ARE YOUR OLDER MEMBERS SAFE?

Credit Union Tips for Elder Fraud

 

 

 

 

 

 

By Loran March, Sr. Fraud Analyst and Sami Davis, Fraud Analyst

December 5, 2024

Are your older members protected? As criminals ramp up their efforts to prey on the vulnerabilities of older adults, elder fraud is becoming an increasingly pressing issue. Credit unions have an important role in protecting their members by staying aware of common scams and taking steps to prevent them. In this article, we walk through some of the fraud schemes that we have seen at Alloya targeting the elderly and share practical tips for keeping your members safe.

Common Scams Targeting the Elderly

Phishing Emails and Messages

Phishing involves sending fraudulent emails or messages that appear to come from legitimate sources, such as banks or government agencies. These messages often contain links or attachments that can steal personal information or install malware. Example: An elderly man received an email that looked like it was from his bank, asking him to update his account details. By clicking on the link and entering his information, his bank account was compromised.

Fake Charity Appeals

Scammers exploit the goodwill of elderly individuals by creating fake charities or disaster relief funds, especially after high-profile disasters. They may contact victims via phone, email or door-to-door solicitation, asking for donations that never reach those in need. Example: An elderly woman donated $500 to what she thought was a legitimate charity helping hurricane victims, only to find out it was a scam.

Home Repair Scams

Fraudsters offer to perform home repairs at a low cost, then either do substandard work or no work at all after receiving payment. They often target elderly homeowners by claiming urgent repairs are needed. Example: An elderly homeowner paid a contractor $3,000 upfront for roof repairs that were never completed.

Utility Scams

Scammers pose as utility company representatives, threatening to shut off services if immediate payment is not made. They often demand payment through untraceable methods, such as prepaid debit cards or wire transfers. These fraudsters commonly manipulate their caller ID to display the local utility company's name, making the call appear legitimate. Example: An elderly couple received a call from someone claiming to be from their electric company, saying they owed back payments, and their power would be cut off unless they paid immediately with gift cards. The couple, fearing a loss of power, complied with the scammer's demands without realizing it was a fraudulent call.

Imposter Scams

Fraudsters often pose as tech support representatives, relatives, or government employees to gain the trust of their targets. By impersonating someone familiar or reputable, they can manipulate elderly individuals into providing personal information or money. Example: An elderly woman received a call from someone pretending to be her grandson, claiming to be in jail and needing bail money. She was instructed to wire $2,000 immediately.

Romance Scams

Fraudsters create fake profiles on dating sites and social media to establish romantic relationships with elderly individuals. Once trust is built, they request money for various fabricated emergencies. Example: An elderly widow met a man online who claimed to need money for medical bills. Over several months, she sent him over $50,000, only to discover he was not who he claimed to be.

Investment Scams

Scammers offer seemingly lucrative investment opportunities, promising high returns with minimal risk. They often target the elderly by exploiting their retirement savings. Example: An elderly couple invested their savings in a high-return investment scheme that turned out to be a Ponzi scheme. They lost their entire investment when the scheme collapsed.

Prepayment Scams

Victims are asked to pay in advance for services or products that are never delivered. This scam preys on the trust and willingness of the elderly to comply with requests. Example: An elderly man paid upfront for a home security system that was never installed. The company turned out to be a fraudulent operation.

Red Flags

Pressure for Immediate Action: One of the hallmarks of fraudulent schemes is the pressure to act quickly. Scammers may insist on immediate payment or decision-making, reducing the likelihood that the victim will seek advice or verification. Example: A caller posing as an IRS agent threatened an elderly couple with arrest if they did not immediately pay a supposed back tax via gift cards.

Specified Payment Methods: Elder fraud often involves requests for payments through gift cards, cryptocurrency or other untraceable methods. These payment methods are preferred by scammers because they are difficult to track and reverse. Example: An elderly victim was scammed into purchasing $5,000 worth of gift cards and giving the card numbers to the scammer, who claimed they were needed to fix a computer issue.

How to Fight Back

Your credit union can fight back against elder fraud and protect your older members in several ways:

  • Keep up with Industry Trends: Providing regular training sessions and updates can help staff identify and prevent scams. Utilize industry publications, webinars and associations to stay current.
  • Provide Educational Materials: Send mail inserts, brochures, newsletters, provide online resources, such as informational videos, or host seminars specifically for elderly members. Example: Mail a series of easy-to-understand brochures on common scams and how to spot them.
  • Provide Fraud Prevention Resources: Suggest resources such as credit monitoring services and identity theft protection to older members. These services can alert them to suspicious activities on their accounts.
  • Contact Family Members: When fraud concerns arise, contact the family members listed on the account to inform them and discuss protective measures. This can be especially helpful if the elderly member is unaware or in denial of the scam.
  • Prioritize Effective Staff Communication: Train staff on how to communicate effectively with elderly members about fraud. This includes being patient, clear and respectful while explaining the risks and steps to take.

Reporting Fraud

If elder fraud is suspected, it is crucial to report it to the appropriate authorities promptly. This ensures that timely action can be taken to prevent further losses and to catch the perpetrators. The following agencies and organizations should be contacted in the event of suspected elder fraud:

  • Local Law Enforcement: Contact your local police department to report the fraud. They can provide immediate assistance and may initiate an investigation.
  • The National Center on Elder Abuse provides an interactive map of resources specific to each state or territory. This includes a directory listing of state reporting numbers, government agencies, state laws, state-specific data and statistics, and other resources. NCEA - State (acl.gov)
  • The Federal Trade Commission (FTC): File a complaint with the FTC at ReportFraud.ftc.gov or by calling 1-877-FTC-HELP. The FTC collects information about fraud and can provide resources and support for victims.
  • Consumer Financial Protection Bureau (CFPB): The CFPB’s Office for Older Americans created helpful placemats targeted toward older adults. These placements contain scam prevention messages. These resources can be displayed in your branch offices. The resources are free to the public for download or to order. Fraud prevention resources | Consumer Financial Protection Bureau (consumerfinance.gov).
  • State Attorney General's Office: Each state has an Attorney General's office that handles consumer protection issues, including elder fraud. Contact your state Attorney General's office to report the fraud and get assistance.
  • Credit Bureaus: Notify the major credit bureaus (Equifax, Experian and TransUnion) to place a fraud alert or freeze on the affected account to prevent further unauthorized activities.

By promptly reporting suspected fraud to these agencies and organizations, credit unions can contribute to broader efforts to combat elder fraud. Through working together, we can create a safer financial environment for all.

Wire Return Process and Regulatory Protections

Wire Return Process:

In the unfortunate event of a fraudulent wire transfer, it is vital to act swiftly to initiate the wire return process. This involves contacting the receiving financial institution to request a return of the funds. Your credit union should have clear procedures in place for these situations, including:

  • Immediate notification to Alloya to contact the receiving institution with a request for return of funds.
  • Documenting all communications and actions taken during the process.
  • Coordinating with your members to provide necessary information and support.
  • Advising your members to file a police report or other law enforcement regarding the fraud scam.

Alloya strives to build strong relationships with other financial institutions to facilitate smoother resolution of these issues. However, we advise that you foster these relationships independently as well.

Regulation E and Guaranteed Funds:

Regulation E, established by the Electronic Fund Transfer Act, provides protection for consumers against unauthorized electronic fund transfers, including wire transfers. Under this regulation, credit union members are entitled to certain guarantees, including:

  • Prompt investigation of unauthorized transactions.
  • Provisional credit for disputed amounts while the investigation is ongoing.
  • Reimbursement for losses due to unauthorized transfers if reported within the required timeframe.

Credit unions should ensure that their members are informed of these protections and understand their rights under Regulation E.

Indemnifications Between Institutions:

When handling fraud cases involving multiple financial institutions, indemnification agreements play a crucial role. These agreements outline the responsibilities and liabilities of each institution involved in the transaction. Key elements typically include:

  • Definition of liability for losses incurred due to fraudulent activities.
  • Procedures for dispute resolution and cooperation during investigations.
  • Terms for reimbursement and recovery of funds from the fraudulent transactions.

Establishing clear indemnification agreements can help manage risks and ensure a cooperative approach to resolving fraud cases, ultimately protecting both the credit union and its members. However, these agreements do not guarantee that funds will be returned or returned promptly. Some institutions may take up to 90 business days to conduct a thorough investigation of a fraud claim before responding to an indemnification request.

When it comes to preventing elder fraud, your credit union has a vital role to play. By improving your processes, implementing relevant protections and educating your older members about trending scams, your credit union can safeguard elderly members from financial fraud and ensure a secure financial environment for all members.