FINRA Study Demonstrates Alarming Elder Vulnerability to Scams
Elderly victims lose billions every year to elder financial exploitation. Although family members and caregivers are often to blame, a significant portion is lost due to scams perpetrated by strangers. In September 2023, FINRA published the results of a study that attempted to answer the question: How vulnerable are older adults to government impersonation scams?
How the Study Gathered Data
In the experiment, elderly subjects received phone calls, mailers, and emails from a fictitious organization called the US Retirement Protection Task Force (USRPTF). The messages informed the elderly person that there was unusual activity in their Social Security and Medicare accounts. Mailers indicated that the elderly person must confirm their account information by calling an 800 number or by logging into a website. Subjects received emails with similar information.
- 5% of the elderly people called did not engage.
- 15% engaged but indicated skepticism by expressing doubt and asking questions about the USRPTF.
- 16% did not express skepticism.
- 12% willingly shared personal information.
- 5% provided the last four digits of their Social Security number.
The study concludes that an alarmingly large number of seniors may be susceptible to government impersonation scams. Participants who fell for the ruse confirmed information about the account or provided the last four digits of their social security number. In a real scam, the fraudster would likely ask for more identifying information, possibly resulting in a financially devastating loss for their victim.
Even more worryingly, scammers are becoming more sophisticated and using Artificial Intelligence to produce more believable scenarios. There are likely scams in the making (or already underway) that are far more persuasive than the fake government agency used for the experiment.
About the Test Subjects
- A large proportion of the elderly targets in the study had attained college-level education.
- The median age for participants was mid-80s.
- The subjects who engaged with the caller but did not provide the last four digits of their social security number had the highest scores for cognition and financial literacy.
Risks Exist Even in the Absence of Cognitive Decline
Cognitive decline and social isolation are risk factors for seniors. But these risk factors do not provide the full picture and it is important to note that seniors are more likely to fall for scams even in the absence of dementia or Alzheimer’s. The FINRA study excluded participants with dementia as a part of their sensitivity analysis and their exclusion did not have a statistically meaningful impact on their findings.
Prevalence of Scams Targeting the Elderly
In 2020, the Federal Trade Commission reported that the elderly were most likely to fall victim to the following frauds:
- Tech support scams
- Prize, lottery, or sweepstakes scams
- Friend or family imposter scams
- Romance scams
Romance scams accounted for the highest losses, with $139 million lost in 2020 alone.
In 2022, the elderly lost approximately $1.5 billion to scams. Recent scams include the “Phantom Hacker” scam, in which thousands of elderly victims lost their entire life savings. Elderly victims were targeted by scammers impersonating tech support callers, financial institution representatives, and US Government representatives.
What Protections Are There for Elderly Victims of Scams?
Victims should report online scams to the Internet Crime Complaint Center (iC3). Elderly victims of fraud can also report scams to the Federal Trade Commission. If the fraudster is a real-life representative of a financial institution, like a broker or a financial adviser, the victim could speak with a securities attorney.
Duty to Report
In many states, professionals including caregivers, social workers, and financial advisers are required to report suspected elder financial abuse.
State Regulators and Financial Professionals
In certain states, state securities regulations require brokers to report any instances of suspected elder exploitation. Recently, an Ohio broker faced a regulatory action when he violated state regulations for reporting suspected elder financial abuse. His suspicions began when the client requested a withdrawal of $200,000 in four separate checks of $50,000 each. The client informed her broker that she intended to buy a house. Later, her son informed the broker that the client had been scammed into believing he had been kidnapped, and she had used the money to make cash payments to pay his ransom.
Not every state has elder abuse laws that require financial professionals to report their suspicions of fraud.
What Should I Do If I Suspect a Senior is a Victim of a Scam?
Depending on where you live, multiple state agencies may be able to help you or your loved one in the wake of a financial scam. It is essential to assist the elderly in this endeavor – seniors are often reluctant to ask for help and report their victimization from scams. Professional advocates, like elder abuse lawyers, can help you determine if you can pursue a civil settlement against a caregiver, a financial institution, or a nursing home.