Warning that more than 40,000 Western New York senior citizens may have fallen victim to financial scams costing them $15 million, U.S. Sen. Kirsten Gillibrand on Tuesday called for a series of measures to fight fraud and protect the vulnerable elderly.
New York's junior senator issued a report saying 500,000 senior citizens statewide have lost about $180 million to an array of investments, scams or tactics that specifically take advantage of older consumers.
Such activities include selling them complex products that may not be appropriate to their needs, lying about a financial adviser's expertise, deceiving them through mail, telemarketing or Internet fraud, and illegally trying to seize their government benefits to pay debts.
"Seniors have spent a lifetime saving and preparing for the golden years, and they deserve financial security and peace of mind," Gillibrand said. "But far too many seniors are being lured into investments, and getting scammed by criminals out of their savings and benefits."
Americans over 65 control nearly $15 trillion in assets, but face the challenge of making sure their accumulated savings last through their retirement, Gillibrand noted during a news teleconference. Since much of that wealth is investable, senior citizens are pitched complicated investment products, such as reverse mortgages and annuities, that may or may not be suitable.
To address the problems, the Democrat announced four bills she is sponsoring or co-sponsoring to crack down on financial fraud, increase awareness of criminal tactics, and tighten penalties for scammers.
She also unveiled plans for a series of financial literacy workshops across the state through the end of this year, with AARP and other groups, to teach consumers what to watch for. Buffalo's will be on Oct. 19.
"We can go through these areas where seniors are taken advantage of, and give them the tools they need one-on-one so they don't fall prey to these types of activities," she said.
First, her proposed Senior Investor Protections Enhancement Act would target those who sell unsuitable investment products, fail to disclose fees, charge large penalty fees or sell a product other than that which was marketed. New York insurance regulators are also considering adopting a separate rule to prevent unsuitable sales.
Perpetrators would be fined $50,000 for each violation. But she said the legislation would not interfere with legitimate investment advisers or sales.
Second, the Senior Investor Protection Act would take aim at the use by advisers of so-called "senior designations" -- certain credentials that are misleading and easy to get -- to lure seniors into fraudulent investments. The hope is to strengthen the criteria and training.
The legislation would provide $8 million in grants to states over five years, giving them resources to hire staff or buy technology to prosecute fraudulent investment advisers. The money also would help states train regulators and law enforcement to prevent scams, while distributing educational materials.
That would give states an incentive to adopt model rules developed by the North American Securities Administrators Association and the National Association of Insurance Commissioners. New York and most other states have yet to accept these rules, but Gillibrand called for that to change.
She also hopes states will register advisers and create a database that consumers can search to see who is licensed and what training they have.
Third, she is co-sponsoring the Illegal Garnishment Prevention Act to prohibit the Treasury Department from promoting the use of direct deposit for Social Security and Veterans benefits, until it enacts rules to prevent banks from enforcing "freeze" or collection orders on accounts with benefits in them.
U.S. law exempts such benefits from seizure by collectors to pay debts. But more than 80 percent of the 51 million Social Security recipients get their money electronically, not through checks. So banks say they can't tell what's in an account, creating a loophole allowing collectors to get court orders freezing or garnishing accounts.
From 2006 to 2007, nearly $180 million was collected from bank accounts that included Social Security funds, according to the Social Security Administration.
Last September, Gov. David A. Paterson signed the Exempt Income Protection Act, which went into effect in January to shield recipients of government benefits from illegal seizure. The new law sought to partially close the loophole by ensuring that the first $1,716 of any bank account, and the first $2,500 in an account with government benefits, cannot be frozen.
But Gillibrand said there's not enough enforcement, so banks and debt collectors ignore it.
Fourth, she's introducing the Senior Financial Empowerment Act to direct the Federal Trade Commission to set up a one-stop shop for consumer education on mail, telemarketing and Internet fraud against seniors, increase public awareness of the threat, and provide grants for prevention efforts.