency funds. Other arrangements may be less costly.
- Ask CFPB about consumer financial products and advice about other options.
- Tell us your story, and tag your issue “pension advance loan.”
The CFPB gives the following as an example of the “grandparent scam.” This is how it normally works:
“An imposter calls a grandparent pretending to be a grandchild in trouble; the scammer may even know the grandchild’s name. The scammer is usually crying making it hard to recognize the grandchild’s voice. The scammer pleads for the grandparent to immediately wire money and not tell any family members for fear of upsetting them. Many people will immediately jump to the assistance of the grandchild and won’t ask questions until later.”
Should you get a call asking for money from a relative in distress, verify that the caller is not an imposter. This isn’t just pension troubles, but a problem that could in theory affect anyone with a family!
- Ask a question that only your loved one can answer.
- Hang up and call the relative’s known phone number.
- Call someone else you trust to verify the story before you send money.