A Complete Guide to Elder Financial Abuse

In honor of World Elder Abuse Awareness Day on June 15, we took a closer look at the frightening epidemic of elder financial abuse. In this article, we’ll discuss the issues surrounding the financial abuse of older adults and provide a comprehensive list of resources you can use to help protect yourself and those around you.

What is elder financial abuse?

Elder financial abuse or exploitation is defined in the Older Americans Act of 2006 as:

“The fraudulent or otherwise illegal, unauthorized, or improper act or process of an individual, including a caregiver or fiduciary, that uses the resources of an older individual for monetary or personal benefit, profit, or gain, or that results in depriving an older individual of rightful access to, or use of, benefits, resources, belongings, or assets.”

In other words, this type of abuse involves taking advantage of an older person for financial gain. 

Elder financial abuse is big business. It’s estimated that older adults lose more than $36 billion every year to scams, fraud and exploitation.¹ It’s even more alarming that almost half of that money is lost due to tactics that – while deceptive in nature – are technically legal. With large numbers of Baby Boomers aging into retirement, experts predict the problem is only going to get worse.

The number of seniors of seniors in the U.S. who have experienced some form of financial abuse is estimated to be as high as 37 percent.² In other words, if you have three living grandparents or two older parents, there’s a good chance at least one of them has been a victim of financial abuse, and they may not even know it.

Who commits elder financial abuse?

The sheer number of financial abuse victims is frightening, but what may be even worse is that the abuse is often carried out by someone close to the victim. One survey found that two-thirds of financial crimes against the elderly are carried out by family, friends or other trusted individuals.³ The perpetrators of elder financial abuse can include:

• Family members
• Caretakers
• Neighbors
• Friends and acquaintances
• Attorneys
• Banks and other financial institutions
• Health care providers

How is elder financial abuse carried out?

There are dozens of ways in which elder financial abuse is carried out. Here are some of the more common ways this type of abuse is perpetrated. 

 Impersonators 

• Lotteries and sweepstakes
  A scammer may claim to be associated with a prize or lottery commission. They may tell the victim that they won the lottery or a special prize and that they need to send money to cover the taxes on their winnings.
 
• Home repair
  One popular scam involves a “paver” telling a senior about a job the scammer claims to have completed in the neighborhood and that they have some leftover materials to either use today or get rid of. They may then claim that they can repair or repave the senior’s driveaway at a deeply discounted price and insist on receiving payment in advance. The scammer will typically leave without completing the promised work.
 
• Law enforcement
  Thieves will sometimes call a senior citizen and pretend to be a law enforcement agent claiming that the senior owes a fine. They may also try to convince a fraud victim that one of their family members is in jail and that the victim should send bail money.
 
• Charity
  One common scam involves someone impersonating a charity foundation in an effort to collect donations. This fraudulent appeal is especially common following a natural disaster.
 
• Utility company
  In some cases, an abuser may impersonate someone from a cable, electric, water or other utility company and attempt to collect an unnecessary payment.
 
• Grandchildren
  In one of the more heartbreaking types of financial abuse, a thief will call an older person pretending to be their grandchild and ask to borrow money to take care of an unexpected hardship.
 
• Email phishing
  An email phishing scam can happen when a senior receives an email appearing to be from a legitimate entity such as the IRS requesting them to update or verify their personal information. When the senior reveals their social security number, credit card information or other sensitive information, the scammer may then use it for identity theft.

It happened: An 82-year old Texas woman was scammed out of her life’s savings. Scammers informed her that she won a sweepstakes and that she needed to send money to cover taxes and fees tied to the winnings. After the woman made the initial payment, the scam progressed with additional demands and conditions. After losing hundreds of thousands of dollars, the woman sadly committed suicide with $69 left to her name.

 Financial fraud

• Predatory lenders
  Older clients are sometimes pressured into taking out reverse mortgages or other predatory loans with high interest rates. It may be against the client’s best interest to take out the loan, but they may be convinced to do so due to high pressure or fraudulent misinformation.
 
• Investments
  Senior citizens are popular targets for pyramid schemes and other “get rich quick” schemes.
 
• Identity theft
  When a victim’s identity is stolen, it can be used to open up fraudulent credit cards or other lines of credit in their name. A senior’s Social Security number is a popular target for scammers.

It happened: The CEO of a financial services company in California was charged with conspiracy to commit wire fraud after conning 11 retirees out of more than $4 million. The man, who faces up to 20 years in prison if convicted, solicited the funds to be put into a retirement portfolio. He instead deposited the money into his own personal bank account and used it to buy jewelry, luxury cars and more.

 Caretakers, friends and family members

• Power of attorney
  Someone who has been granted power of attorney can sometimes abuse that designation in order to acquire money, assets and possessions.
 
• Bank cards or checks
  A caretaker who has access to a senior’s bank cards or checks can use them to withdraw money or make fraudulent purchases.
 
• Threats of violence
  An older person who cannot defend themselves can be an easy target for a threat of violence in exchange for money or assets.
 
• Withholding of care
  A friend or family member might threaten to not pick up the person’s groceries, not mow their lawn or withhold any other service unless they receive an exchange of money or a paid caretaker might neglect certain responsibilities while still collecting their full payment.

It happened: In Massachusetts, the niece of a disabled Army veteran used her uncle’s government VA grant — intended for a handicapped-accessible van — to buy herself an SUV. The woman was caught and was charged with larceny.

The effects of elder financial abuse

The effects of financial abuse can be extremely negative for a senior. In addition to financial losses, victims may also experience:

• A loss of trust and an increased skepticism of everyone, even trustworthy friends and family members
 
• Feelings of depression, fear, shame, anger and other negative emotions
 
• Depleted physical health due to stress or the inability to afford proper care or nutrition
 
• Alcoholism or other risky and destructive behavior
 
• Loss of a residence, car or utilities due to inability to make payments
 
• Dependency on government assistance

Why seniors can be vulnerable to financial abuse

Anyone can be a victim of financial abuse, but what makes seniors especially vulnerable? While an age-related decline in cognitive thinking could certainly make some older adults easier targets for abuse, there are other reasons for elder financial abuse.

Wealth

Older Baby Boomers have a median net worth of more than $241,000, and the 50-and-over demographic is responsible for 49 percent of all Consumer Packaged Goods (CPG) sales in the United States.⁴ The concentration of wealth in this generation can make them more desirable targets for scammers and thieves.

More trusting nature

MIT conducted a study in which people of various age groups were asked if most people can be trusted. Baby Boomers gave the highest percentage of “yes” answers out of all age groups surveyed.⁴ This trusting nature could be attributed to growing up in a more trusting era, and it can point to a reason why a senior might be more likely to fall for a scam.

The notion of seniors being more trusting was backed up by a second study, conducted at UCLA. Participants were shown pictures of different faces and asked if they felt the face was trustworthy or untrustworthy. Once again, seniors gave the highest number of “trustworthy” answers, even for faces that gathered a high response of “untrustworthy” by younger participants.⁵

Further, older participants in the study exhibited less activity in their anterior insula while viewing the faces deemed “untrustworthy” by younger participants. This part of the brain supports interoceptive awareness, or what we commonly refer to as a “gut feeling.” The study results suggest that seniors may not as readily identify a potential risk, such as an untrustworthy person.

Declining financial capacity

Trust level isn’t the only thing that may contribute to an older adult’s vulnerability. There is also research that suggests older adults are significantly worse at making decisions related to their finances. One study conducted at Boston College suggested that a person’s financial literacy test scores decline by 1 percent every year over the age of 60.⁶

Another study found that although the capacity to make financial decisions may decline with age, an individual’s confidence to do so did not.⁷ This combination could lead many seniors to remain unaware of their financial vulnerability. 

When combined, you have a demographic that on average has wealth, is more trusting of other people, has a less active “gut feeling” and is not as adept at making financial decisions as they once were but maintains confidence in their ability to do so. These factors can all lead to an increased vulnerability to financial abuse.

How seniors can protect themselves

There are a number of ways in which seniors can better protect themselves from financial abuse.

• Remain socially active
  Isolation is one thing that can contribute to a senior’s financial vulnerability, as being cut off from the outside world can make it more difficult for others to detect warning signs. An isolated individual may also feel that they lack the resources and relationships they need to feel financially secure.
 
• Avoid joint bank accounts
  Some seniors might open a joint bank account so that a family member can more easily make payments or withdrawals on their behalf and help manage their finances. But a joint bank account can also serve as an easy way for theft and abuse to occur.
 
• Don’t give up your home
  Particularly when moving into an assisted living facility, an older adult might consider signing over their home to a trusted family member in order to let that person handle the selling of the home. A home can be among a senior’s most valuable assets, however, and it may not be a safe idea to sign the home over to another person, no matter how trustworthy they might be.
 
• Invoke a power of attorney
  The risk of financial abuse heightens after a person develops a decreased capacity to make independent financial decisions. Invoking a power of attorney can be one proactive way to prepare for the future of one’s wealth and assets. Seniors can consider getting legal advice to help in this process.
 
• Set up a revocable trust
  Placing a senior’s assets in a revocable living trust and naming a fiduciary can be one way to protect against outsiders getting access to any of the senior’s assets that are of significant value.

The Senior Safe Act

While there are a number of ways in which seniors can protect themselves, Congress is also doing its part. The bipartisan Senior Safe Act was passed by the Senate on May 22nd and is expected to become law. Originally introduced to the House in 2017, the bill encourages financial advisors and their firms to report any exploitation of older clients. The bill also protects those financial advisors from liability and from violations of privacy laws when they report cases of elder financial abuse.

Resources for assistance

Below is a list of national and state resources that can help seniors protect themselves and help them recover from financial abuse.

National Resources

Consumer Financial Protection Bureau’s Office for Older Americans
The Consumer Financial Protection Bureau is a U.S. government agency that regulates the activity of banks, lenders and other financial institutions to ensure consumers remain free of unfair, deceptive or abusive practices.

Phone: 855-411-2372

Federal Trade Commission (Phone scams)
The Federal Trade Commission is a consumer protection agency that aims to prevent unfair, fraudulent and deceptive business practices, such as phone scams. Learn how to recognize a telephone scam and what to do when you are targeted.

Phone: 877-382-4357

Federal Trade Commission (Identity thefy)
The Federal Trade Commission works to protect consumers from identity theft by providing resources for anyone who fears their personal information has been breached or lost. They also provide tips for protecting your identity and help recovering from identity theft.

Phone: 877-382-4357

Federal Trade Commission (Scam alerts)
The Federal Trade Commission publishes information about ongoing scams in order to build awareness and to help consumers to remain a step ahead of thieves.

Phone: 877-382-4357

National Institute of Justice
The National Institute of Justice conducts research and provides information about the financial exploitation of the elderly with the goal of improving knowledge and understanding of the crime.

Phone: 202-307-2942

U.S. Securities and Exchange Commission
The Securities and Exchange Commission aims to protect investors through education, regulation and the enforcement of fair and orderly markets.

Phone: 202-551-6551

U.S. Postal Service Inspection Service
The Postal Inspection Service maintains public trust in the mail system by enforcing laws designed to protect the U.S. Postal Service and its users from dangerous or illegal activity and provides assistance to victims of mail fraud, identity theft and other crimes.

Phone: 877-876-2455

Financial Services Roundtable
The BITS Financial Services Roundtable published a fraud protection toolkit complete with information about types of financial abuse provides tips to help consumers stay aware of potential risks.

Phone: 202-289-4322

Investor Protection Trust
The Investor Protection Trust is a non-profit organization that provides tools and information to help investors recognize and avoid investment fraud and financial abuse.

Phone: 202-775-2113

AnnualCreditReport.com
This website provides free annual credit reports that can be used to check for instances of identity theft and fraud.

Elder Financial Protection Network
The Elder Financial Protection Network is an organization dedicated to helping seniors recognize and avoid financial abuse.

Phone: 707-981-8403

National Elder Law Foundation
The National Elder Law Foundation is certified by the American Bar Association and serves by helping consumers to connect with attorneys specializing in elder law and needs.

Phone: 520-881-1076

Senior Fraud Education Program
CaregiverStress.com provides information and resources concerning fraud for both caregivers and seniors.

Phone: 888-575-0946

National Adult Protective Services Association
The national non-profit organization has representation in all 50 states and works to increase awareness of elder abuse through education and advocacy.

Phone: 202-370-6292

U.S. Department of Justice
The Department of Justice fights financial crimes against older Americans through outreach efforts that include scam alerts, training and more.

Phone: 202-514-2000

National Center on Elder Abuse
The NCEA is a national resource center that provides elder abuse information, resources and training to the public and community-based organizations.

Phone: 855-500-3537

National Committee for the Prevention of Elder Abuse
A non-profit organization, the NCPEA is made up of researchers, practitioners, educators and advocates all dedicated to the prevention of abuse of senior adults.

Phone: 416-342-1655

American Bankers Association
The ABA provides tips and information designed to help older consumers remain safe from fraud.

Phone: 800-226-5377

Women's Institute for a Secure Retirement
WISER aims to improve the long-term financial security of women through education and advocacy and provides useful tools and information related to elder financial abuse.

Phone: 202-393-5452

Department of Health & Human Services
The U.S. Department of Health and Human Services builds awareness of elder fraud, allows for fraud to be reported and provides support for victims and their families.

Phone: 877-696-6775

State Elder Abuse Programs

Select your state