Elder Consumer Rights
Older consumers are often targeted by scammers looking to take advantage of a vulnerable population. The federal Administration on Aging defines elder abuse to include “illegal taking, misuse, or concealment of funds, property, or assets of a senior for someone else’s benefit.” Consumer fraud affecting older individuals is typically perpetrated by strangers, but seniors are also vulnerable to fraud, exploitation, and abuse by caregivers or family members. Federal consumer protection agencies, such as the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB), have programs addressing the specific needs of seniors. State governments, such as California, Massachusetts, and Oregon, offer additional programs, and state consumer protection statutes cover many types of elder consumer fraud.
Common Scams Targeting Older Consumers
Seniors are vulnerable to fraud and exploitation due to a wide range of factors associated with aging, which may include both physical and mental declines in functioning. Scammers may take advantage of individual seniors’ particular frailties, or they may seek to exploit more common vulnerabilities, such as a lack of familiarity with newer technologies. Common scams include:
- Investment fraud and other financial scams;
- Deceptive telephone, mail, and internet solicitations;
- Medicare fraud and other abuses of the health care system;
- Abuses of senior tenants’ rights by landlords; and
- Mortgage fraud.
Financial scams involving securities fraud often target seniors. They should be wary of anyone who solicits them for investments, whether by phone, mail, email, or in person. Scammers often make wild promises of guaranteed returns or suspiciously high rates of return. Many of these turn out to be pyramid or Ponzi schemes, which promise a great deal, but are in fact designed to benefit no one except the scammer.
Even if a security appears legitimate, its value or potential could be exaggerated. A “pump and dump” scheme involves aggressive promotion of a particular stock, out of all proportion to its actual potential for growth. The scammer may collect fees for brokering the purchase of shares, or sell his or her shares in the company once the price rises to a certain point. Scammers always vanish when the stock inevitably collapses.
Seniors may be particularly vulnerable to telemarketing scams. Federal and state rules, which regulate the acceptable hours for telemarketing calls and allow consumers to opt out of inclusion on telemarketers’ call lists, offer seniors some protection.
Fake Sweepstakes, Contests, and Other Offers
Receiving a notice in the mail announcing a prize, free gift, or other windfall can be exciting for anyone, but seniors are generally more vulnerable than others to scams that use this method. Fake sweepstakes and contests often instruct recipients that, in order to claim their winnings, they must send in a payment or authorize credit card charges. The fine print often reveals, however, that the payment only secures the possibility of winning.
The Internet has brought advance fee schemes, commonly known as the “Nigerian email scam,” to prominence. Seniors reportedly often fall victim to this scam, in which they are emailed by a person purporting to live abroad. The person may claim to be the relative of some national leader, such as the former Nigerian president. The scammer asks for assistance in moving a sum of money out of the country, usually in exchange for a percentage once the transfer is complete. He or she often requests information from the recipient, like bank account numbers, to facilitate a money transfer. These scams typically end with the victim having lost significant sums of money. The U.S. State Department offers assistance in preventing international fraud, but it still costs Americans hundreds of millions of dollars each year.
Health Care Fraud and Abuse
Scams that target seniors’ health care could put their lives in danger along with their finances. Offers of fraudulent insurance coverage, in which a senior pays a premium for what he or she believes is supplemental health insurance coverage, are a common type of scheme. This may involve authorization to automatically debit the senior’s bank account or charge the individual’s credit card, allowing the scammer to continue receiving payments without the senior’s involvement.
A form of elder abuse involves billing a senior’s health insurance provider, or Medicare, for services the senior is not actually receiving. Sometimes the claimed care is necessary for the senior’s health, and sometimes it is only claimed as necessary.
A reverse mortgage is a form of financing for a person’s residence that allows seniors to supplement their income through the equity in their homes. Unlike a traditional mortgage , the borrower is usually not obligated to make monthly payments. The lender makes monthly payments to the borrower instead of paying a lump sum, and it takes a lien on the property. The loan is repaid if the borrower sells the home, or the lender may take possession when the borrower dies.
Reverse mortgages are only available to homeowners who are at least 62 years old. Lenders must follow all of the same regulations that apply to other mortgages, such as the three-day right to cancel the loan. Since reverse mortgages are only available to seniors, they are susceptible to various types of elder consumer fraud.