Public Service Announcement: "Combatting Financial Exploitation: A New Tool"

Regular readers of this blog know that preventing the financial exploitation of older or disabled folks is something that I am passionate about.  I've written and spoken on the topic frequently over the past couple of years.

This week, I had the privilege to join a distinguished panel of experts for a series of training webinars on combatting financial exploitation of the elderly and disabled.  The webinar was coordinated by the NC Administrative Office of the Courts (specifically, the inimitable Lori Cole), and included representatives of the NC Department of Justice (the ever-risible Raj Premakumar), UNC School of Government (the erudite Aimee Wall), NC Bankers Association (the staid Jan Dillon), and NC Department of Health and Human Services (the passionate triumverate of Nancy Warren, Renae Minor and LeShana Baldwin).  More than 300 participants registered, most of whom were lawyers, judges, clerks of court, financial professionals, and social services officials from all across North Carolina.

Here are a few quotes from participants who contacted us after the webinar to profide feedback:

"Thank you so much for all the great information I received with the combatting financial exploitation webinar class. This will help me to stay up to date with the new change." - an Assistant Clerk of Court

 "Thank you for an informative CLE!" - a County Attorney

 "Thanks for the program and the info!" - a County Attorney

 "The webinar today was a very good introduction." - an Assistant Clerk of Court

 "It was a very good program." - a Social Services Attorney

"The information was very helpful." - an Assistant Clerk of Court

For those who were unable to join us, a copy of the materials from the presentation is available here.

A video of the presentation will be available soon, and I will update this post to include it.

If you encounter circumstances that lead you to suspect the financial exploitation of an older or disabled person, whether in your professional life or your personal life, please report your suspicions appropriately. 

 

 

More on Elder Financial Abuse

I've written an article about North Carolina's new law designed to further protect older adults from financial exploitation, and it was published in Gray Matters (the official newsletter of the Elder & Special Needs Law Section of the North Carolina Bar Association) this week.  You can read it here or here.

http://elderlaw.ncbar.org/media/29919677/elnovember2013.pdf

You might also be interested to read the first column in the newsletter, the Chair's Comments, in which Bob Mason and I discuss the effects of the new statute on estate and Medicaid planning.

My friend and law school classmate Mike Anderson has written a more technical piece about the new law for the Estate Planning & Fiduciary Law Section's newsletter, The Will and The Way, focusing on criminal liability and the ability of agencies to obtain a subpoena.  (Mike's practice includes fiduciary litigation.)

If you read the North Carolina Business & Banking Law Blog regularly, you may recall that I first wrote about the new law in August, with related posts in September (addressing federal agency guidance for financial institutions) and October (sharing a PowerPoint presentation from a speech I gave on the topic at a joint seminar of the NC Bankers Association and the NC Credit Union League).

More on Protecting Older North Carolinians from Financial Exploitation

I had the honor of speaking today about the new law designed to help protect older North Carolinians from financial exploitation at the Elder Financial Abuse Summit co-sponsored by the North Carolina Bankers Association and the North Carolina Credit Union League. 

We had a great turnout of financial services professionals from banks and credit unions across the state.  If you were not able to attend, I am sharing my handouts here.

 

Please feel free to share these materials with anyone associated with a financial institution so that they will be aware of the tools and protections financial institutions now have to combate elder financial exploitation.

Federal Financial Agencies Issue Guidance Relevant to New N.C. Statute Protecting Older Adults from Financial Exploitation

You may recall that shortly after Senate Bill 140, which creates new mechanisms to protect older adults and disabled adults from financial exploitation, was enacted by the General Assembly, I summarized and analyzed the legislation on this blog.  Just a few days ago, several federal agencies jointly issued official guidance designed to make it easier for financial institutions to cooperate in those efforts.



Photo credit: Ed Yourdon / Foter

The CFPB, FRB, FDIC, OCC, NCUA, SEC, CFTC and FTC all came together to issue "Interagency Guidance on Privacy Laws and Reporting Financial Abuse of Older Adults" on September 24, 2013.  The guidance is meant to assure financial institutions that the Gramm-Leach-Bliley Act (GLBA), which controls the privacy of consumer financial information, will not prohibit the reporting of suspected elder financial abuse to appropriate governmental agencies.  It says 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."  For example, the FDIC's privacy regulations, which apply to state-chartered banks that are not members of the Federal Reserve System, provides in Part 332, 15(a)(7)(i) an exception from the non-disclosure rules "[t]o comply with federal, state, or local laws, rules and other applicable legal requirements."  The guidance makes clear that the FDIC believes this would apply in cases where state law calls for the reporting of suspected elder financial abuse.

The guidance does not go as far as to sanction to disclosure of information to non-governmental persons, such as a suspected victim's family members or close friends.  Recall that the N.C. Act gives financial institutions permission to solicit a list of trusted individuals from older and disabled adults, and requires that those financial institution notify the named individuals when exploitation of the customer is suspected.  Despite this omission in the federal guidance, financial institutions may derive some relief from other language in the GLBA regulations that create exceptions for disclosure of consumer's information:

"With the consent or at the direction of the consumer, provided that the consumer has not revoked the consent or direction; or

To protect against or prevent actual or potential fraud, unauthorized transactions, claims, or other liability...."

The federal agencies' guidance closes with a reminder that the filing of a Suspicious Activity Report (SAR) by a financial institution may be appropriate in some instances of suspected elder financial abuse, and references a May 2013 FinCEN publication in which the CFPB's Office of Financial Protection of Older Americans discusses the use of SARs for elder financial abuse reporting and in which FinCEN points out the new box on the SAR form to indicate suspected elder abuse. 

When the N.C. Act becomes effective on December 1, 2013, financial institutions may be more willing to participate in the solicitation of lists of trusted individuals and to report suspected abuse given the federal agencies' statement of support in this new guidance. 

New Law Helps Protect Older Adults and Disabled Persons from Financial Exploitation

Older North Carolinians will soon have a new source of protection from financial exploitation, and financial institutions will soon have a new customer protection law to observe.  

Just a couple of weeks ago, Governor Pat McCrory signed into law a bipartisan bill designed to protect older adults and disabled adults from financial exploitation.  The actual title of the bill is "AN ACT TO INCREASE THE RECOGNITION, REPORTING, AND PROSECUTION OF THOSE WHO WOULD DEFRAUD OR FINANCIALLY EXPLOIT DISABLED OR OLDER ADULTS and to CONTINUE THE TASK FORCE ON FRAUD AGAINST OLDER ADULTS, as recommended by THE TASK FORCE ON FRAUD AGAINST OLDER ADULTS."  If ever there was a bill that could benefit from a short title, this is it!  Alas, the General Assembly did not include a short title.  

The legislation was supported by the North Carolina Bankers Association, the North Carolina Credit Union Association, and the North Carolina Attorney General's office.  It passed almost unanimously: 111 to 1 in the House and 47 to 0 in the Senate.  (The lone objector was Rep. Speciale, who told me that he was concerned about the regulatory burden created.)

Photo credit: Ed Yourdon / Foter

The Act gives financial institutions permission to solicit a list of trusted individuals from older and disabled adults to notify in case of suspected exploitation.  Institutions are not required to ask for a list, nor are customers required to provide any names. 

 

If a financial institution, or an officer or employee of a financial institution, has "reasonable cause to believe that a disabled adult or older adult [customer] is the victim or target of financial exploitation," they must report the information.  (The term "disabled adult" means anyone who is physically or mentally incapacitated as defined in N.C.G.S. 108A-101(d). The term "older adult" means anyone age 65 or older.)  Note the use of the word "target," which, although not defined, implies that financial institutions should be somewhat proactive in reporting before a customer is victimized. It is also interesting that the term "financial exploitation" is defined as "the illegal or improper use of a disabled adult's or older adult's financial resources for another's profit or pecuniary advantage."  The use of the term "improper" indicates that the acts in question need not necessarily be illegal.

 

A financial institution must report suspected exploitation to the following:

•  Persons on the list provided by the customer, if such a list has been provided by the customer (unless a person on the list is suspected);
• The appropriate local law enforcement agency; and
• The appropriate county department of social services, if the customer is a disabled adult.

The report may be verbal, but I would suggest documenting it in writing. The report must include the name and address of the customer, the nature of the suspected exploitation, and any other relevant information.  The Act provides that no financial institution, officer, or employee who reports this sort of information in good faith can be held liable for doing so.

The Act enables a law enforcement agency or a social services department investigating alleged financial exploitation to seek a  subpoena for the financial records of the disabled or older adult.  A customer whose information is turned over pursuant to a subpoena of this type cannot be penalized or prosecuted for anything obtained by a law enforcement agency using this type of subpoena, with the exception of a joint account holder accused of exploiting the other account holder.
 

The agency is required to notify the customer when the subpoena is issued, unless there is a risk that a customer notice could hamper an investigation, in which case the judge may order that the customer not be notified until later.  In that event, the judge's order will also direct the financial institution not to disclose the existence of the subpoena or investigation to the customer. 

Action Items for Financial Institutions:  The law becomes effective December 1, 2013.  Financial institutions should begin updating their subpoena response policies to address the new law, decide whether they will solicit lists of trusted individuals from their older or disabled customers, and update privacy policies to comport with the new law and policy.

You can read the full text of the new law here.