Elder financial abuse and exploitation make for a silent epidemic of crime across America, and the phenomenon is only growing in scale. According to research conducted in 2010 by the watchdog organization Investor Protection Trust, one in five seniors - at least 20% - will experience elder financial abuse. And the damage to our national economy from elder financial abuse is estimated at anywhere from $3 billion to $36 billion per year, a figure that can only cause alarm. As the population of senior citizens in our country continues to grow, so too will the challenge posed by fraudsters who want to prey on our elderly and steal their money.
To help seniors and their loved ones identify and avoid scams, we've compiled a list of the most common ploys, tricks, and tactics financial criminals use against the elderly. So watch out for the following forms of fraud:
1) Grandparents Scam
Photo: ABC News 5
A senior will receive a phone call beginning with, "Grandma?" The caller will cleverly elicit the grandchild's name. Posing as the grandchild, the scammer will then say they've gotten into some form of deep trouble - they might tell the senior they're in jail or stranded in a foreign country. It's an emergency, and they need help immediately! With the grandparent now upset and ready to assist their supposed grandchild by any means possible, the scammer will ask them to wire money to their bank account, often by Western Union.
To avoid falling for the grandparent scam, don't let a caller drag you into the guessing game, whereby you willingly provide them with the names of your grandchildren and other relatives. If a scammer is more sophisticated, they might research you on social media. Call your family members and check on the whereabouts of your grandchildren, no matter how convincing a story you may hear over the phone.
2) Secret Shopper
Example of a secret shopper scam mailer. Image: Rip Off Report
To your surprise, you receive a check in the mail for several thousand dollars to Wal-Mart or another big-box store. You've been chosen for the secret shopper program! In reality, you're being conned into depositing a bad check. Once you've deposited, the scammers will ask you to mail them a check with the difference - and that's in addition to your being responsible for the fraudulent check you've cashed. Secret Shopper is a nasty scam that leaves you thousands of dollars poorer.
Stay away from fraud schemes like Secret Shopper by using the too-good-to-be-true rule: if it's too good to be true, it's not true - someone's after your money. That means you should simply shred Secret Shopper offers as garbage.
3) Email Scams
Don't fall for the Nigerian prince ploy. Image: Geek.com
Email scams have been around a long time and aren't going away - it's cost-effective for swindlers to send out millions of spam emails, even if they only get one or two responses from potential victims. If you have an email account, you're going to receive these from time to time, even with the best spam filters.
The most notorious email scams are "Nigerian prince letters," which inform recipients that they have been selected to share in an enormous royal fortune in Nigeria or some other West African nation. All the recipients have to do to gain their riches is wire money to the esteemed "prince" to pay the transaction fee. Naturally, there is no pot of gold at the end of the Nigerian rainbow, with the net result of your bank account being emptied.
Another common type of email scam is known as phishing, the imitation of real websites to elicit personal and financial information. You might very well receive a "bank alert" that seems to be from your bank; the message will inform you that your bank account is overdrawn, you are the victim of identity theft, etc. Even the layout of the email and fake website will look convincingly real. Yet the actual purpose of the phishing scam is to get you to enter your bank account ID, password, Social Security Number, etc., into the phony website, all in order to defraud you.
In addition to Nigerian prince emails and phishing schemes, you may also receive emails marked "urgent," etc. Often they'll seemingly be sent from friends and relatives. They'll have attachments in the form of letters or videos you're told to open. In reality, they're fake letters with harmful attachments - viruses or malware that are designed to infect your computer and steal your personal information. Online criminals can even mask their spam messages to make it appear they come from friends, family, and colleagues in their attempt to trick you into opening the attachment in order to unleash their virus.
To steer clear of email scams, the best policy is simply to delete unfamiliar emails and not engage too-good-to-be true offers to share in African riches. If you get a "bank alert" email that you're unsure of, check your account online (don't click on any link in the message) or simply call your bank to check your account. Also remember to never open attachments in unknown messages, and be very weary of vague requests from seemingly familiar senders who might very well be identity thieves and con artists.
4) Investment Fraud
Investment fraud is an all-too-common form of elder financial abuse, and scammers find numerous ways to perpetrate the crime against seniors. The first variety are classic Ponzi schemes, were elderly clients are recruited into dubious investment ventures promising big returns, but which in reality generate no profit - investment proceeds are simply skimmed from client funds. Ponzi schemers will pose as legitimate entrepreneurs or investment advisors, sometimes offering free meals to attend their "wealth seminars." By the time a Ponzi scheme collapses (as it inevitably will if authorities don't intervene), victims are often left penniless and effectively unable to recover any of the funds they had invested in the scheme - the perpetrator likely spent all the money and distributed it out as false profits.
It's unfortunate but true that there are also a few bad-faith brokers out there who are willing to defraud their elderly clients. Investment advisors and brokers who violate their clients' trust can sometimes go years stealing before they finally get caught. To keep a financial predator from looting your accounts or those of your loved ones, make sure to review their background through FINRA's BrokerCheck - it never hurts to get a second opinion on a firm or particular advisor.
Along with Ponzi schemes and outright abuses by bad-faith brokers, also watch out for multi-level marketing schemes (MLMs). MLMs, otherwise known as pyramid schemes and "network marketing," are technically legal business models that require the new member to recruit others into the venture in order to sell whatever product might be on offer. Senior citizens, at times lonely and in need of companionship, can be vulnerable to these schemes, some of which will send them box-loads of products and charge them whether they agreed or not. So while MLMs are legal, they are often highly exploitative of senior citizens through their deceptive terms and conditions.
To steer clear of investment fraud, apply the "too good to be true" rule to investment offerings that boast sky-high returns and near-zero risk - chances are it's a Ponzi scheme. Conduct due diligence and consult a reputable advisor who can help you and your loved ones make sound investment decisions. And stay away from MLM pyramids, the only point of which is to enrich their very top layer while exploiting everyone else below them with largely empty promises of wealth.
5) Telemarketing Fraud
Often connected with investment scams are predatory telemarketing schemes, another way fraudsters look to entrap seniors. Many elderly Americans receive several phone calls a week from slick salesmen pitching everything from penny stocks to flimsy-sounding "premium retirement programs" for their portfolios. Quick-talking telemarketers will pressure lonely, confused seniors into "once-in-a-lifetime" investments in dubious or non-existent oil and gas holdings, foreign currency exchange, real estate, and even "blockbuster" movie productions. Another ploy is to hit up the victim for contributions to a supposed charity. Finally, don't be fooled by con men (and women) who pretend to be calling from your bank, hospital, insurance provider, etc. They're looking to elicit your personal information to commit identity theft against you.
It's sad but true that financial abuse is made easy over the telephone. To prevent telemarketing fraud, simply make it an express policy to never sign onto anything over the phone. Courteously hang up and make sure to register for the US government's Do Not Call list. Keep it simple - never give personal or financial information to unknown callers, no matter who they might claim to be.
6) Repair Fraud
Al G. Swindler was a master of repair fraud in Jim Davis's Garfield cartoon. Image: Jim Davis
Seniors are frequently targeted for elder financial abuse right in their own home - through the common tactic of repair fraud. If an elder is forgetful or possibly suffering from dementia, wrongdoers will look to exploit this weakness by over-charging for home repairs and yardwork. Sometimes scammers will even come around repeatedly, performing the same task several times over a given period and defrauding the victim in the process. Even unscrupulous auto mechanics have been known to jack up prices for elderly, confused customers and engage in dishonest, unethical practices like changing tires every few months.
Another updated form of repair fraud is the "antivirus" scam, which can be perpetrated in person, online, or over the phone. You might receive a fake email, a telephone call, or even a door-to-door visit from someone claiming to check your computer for viruses. They'll tell you your computer is infected and "repair" it, charging you for a non-existent service and possibly even stealing your personal and financial information while they access your computer.
Countering repair fraud might mean going to the doctor and getting an evaluation over possible memory loss or increased confusion. Seniors with conditions like dementia must be protected from financial exploitation - one effective way to shield vulnerable elderly loved ones from repair fraud is to obtain financial power of attorney. When a responsible younger relative takes on this legal duty, it's sometimes possible to recover funds lost to repair fraud.
7) Sweepstakes Scams
Fake sweepstakes, lotteries, and raffles represent a widespread form of fraud perpetrated against senior citizens. You'll get a flashy mailer informing you of your "amazing" prize winnings, or perhaps a telephone call or spam email. A fabulous fortune is yours to be had, you're told, and all you have to do to attain your winnings is pay a phony "tax," "shipping fees," or other made-up charges. Your social security number and bank information might even "required" to claim the supposed prize. In reality, of course, the sweepstakes is a scam meant to trick you out of hundreds or even thousands of dollars, potentially putting your identity at risk.
The too-good-to-be-true rule applies to most scams, and ridiculous sweepstakes mailers are no exception. A real raffle or lottery wouldn't require you pay or provide sensitive personal info to access your prize. Sweepstakes offers and other contest "winnings" should be promptly tossed in the trash, and whoever's sending them through the postal system should be regarded with strong suspicion. Seniors should have a trusted love one help them sort through mail and identify all such deceptive mailers.
Stop Elder Financial Abuse through Vigilance
The scams laid out above are common methods bad actors will commit elder financial abuse against our seniors, though the list is hardly exhaustive. Unfortunately predators are always looking for new ways to exploit the weak, lonely and vulnerable in our communities, and it's the duty of each one of us to stop them. Institute a system of checks and balances with your loved ones as well as financial professionals, attorneys, and caretakers to ensure that scammers are detected and caught before they can inflict any more damage. Communicate with your family and neighbors, and remember that good company is a great cure for loneliness and a defense against potential exploitation. Using common sense and awareness, it's possible to spot the red flags of elder financial abuse and act to prevent it before it's too late.