Legislatures work to combat financial abuse of vulnerable adults
Midwest legislatures are working to pass laws to define and prevent financial exploitation of elders. In the interest of protecting their customers, community bankers have long worked to stop this crime where they are able. New state laws, however, will involve banks more deeply than before in prevention. Some propose to add requirements for banks; others seek to empower banks to stop the crime.
Last year, two Midwest legislatures – Kansas and North Dakota – introduced laws that define elder financial exploitation. Illinois and Montana passed, and Minnesota introduced, laws defining perpetrators’ liability for elder exploitation. Illinois introduced a bill to provide a legal safe harbor for those who furnish information concerning financial abuse. South Dakota commissioned, and the Indiana Senate urged, a task force to study the crime and ways to prevent it.
In Colorado and Illinois, legislatures created new reporting and staff training requirements for banks. Similar requirements were introduced in Minnesota in 2015 but did not pass. North Dakota introduced reporting requirements for medical professionals, fireman and police officers, although no new requirements have been introduced for banks.
A comprehensive bill, S.B. 54, is moving forward in South Dakota which defines the pertinent laws for protecting elders and facilitates banks’ participation in preventing financial abuse. The bill, which is the legislative product of the Elder Abuse Prevention Task Force commissioned last year, passed the Senate Judiciary Committee on Jan. 28.
The goals of Minnesota’s Vulnerable and Older Adult Financial Abuse Protection Act, which was attached to the governor’s budget bill in 2015 by the Department of Commerce, remains a priority of Commerce Commissioner Mike Rothman, said Ross Corson, director of communications for the Commerce Department.
In Wisconsin, members of the Democratic minority in the Assembly is writing bills on elder financial abuse, according to Mike Semmann, executive vice president and chief operating officer at the Wisconsin Bankers Association.
An intractable problem
Lawmakers’ forward progress on elder abuse laws is both motivated by this issue’s populist appeal and by a real need for better defined laws. Elder financial abuse is a complex problem. The story of Lois Campbell of Duluth, Minn., illustrates its intractability well.
In 2002, Campbell was hospitalized and diagnosed with dementia. Her doctor recommended she move into an assisted living facility. Campbell, however, adamantly opposed entering assisted living. When she learned that her son, Scott Campbell, was looking for an assisted living situation for her, she removed him from her bank account. Her other son, Tim Campbell, was then added on her bank account as a signer in 2003.
Trouble with Lois’s finances soon arose. With power of attorney and access to his mother’s accounts, Tim Campbell spent some $107,000 on an $18,000 vehicle, purchases at Home Depot, nights out, and other personal uses. Only some $700 remained in Lois’s account after 18 months. Lois was diagnosed with leukemia in 2004 and died later that year.
In 2008, the state charged Tim Campbell with three counts of theft by false representation and three counts of financial exploitation of a vulnerable adult. He was successfully charged, however, only after an appeal by the Minnesota attorney general. The jury for his first trial did not reach a verdict because Minnesota statute on exploitation of a vulnerable adult was too vague.
Minnesota resolved the issues with its vague statutes in 2009. Now other Midwest states are more clearly defining what a vulnerable adult is in legal terms, the duties of caregivers, and the penalties associated with the crime.
More difficult, though, than defining financial elder abuse is catching it. The Campbell case also illustrates this. Campbell had two sons; both were police officers. Tim Campbell worked in the Duluth financial crimes unit. If not for Scott Campbell, the police would likely never have been aware of his brother’s crime. “It is a very tricky crime to catch,” said Amanda Vickstrom, executive director at the Minnesota Elder Justice Center. “In Lois’s case there were siblings to catch it. If there are no other siblings, there can be no one to find out.”
Vulnerable adults also do not want to come forward when the perpetrator is a family member or friend, Vickstrom said. “They do not want their kid to go to jail,” she said. “Even though they want to stop it, they don’t seek assistance.”
Only one in 44 cases of financial exploitation reaches protective services agencies or programs for victims, according to the Consumer Financial Protection Bureau. A study by the MetLife Mature Market Institute in 2011 found that victims of elder financial exploitation lose at least $2.9 billion dollars each year. “That’s the most conservative study,” Vickstrom said.
Punitive reporting requirements
The difficulties in identifying financial exploitation have caused some legislatures to require banks to act as reporters. States such as Minnesota and Illinois introduced reporting requirements in 2015 with penalties for failure to report.
In the Illinois bill, the penalty for failure to report an abuse concerning an elder adult is $1,000. If the failure to report was “willful” the penalty is $5,000. The state, however, can only collect the penalty when the Illinois attorney general brings civil action against the financial institution.
The Illinois bill also requires banks to “make an abuse report if an employee has direct contact with an elder adult or reviews or approves an elder adult’s financial documents, records, or transactions in connection with financial services.” Banks would be required to report if an employee observes anything that leads them “to know or have reasonable cause to suspect” that the elder adult is the victim of financial abuse. The bill also would require banks to train employees on the requirements and signs of elder abuse.
In Minnesota, a statute already allows banks to disclose confidential customer information connected with suspected elder abuse to law enforcement. The Vulnerable and Older Adult Financial Abuse Protection Act would require banks to report suspected elder abuse to the Commerce Department. It also creates a civil penalty of $5,000 for a bank which fails to do so. The Commerce Department has not yet indicated if it will pursue passage of the Vulnerable and Older Adult Financial Abuse Protection Act again in 2016.
Empowering banks in good faith
South Dakota’s S.B. 54 takes an approach that empowers and enables banks to participate in fighting financial elder abuse.
The legislature took an interest in combating financial abuse of vulnerable adults and commissioned a task force to come up with policy proposals for an elder abuse bill. The task force considered all types of abuse: physical, emotional and financial. The South Dakota Bankers Association saw both an opportunity to define state law so as to empower banks to fight financial exploitation, and to ensure the bill did not take a punitive reporting approach.
With the leadership of its legislative committee and its board, SDBA convinced the legislature to appoint two bankers − Kristina Schaefer, general counsel and director of risk management at Fishback Financial Corporation, Sioux Falls, and Rick Rylance, western regional president, Dacotah Bank, Rapid City – to its task force.
On Jan. 28, S.B. 54, which will adopt the task force’s statutory recommendations, was passed in the Senate Judiciary Committee. It allows banks to report suspected exploitation to state law enforcement at their discretion. Banks are immune at the state level from any civil or criminal liability that might result from reporting or not reporting suspicious activity. They also are required to report suspected exploitation of a vulnerable adult in Suspicious Activity Reports to the U.S. Treasury, according to federal regulation.
The task force, which contained 15 non-banker members, determined that a reporting requirement with penalties was not the best approach. “It is not good for anyone to have customers become victims of exploitation,” Schaefer said. “When customers have money taken, community banks make them whole nine times out of 10. When they can’t make a customer whole, it is an awful situation for community bankers. We strive to prevent those types of situations where we can.”
S.B. 54 also creates the opportunity for perpetrators of exploitation to be liable for damages and the cost of taking legal action. “Often victims could do nothing to regain stolen funds because there was no point filing suit when the cost would exceed the amount taken,” Schaefer said.
The law also opens up perpetrators to action brought by the elder or by a person or organization acting on behalf of the elder, said Curt Everson, president of SDBA. “Not only will it be a crime to exploit an elder, the perpetrator will also be liable for restitutions, even to banks seeking to regain lost funds,” he said.
Because of the work of Rylance and Schaefer, what could have been a punitive approach for banks became a bill that provides safe harbors and empowers bank, Everson said. “Kristina and Rick did a very good job. They brought viewpoints that made sense to the task force,” Everson said.
Exacerbated by scale
Financial exploitation of elders has been called “the crime of the 21st century” by the CFPB. It is deserving of that title in part because the demographic affected by exploitation will grow substantially in the 21st century.
The U.S. Census Bureau recorded the greatest number and proportion of people age 65 and older in census history in 2010. Some 40.3 million − 13 percent of the total population – were older than 65 years old. This “boomer generation effect,” the Census Bureau said, will continue for decades.
By 2050, about 20 percent of the U.S. population will be age 65 or older. Also, according to the Census Bureau, the fastest growing segment of America’s population consists of those 85 and up. In 2010, there were 5.8 million people age 85 or older. By 2050, there will be some 19 million people age 85 or older.