Senator Dodd is leading the way in California with SB 278. As stated in the description under his legislative schedule for 2023-24, “ SB 278 Elder Financial Abuse: Holds institutions accountable for fraud against seniors”, Senator Bill Dodd captures the essence of what he intends to do with this legislative bill to help seniors avoid unnecessary and tragic loss of their life savings for retirement. He is 68 years old so can relate well to seniors like him.
Close to the population of Canada with over 39 million people, Californians over 65 will see changes which will make them safer from being victims of devastating impact and life-altering circumstances which does not have to happen in the first place. It should create better outcomes for them as is the intention and entire purpose of the UK’s Consumer Duty.
By the fall of 2024, it appears likely that California Governor Gavin Newsom will sign off on this legislation which has not only been embraced and supported by many seniors’ groups and consumer rights organizations but has been accepted with input, consultations and recommended amendments from the California Bankers Assocation (CBA) and the credit unions in California. The CBA stated, “The current version is focused on prevention and helps ensure appropriate intervention before vital funds are lost to fraudsters.”
Why would financial institutions not want to prevent long-time clients and members from getting wiped out when steps they may or should have taken on their own volition failed to prevent elder financial abuse and fraud? After all, any new legislative initiative such as this one in California to protect elders/seniors from financial fraud does not obviate the need for financial institutions to implement and have in place robust measures of their own to prevent money laundering from being carried out in their branches.
A key piece of this new legislation is it will absolve financial institutions and their staff of liability if they refuse a client/member transaction initially given the nature of the request (e.g., wiring a considerable sum of money to an unknown account that cannot be assured or trusted). It really comes down to a pause or a temporary hold on a request to ensure it is a legitimate and safe one, not fraudulent and part of a financial abuse scheme. The perpetrator could be someone the senior knows or a complete fraudster defrauding them of their hard-earned money.
A temporary hold is a tool that a financial institution can use to help protect a client or member’s savings. If they have a reasonable belief that you are vulnerable and being financially exploited, they may choose to place a temporary hold on your account. Key to this legislation is establishing a trusted contact person with the senior and then allowing the financial institution to delay transmitting and carrying out a financial transaction by three business days.
Here is more rationale and explanation behind this new legislation as written up in an analysis of a June 17, 2024, Bank and Finance Committee hearing by Luke Reidenbach.
Purpose
According to the author:
Elder financial abuse is an epidemic. Losses equal $28 billion dollars annually, across the U.S. The breadth of predatory practices is staggering. According to the U.S. Treasury, older adults are targets for financial exploitation due to their income and accumulated life-long savings, in addition to the possibility that they may face declining cognitive abilities, isolation, and lack of familiarity with technology.
As mandated reporters, care custodians, investment advisers, banks, credit unions, and other financial institutions are well positioned to detect when an elder might be the victim of a scam or other financial abuse – and take action to protect elders from the devastating loss of their life savings. SB 278 makes clear what are the prudent actions financial institutions should take when they reasonably suspect financial abuse against an elderly customer is happening.
Elder financial abuse
Elder financial abuse can take on many forms and can be committed by strangers or by friends and family. Forms of financial abuse include taking money or property from an elder or dependent adult, borrowing money and not paying it back, or selling their possessions without permission. The impact of financial abuse on a senior can be severe. In some cases, they are unable to rebuild their financial independence.
Not only is elder financial abuse harmful to the victims, it also appears to be a growing problem. According to the American Association of Retired Persons, the rate of elder financial exploitation more than doubled during the COVID-19 pandemic. Moreover, new scams and strategies increasingly target seniors, including “smishing” efforts in which perpetrators text potential victims posing as legitimate business to gain access to their money.
New technology and faster payments make fraud and financial abuse more difficult to prevent. Peer-to-peer payment apps, crypto assets, and other financial technology services allow scammers to move cash quickly once it leaves a victim’s bank. The availability of private data and artificial intelligence software allow scammers to easily develop new and complex strategies to rob victims of their money.
Many of the scams perpetuated against seniors could fool an intelligent person of any age, but seniors are often targeted for a number of reasons. First, the elderly are more likely to have diminished capacities because of their advanced age, which makes them more vulnerable. Second, seniors tend to hold more wealth and have more access to liquid assets like cash, making them a lucrative target.
What does this bill do?
SB 278 requires a depository institution to establish an Emergency Financial Contact Program, often referred to as a “trusted contact” program and requires a financial institution or its employees to reach out to an emergency financial contact and delay a transaction by three days when the requested transaction is suspected financial abuse. These interventions, initially included in SB 278’s safe harbor language in prior iterations of the bill, are based on lessons learned from other areas of financial services or other states.
