Why Older People Are Vulnerable to Fraud, and How to Protect Them



Older people who are active investors and who prefer unregulated investments may be more susceptible to investment fraud, a report published Thursday by the AARP Fraud Watch Network found.

The network, established in 2013 to help promote fraud prevention, commissioned a study late last summer that included telephone interviews with 200 known victims of investment fraud and 800 interviews with members of the investing public.

Doug Shadel, lead researcher for the network, said that relatively inexperienced people often invest money on their own these days, in part because of the decline in traditional pensions. At the same time, he said, technology makes it easier for scam artists to reach larger numbers of people, by telephone or email.

The report sought to pinpoint traits that may help explain why some people are more susceptible to investment fraud, Mr. Shadel said. Victims were more likely to be men 70 or older, and they tended to be risk takers. About half of fraud victims agreed that they did not mind taking chances with their money, as long as “there’s a chance it might pay off.”

And nearly half of fraud victims, compared with less than a third of general investors, agreed that “the most profitable financial returns are often found in investments that are not regulated by the government.”

Victims were more likely to report valuing wealth accumulation as a measure of success in life and being open to sales pitches, the research found.

Victims reported that they frequently received targeted telephone calls and emails from brokers and that they made five or more investment decisions a year. Also, they were more likely than general investors to respond to remote sales pitches, including those delivered in television commercials.

As many as 17 percent of Americans 65 and older report being the victim of financial exploitation, according to the Consumer Financial Protection Bureau. Estimates of annual losses are in the billions of dollars. One factor that may play a role is mild cognitive impairment, a condition that can be a precursor to dementia and can diminish an older person’s ability to make financial decisions.

Older people are at risk of being swindled not only by strangers, but also by people they know. Douglas Canada, a 78-year-old retiree in Nevada, sought help from the fraud network after he was tricked by an old acquaintance: He received a call in 2015 from a man who had been a co-worker three decades earlier. The man invited Mr. Canada and his wife to lunch to talk about an investment opportunity. The man and his date sported Rolex watches, and they even bought a diamond ring during the outing. “They really put on a good show,” Mr. Canada recalled.

The man told Mr. Canada that he had grown rich by buying and renovating foreclosed homes in another state. He invited Mr. Canada to invest, promising double-digit returns. Mr. Canada sent a cashier’s check for $40,000 — but has since been unable to contact the man. Mr. Canada has hired a lawyer and a private investigator, and he has written to the state authorities, but isn’t optimistic about getting his money back. “He’s a con man,” Mr. Canada said. “I was gullible, and I fell for it.”

Some scams — gold investing, real estate schemes, and even one involving leases on A.T.M.s — may sound improbable after the fact, Mr. Shadel said, but victims report being persuaded — sometimes, because of word of mouth from friends or family.

Recognizing that you may have a predisposition toward risky behavior, like being open to pitches, may help you avoid being taken in, Mr. Shadel said. “You can at least be aware of your psychological mind-set,” he said. Consumers can take a quiz, based on the study’s findings, on the fraud watch website.

Mr. Shadel urged consumers to deal only with regulated brokers and investments, and to “ask and check”: If you get a call from a broker, ask if he or she is registered with state and federal securities regulators, he said, “and then check to see if it’s true.”

You can check a broker’s background though Finra, the Financial Industry Regulatory Authority, using its online BrokerCheck tool at www.finra.org, or by calling 800-289-9999.

Maggie Flowers, associate director for economic security with the National Council on Aging, said that older people should be skeptical of any offers, particularly unsolicited ones. “Always ask for things in writing,” she said, “so you can think it through and talk through the options with a loved one or peers.”

Here are some questions and answers about older people and fraud:
Are older people at risk for fraud only if they are wealthy?

No, Ms. Flowers said. Scam artists know that many older people have fixed incomes, which may make them vulnerable to fraud because they are open to hearing about ways to make money and pay their bills.

Where can I learn more about protecting an older person from fraud?

The National Council on Aging offers tips on avoiding fraud at EconomicCheck.org.

The Consumer Financial Protection Bureau offers a “Money Smart” guide for older adults, and other resources, on its website.

What should I do if I think an older person has been a victim of financial fraud?

You should report it to the local police, and your state attorney general’s office.

You can also contact your local adult protective services agency. You can find a local agency that investigates reports of financial exploitation on the federal Eldercare Locator website or by calling 800-677-1116.

The Justice Department also offers an online “elder abuse resource road map.”

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Debt Collectors Make a Killing on the Debts of the Dead


By Arielle Pardes


It was five days after Teresa Van Deusen’s sister died when the letter from American Express arrived, offering condolences. How they knew her sister had died was a mystery—Van Deusen never called to inform them, and they hadn’t made any changes on her account. But there it was, a letter expressing sympathies, and also reminding her of the $16,000 in credit card debt her sister owed.

When someone dies, his or her debt doesn’t disappear. His or her remaining assets get pooled together, and then a probate court doles out payments to cover any remaining debts: First the mortgage; then other secured debts, like car loans; and then, if there’s any money left, unsecured debt, like credit cards. If, say, you’re set to inherit the family house but your parents die with debt that their other assets couldn’t cover, a court can force you to sell the house in order to pay off the debts. Most Americans who have debt don’t die with a ton of money or assets leftover, and credit card companies clamber to get to the estate first, since when that money gets paid off to other agencies, the debt goes away.

Credit card companies have two options: Pursue the debt, or chalk it up as a loss to get a tax credit. For example, Van Deusen’s sister had about $5,000 outstanding on her credit card with Wells Fargo, but the bank chose not to chase it down. “They sent a letter that said, ‘We’re declaring this as a loss, and we’re sorry for your loss,’ and [sent us] a 1099-C”—a form Van Deusen would need to pay taxes on the canceled debt. But plenty of other collectors take other strategies.

“Collecting the debts of the dead—particularly the unsecured debt, like credit card debt—is a pretty good racket,” said Oliver Bateman, a former debt collector who wrote for us last year about his demoralizing experience in that job.

The Fair Debt Collection Practices Act prevents collectors from making threats, calling too many times, harassing family members, or using deception in the pursuit of collecting debt. But collectors can contact family members of the deceased in order to reach the administrator of the estate. Some companies take it one step further, trying to squeeze money out of relatives or friends, even though they have no legal obligation to repay the debts of the person who’s died. (The only time a creditor can legally collect from a family member is if someone has co-signed on a loan or if he or she is the debtor’s spouse and live in a community property state.)

Michelle Dunn, a consultant for the debt collection industry who literally wrote the handbook on debt collection, says this kind of thing “happens every day.”

“Some bill collectors will talk to anybody in the family and try to get them to pay a bill. They’ll say it’s their ‘moral obligation,’ which is absolutely false,” Dunn said. “But people are not educated on what their rights are, and if they’ve just had a death in their family, they’re upset. So when a bill collector tells them something like this, they might be more likely to believe it [and agree to pay the debt].”

Bateman told me about a colleague who used a legal research database to track down addresses of next-of-kin, sent those relatives threatening letters about an owed amount, and then persuaded people there was a “moral obligation” to pay it. “A few times, we got payment in full from the kids or other relatives of these people. It was truly breathtaking,” Bateman said.

The Social Security Administration gives notice to financial institutions a few months after someone dies, but debt collectors usually find out much sooner by using databases to track recent deaths. Dunn, who was a bill collector herself before she became a consultant, told me she always read the newspaper obituaries to see if anyone she needed to call had died. “There used to be a newspaper—I’m sure it’s online now—where you could pay for a subscription and see, state by state, the people who have died that day,” she said.

As these online tools become easier to use, collection companies are increasingly more likely to pursue the debt of dead people, one way or another. There are plenty of horror stories: A woman in Hawaii sued Bank of America collectors, after she says they called upwards of 48 times a day just after she received her husband’s life insurance check. (There’s no obligation to use life insurance to pay off debts, unless the deceased person named his or her estate the beneficiary of his or her life insurance money, in which case it gets divided up with the other assets.) Another woman said she was harassed by collectors for five years about her dead sister’s debt, to the point where she moved and changed her phone number multiple times. The collection agency Rumson, Bolling & Associates was sued in 2011 after harassing debtors’ family members, co-workers, and neighbors, as well as threatening to “desecrate the bodies of deceased relatives” if they failed to pay off funeral bills. The company was eventually banned by the Federal Trade Commission from the debt collection business.

But the worst cases are sometimes people who think they’re doing the right thing by informing a bank, loan, or credit card company that the account holder has died, and then get manipulated into paying the debt.

“Someone will call and say, ‘I’ve been going through my uncle’s mail because he’s passed away and I see you’ve sent this letter that he owes some money, and I’m calling to tell you he’s dead,'” said Dunn. “Some bill collectors will then tell them to pay that bill, and they don’t know they don’t need to, so people pay it.”

Van Deusen, who was the administrator of her sister’s estate, estimates that she spent more than 50 hours on the phone with collectors from BBVA bank, and even more with other credit card companies, which she described as “endless, persistent gas lighting.” She was never asked to pay her sister’s debt out of her own pocket, but she says collection agents tried to get the estate to pay off debts that weren’t even real—including nearly $7,000 in fees that were issued post-mortem, and debts that had already been written off. “Death and taxes, sure,” she said, “but dead people shouldn’t be paying debt that the credit card companies have already written off.”

Van Deusen also battled numerous calls from a third-party collection agency that claimed they had purchased her sister’s American Express debt and demanded money from the estate. “I said, ‘Show me a contract.’ Any evidence this was her debt. In the year we were negotiating, they just never produced that.”

Many collection agencies, including the one where Bateman worked, pay employees based on how much debt they collect, which can motivate collectors to squeeze every last dollar out of a family—whether it comes from the dead person’s estate or otherwise. I asked Bateman if he ever felt compelled to bully a debtor, or a family member, in order to earn higher commission. “Sure, all the time,” he said. “Sometimes, I’d have an argument with a particularly sassy debtor who wasn’t going to pay me any money, just because it was fun to do.”

“It’s a recipe for someone to push the limits and break the law because he or she is desperate trying to get these people to pay,” said Dunn. “It’s setting them up to do something wrong.”

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