Family members and caregivers are common perpetrators of elder financial exploitation.

You can take steps to guard against financial exploitation if you or your loved one needs someone to help at home.

• Secure your valuables such as jewelry and other property.
• Secure your private financial documents including checks, financial statements and credit cards. Consider a locked file cabinet.
• Require receipts for purchases made by helpers.
• Monitor bank accounts and telephone bills – Ask for help from a third party, if needed, and consider an automatic bill pay system. Consider setting up transaction alerts that are monitored by a family member or other third party.
• Do not let hired caregivers or helpers open your mail, pay your bills, or manage your finances.
• Never promise money or assets to someone when you die in exchange for care provided now.
• Never lend employees money or personal property.
• If you have trouble reading your statement, ask your bank if a second copy of your bank statement can go to someone who can read it for you. (Also, your bank may be able to send you your bank statement in large print.) This person does not need to have authority to act on your behalf.
• Never let caregivers use your credit/debit card to run errands or make purchases for you.

Source: Money Smart for Older Adults, June 2013

Lack of familiarity with internet security and scams such as phishing and spoofing can dupe older adults into giving out personal financial information. Phishing scammers create authentic-looking emails, text messages, and Internet pages to entice their victims to disclose financial information such as credit card details, bank or credit card account numbers, Social Security numbers, etc.

Here are some examples:

• “We suspect an unauthorized transaction on your account. To ensure that your account is not compromised, please click the link below and confirm your identity.”
• “During our regular verification of accounts, we couldn’t verify your information. Please click here to update and verify your information.”
• “Our records indicate that your account was overcharged. You must call us within 7 days to receive your refund.”

The messages may appear to be from organizations you do business with–such as your financial institution. They may threaten to close your account or take other action if you don’t respond.

The senders are “phishing” for your private account information so they can use it to commit fraud or identity theft against you.

Spoofing scammers disguise an email address to look like it is coming from someone else. For example, you may receive an email that looks like it is coming from a friend who needs immediate funds to cope with an emergency.

Tips for avoiding computer or Internet scams

Take precautions with your personal computer (PC) to reduce your risk of a computer/Internet attack:

• Use trusted security software and make sure it’s updated frequently.
• Do not email financial information or account numbers. Email is not a secure method of transmitting personal information.
• Be cautious about opening attachments and downloading files from emails, regardless of who sent them. These files can contain viruses or other malware that can compromise your computer’s security.
• Use passwords that will be hard for hackers to guess. For example, use a mix of numbers, symbols, and letters instead of easily guessed words.
• Shut down your PC when you are not using it.

For practical tips to help you guard against Internet fraud, secure your computer, and protect your personal information, visit www.OnGuardOnline.gov.

How to Respond to a Phishing [or Spoofing] Attack

Even if you use security software, chances are that some questionable messages will get through. Some of these messages look very realistic. Here are some tips for protecting yourself.

• Do not open any message that comes from an unfamiliar source. If you open a suspicious message, delete it. Do not click on links or call telephone numbers provided in the message. Be wary about opening attachments.
• Delete email and text messages that ask you to confirm or provide personal information (credit card and bank account numbers, Social Security numbers, passwords, etc.). Legitimate companies never ask for this information via email or text.
• If you’re concerned about your account or need to reach an organization that you do business with, call the number on your financial statements or on the back of your credit card or in the telephone book. Do not call the telephone number that the caller or spoof website provides you!
• If you receive an email that looks like it is from a friend or relative asking you to send money, call to verify that the email really came from them.

For more information, go to http://onguardonline.gov/articles/0003-phishing.
Victims of phishing could become victims of identity theft. If you might have been tricked by a phishing email, act promptly to avoid financial loss or damage to your credit.

Source: Money Smart for Older Adults, June 2013

We’ve all heard the timeless saying “If it sounds too good to be true, it probably is.” As an investor, these are good words to live by. The trick is knowing when “good” becomes “too good.”

Senior certifications and designations

A popular practice among financial services salespeople is to identify themselves by a “senior designation” to signal that they have expertise in retirement or the investment needs of older people.

The requirements to earn and maintain a senior designation vary considerably. Programs of study range from weekend seminars to two-year graduate programs. The initials on a business card don’t provide information about the quality of the designation. Some designations indicate extensive knowledge in senior financial needs, while others are merely marketing tools.

While the vast majority of investment advisers, financial planners, and broker-dealers are honest and reputable, it pays to check on a senior designation if you are presented with one. Be wary of investment scams, including the ones listed below.

Common investment scams

• Ponzi schemes: This is an old scam with a simple formula: Scammers promise high returns to investors. Money from new investors is used to pay previous investors. These schemes eventually collapse—leaving most of the investors with a financial loss.
• Promissory notes: A promissory note is a form of debt – similar to a loan or an IOU – that a company may issue to raise money. Typically, an investor agrees to loan money to the company for a set period of time. In exchange, the company promises to pay the investor a fixed return on his or her investment. While promissory notes can be legitimate investments, those that are marketed broadly to individual investors often turn out to be scams.
• Unscrupulous financial advisers: Some advisers cut corners or resort to outright fraud or bilking older adults with unexplained fees, unauthorized trades or other irregularities.
• Affinity fraud: Involves targeting persons with military, religious or spiritual affiliations, by ethnic identity, etc.
• Internet fraud – the “Dot-Con”: Internet fraud has become a booming business. With the growing number of older adults using the Internet, it is increasingly easy for con artists to reach millions of potential older victims at minimal cost.
• Inappropriate or fraudulent annuity sales: Variable annuities are often pitched to seniors through “free lunch” investment seminars. These products can be unsuitable for many retirees and are sometimes sold by salespersons who fail to disclose steep sales commissions and surrender charges that impose costly fees or penalties if you decide that you need your money before the maturity date.

How to check out your broker or investment adviser

You can check a broker’s background via the Financial Industry Regulatory Authority (FINRA) BrokerCheck at www.finra.org , or by calling the FINRA BrokerCheck Hotline at 1-800 289-9999. You may also contact the state securities office and Better Business Bureau.

To learn more about senior certification and designations, visit FINRA at http://www.finra.org/industry/issues/seniors/p124734. Scroll to the bottom of the FINRA page to find links to other helpful resources.

Financial loss prevention tips

Invest wisely online and offline. Here are some important tips you should keep in mind when you are considering purchasing investment products and for protecting those investments once you have them:

• Never judge a person’s trustworthiness by the sound of their voice.
• Take your time when making investment choices. Be careful of “act now” or “before it’s too late” statements.
• Say “no” to anybody who tries to pressure you or rush you into an investment.
• Be wary of salespeople who prey upon your fears or promise returns that sound too good to be true.
• Always ask for a written explanation of any investment opportunity and then shop around and get a second opinion.
• Be wary of any financial adviser who tells you to leave everything in his or her care.
• Stay in charge of your money or enlist the help of a trusted third party to assist you.
• Make checks payable to a company or financial institution, never an individual.
• Retain and maintain account statements and confirmations you receive about your investment transaction.
• Document all conversations with financial advisers.
• Take immediate action if you detect a problem. Time is critical, so do not be afraid to complain.
• Don’t let embarrassment or fear stop you from reporting financial exploitation or investment fraud.
• Don’t put all your eggs in one basket— divide your investments among different asset categories, such as stocks, bonds, and cash held in federally insured deposit accounts

Here are additional tips to keep in mind when considering investment products

• Have enough emergency money in a savings or other readily accessible federally insured deposit account to support you and your family for at least six months before investing in non-deposit products.
• Do your homework. Never invest in a product you do not understand.
  Attend classes, seminars, or check the business reference section of the public library to become better informed.
• Be aware that many investment professionals offer “free seminars” as a marketing technique for obtaining new clients. Be sure to check the background of the presenter, research any recommended investment products, and get a second opinion before making the decision to invest.
• Understand the risks before investing. Investments always have some degree of risk.
• Be sure your financial adviser knows your financial objectives and risk tolerance.

Source: Money Smart for Older Adults, June 2013

Sweepstakes scams may come in the form of a telephone call or an email that congratulates the recipient on winning a lottery, drawing, or sweepstakes that they usually have not even entered. The scammer asks the “winner” for an upfront payment, perhaps to cover a processing fee or taxes. Another variation of this scam involves a letter, sometimes with an authentic looking “Claim Certificate” or a “check” as an advance to pay the winnings. Although bankers are generally aware of this scam and how to spot the phony checks, if deposited, the financial institution may hold the victim responsible for repayment of the entire amount of the fraudulent check and the overdraft charges that may result.

Sweepstakes Recovery Scam

Once it is apparent that no winnings are forthcoming, the victim may receive another call from a person claiming to be an attorney representing sweepstakes winners. In exchange for an upfront fee, the so-called attorney offers to collect the winnings on behalf of the victim. Needless to say, the “attorney” is actually an associate of the original scammer.

Source: Money Smart for Older Adults, June 2013

Medical identity theft is serious business. According to one study, about 1.5 million adults are victims of medical identity theft each year.

What Is Medical Identity Theft?

Medical ID theft occurs when someone steals personal information — such as your name and Medicare number — and uses the information to get medical treatment, prescription drugs, surgery or other services and then bills Medicare for it. Medicare ID theft is a form of Medicare fraud.

A thief may use your name or health insurance numbers to see a doctor, get prescription drugs, file claims with your insurance provider, or get other care. If the thief’s health information is mixed with yours, your treatment, insurance and payment records, and credit report may be affected.
If you see signs of medical identity theft, order copies of your records and check for mistakes. You have the right to see your records and have mistakes corrected.

Medical ID theft can cause financial harm but it is about more than losing time and money. Sometimes people are denied a Medicare service or equipment because their records falsely show they already received it, when in fact it went to someone posing as them.

It can affect your medical and health insurance records. Every time a thief uses your identity to get care, a record is created with incorrect medical information about you. That information might include:

• A different blood type
• An inaccurate history of drug or alcohol abuse
• Test results that are not yours
• A diagnosis of an illness, allergy or condition that you do not have

Any of these could lead to you receiving the wrong treatment and even being injured or getting sick due to an incorrect treatment.

All types of people, including doctors and medical equipment companies, have been caught stealing people’s medical identities. There have even been links to the mafia and thieves in other countries. Sadly, about one-third of medical identity thieves are family members.

How Do You Learn if You Are a Victim?

Here are some warning signs that your identity may be stolen:

• You get a bill for medical services you did not receive.
• You are contacted by a debt collection company for money you do not owe.
• Your insurance company says you’ve reached your limit on medical benefits.
• You are denied insurance for a medical condition you do not have.

How to Avoid Medical Identity Theft

• Protect your Medicare and other health insurance cards in the same way you would protect a credit card.
• Review your Medicare Summary Notices (MSN), Explanations of Benefits (EOB) statements and medical bills for suspicious charges. If you find incorrect information in your records, insist that it be corrected or removed.
• Only give personal information to Medicare-approved doctors, other providers and suppliers; your State Health Insurance Assistance Program or Senior Medicare Patrol (SMP) program; or Social Security. [Call 1-800-MEDICARE (1-800-633-4227) if you aren’t sure if a provider is approved by Medicare.]
• Beware of offers of free medical equipment, services or goods in exchange for your Medicare number.
• Shred papers with your medical identity before putting them in the trash. Remove or destroy labels on prescription bottles and packages before you put them in the trash.

How to Respond if You Suspect Medical Identity Theft

• Ask your health care provider for a copy of your current medical file. If anything seems wrong, write to your health plan or provider and ask for a correction.
• Contact your local Senior Medicare Patrol (see contact information below.)

How Your Senior Medicare Patrol (SMP) Can Help

Your local SMP is ready to provide you with the information you need to protect yourself from Medicare errors, fraud and abuse, detect potential errors, and report your concerns.

For more information or to locate your state SMP, visit www.smpresource.org

Source: Money Smart for Older Adults, June 2013

A person who is named to manage your money or property is a fiduciary. He or she has a duty to manage your money and property for your benefit however he or she may abuse that power.

The person you appoint as your fiduciary should be trustworthy and honest. Your fiduciary can removed if they do not fulfill their obligations or duties. Fiduciaries can be sued and may be ordered to repay money. If elder financial exploitation is reported to the police or Adult Protective Service, the fiduciary could be investigated. If the fiduciary is convicted of stealing your assets, he or she can go to jail.

One way some older adults prepare for the possibility of diminished financial decision-making capacity is by making a power of attorney for finances and designating someone they trust to handle their financial decisions if they no longer can.

Creating a POA is a private way to appoint a substitute decision maker and is relatively inexpensive. If you don’t appoint a POA before your decision-making ability declines, a family member or friend might have to go to court to have a guardian appointed – and that process can be lengthy, expensive, and very public.

A POA does involve some risk. It gives someone else – your agent – a great deal of authority over your finances without regular oversight. POA abuse can take many forms:

• Your agent might pressure you for authority that you do not want to grant.
• Your agent may spend your money on him or herself rather than for your benefit.
• Your agent might do things you didn’t authorize him or her to do – for example, make gifts or change beneficiaries on insurance policies or retirement plans.

Different types of POAs

Some states allow for different types of POAs. Generally, a Power of Attorney goes into effect as soon as it is signed unless the document specifies a different arrangement. That means that even if you are capable of making decisions, your representative can immediately act on your behalf.

A “Durable” Power of Attorney remains effective even if the maker loses the capacity to make financial decisions.

There are different types of powers of attorney and ways to customize this document to fit your needs and preferences. Talk to an attorney for help in making a POA that is appropriate for your circumstances.

What are some ways to minimize the risk of POA abuse?

• Trust, but verify. Only appoint someone you really trust and make sure they know your wishes and preferences. You can require in your POA that your agent regularly report to another person on the financial transactions he or she makes on your behalf.
• Avoid appointing a person who has substance abuse, gambling problems, or who mismanages money.
• Tell friends, family members, and financial advisers about your POA so they can look out for you.
• Ask your bank about their POA procedures. The bank may have its own form you are required to complete (although a POA that is valid under your state’s law should be accepted by financial service providers).
• Remember that POA designations are not written in stone – you can change them. If you decide that your agent isn’t the best person to handle your finances, you can revoke (cancel) your POA. Notify your financial institution if you do this.
• Avoid appointing hired caregivers or other paid helpers as your agent under Power of Attorney.
• Beware of someone who wants to help you out by handling your finances and be your new “best friend.” If an offer of help seems too good to be true, it probably is.

Plan ahead! A durable power of attorney is a very important tool in planning for financial incapacity due to Alzheimer’s disease, another form of dementia, or other health problems. It is advisable to consult with an attorney when preparing a power of attorney, trust or any legal document giving someone else authority over your finances.

If you or a loved one is a victim of financial exploitation by a fiduciary, take action immediately and make a report to Adult Protective Services or your local law enforcement agency.

Source: Money Smart for Older Adults, June 2013

Pension Benefits Filing Scam

The Veterans Affairs’ (VA) pension program provides monthly benefit payments to certain wartime veterans with financial need, and their survivors. Recipients also may be eligible for one of two additional amounts:

• Aid and Attendance (A&A) may be paid to veterans, or their surviving spouses, who require assistance with activities of daily living, are bedridden, are patients in nursing homes, or have a qualifying major vision loss.
• Housebound amounts may be paid to veterans or surviving spouses who are substantially confined to their homes because of a permanent disability.

Tips for avoiding VA pension benefits filing scams

• Be aware that an individual generally must be accredited by VA to assist you in preparing and filing a claim. To find an accredited attorney, claims agent, or veterans service organization (VSO), visit VA’s Accreditation Search page at http://www.va.gov/ogc/apps/accreditation/index.asp
• Never pay a fee to anyone for preparing and filing your initial claim. Although an attorney may charge a consulting fee for advising you about the benefits for which you may be eligible, the clock stops running as soon as you indicate your intention to file.
• Avoid attorneys or claims agents who try to market financial products, such as trusts and annuities, in connection with filing your VA claim. Older veterans may face problems with annuities since you may not have access to your funds, should you need them, without paying a costly surrender fee.
• Know that shifting your assets into certain types of investments in order to meet eligibility thresholds for VA pension benefits could make you ineligible for Medicaid for a period of time.

Lump-Sum Payment for Future Benefits Scam

Another scam targets veterans who receive either monthly disability compensation or pension payments. The scammer may offer a lump sum payment in exchange for the veteran’s future benefits. Although Federal law prohibits assigning benefits to a third party, many scammers — who usually identify themselves as corporate entities — get around this limitation by representing the lump sum payment as an advance. Whatever the name, these transactions generally are not a good deal for the veteran.

Consider this example:

A veteran received a lump-sum payment of $73,000 in exchange for his monthly benefits check of $2,744 for a ten-year period. At the end of the ten years, the veteran’s total repayment is estimated as $256,293. This translates to an annual interest rate of 44.5 percent.

Tips for avoiding the lump-sum payment scam

• Be aware that lump sum payment arrangements are very costly, often the equivalent of a 60 to 70 percent annual interest rate.
• Say no to arrangements that allow a creditor to access the account where you receive your benefits. Past arrangements have included joint checking accounts from which the scammer could withdraw funds as soon as they were deposited and accounts that remained in the veteran’s name but that allowed the lump-sum provider to make monthly withdrawals in the amount of the benefit.
• Remember that your military benefits cannot be garnished by a creditor. Some lump-sum providers know this, of course, and may ask for additional collateral.
• Seek advice from a trusted financial expert if you need emergency funds. Other arrangements are less costly.

Where to Get More Information or Assistance

For help understanding your VA benefits, visit www.va.gov or call
1-800-827-1000. Also, the Federal Trade Commission: http://www.ftc.gov/opa/2013/02/vetspension.shtm

Source: Money Smart for Older Adults, June 2013

Reverse Mortgage Proceeds Fraud

Scenario

To pay for his recommended home improvements, a handyman convinces an older woman to appoint him as her Power of Attorney so he can help her get a reverse mortgage on the home she had purchased in the 1950’s and owns outright.  When the lender provided a lump-sum payout, she never saw any of the money because the handyman used it for drugs, among other things.

What is a reverse mortgage?

Although Reverse Mortgages can be legitimate products and are appropriate for many consumers, scammers also sell these products to the disadvantage of their victims.

A reverse mortgage is a special type of loan that allows homeowners age 62 and older to borrow against the equity in their homes. It is called a “reverse” mortgage because you receive money from the lender, instead of making payments. The money you receive, and the interest charged on the loan, increases the balance of your loan each month. Over time, the equity you have in your home decreases as the amount you owe increases.

When you take out a reverse mortgage loan, you can receive your money as a line of credit available when you need it, in regular monthly installments, or up-front as a lump sum. You do not have to pay back the loan as long as you continue to live in the home, maintain your home, and stay current on expenses such as homeowner’s insurance and property taxes. If you move out or die, the loan becomes due and must be paid off.

How borrowers get scammed

Scammers can take advantage of the fact that borrowers can receive the loan in the form of a lump sum payout. The reverse mortgage proceeds scam may include one or several of the following elements:

• Family members or others who pressure the older adult to get a reverse mortgage and then “borrow” the money or scam the elder out of the proceeds.
• Scammers who “require” an older borrower to sign a Power of Attorney or to sign proceeds over to a “loan officer or other agent” for future “disbursals.” The scammers then embezzle a portion or all of the funds.
• Brokers who pressure or fraudulently require the borrower to purchase annuities, long-term care insurance, high risk investments or other financial products with the proceeds from the reverse mortgage in order to generate additional commissions.

Mortgage Assistance Rescue Scam

Beware of anyone who promises you can stay in your home or who asks for a lot of money to help you. Scammers might promise guaranteed or immediate relief from foreclosure, and they might charge you very high fees for little or no services.

Mortgage relief companies may not collect any fees until they have provided you with a written offer from a lender or servicer that you decide is acceptable and a written document from the lender or servicer describing the key changes to the mortgage that would result if you accept the offer. The companies also must remind you of your right to reject the offer without any charge.

Don’t get scammed. There is help available at little or no cost to you. Foreclosure prevention counseling is available free of charge through HUD’s Housing Counseling Program. Call the CFPB at 1-855-411-CFPB (2372) to be connected to a HUD-approved housing counselor.

Contractor Fraud and Home Improvement Scams

Scenario

Monica is 76 years old and lives alone in her home. One morning she is outside watering her garden when a truck pulls up and a man approaches her. He tells her that he is a building contractor and that he can see that she has a problem with her roof. He points to a spot near the chimney and tells her he can fix the problem now with the materials he has left over from a job he just finished nearby. He says he’ll give her a big discount if she’ll pay him today in cash. After going up on the roof and tearing off some roof tiles, he tells her that the problem is worse than he thought, but he can do it for $2,800. When Monica says she doesn’t have $2,800 in cash, the contractor becomes angry and threatening. He says if Monica doesn’t have the money she will have to take out a loan to pay him.

Contractor Fraud

Home Repair / Home Improvement Scams

Sooner or later every home needs repairs or improvements. Although some home improvement companies do good work, some may not provide the level of service you expect.  Many homeowners are targeted by scam artists who use high pressure tactics to sell unneeded and overpriced contracts for “home improvements.” Often these scam artists charge more than their quoted prices or their work does not live up to their promises. When the homeowner refuses to pay for shoddy or incomplete work, the contractor or an affiliated lender threatens foreclosure on the home.

Impersonating Officials

Con artists may pose as building inspectors and order immediate repairs which they can do on the side. They may also pose as government officials and demand a fee for processing emergency loan documents.

Tips for Avoiding Contractor Fraud

Here are some common sense tips to protect yourself from contractor fraud.

• Ask to see identification for anyone representing him or herself as a government official. Call the government agency to verify the identity if there is any payment of money involved.
• Get bids from several local, established contractors. Obtain at least three legible bids in writing and don’t sign anything before carefully reading it. Do not do business with anyone who approaches you door-to-door or on the phone. Note that many states and local jurisdictions have laws regulating door-to-door sales.
• Avoid contractors who:
  • Are working door-to-door
  • Come from out of state
  • Don’t provide an address and telephone number, or refuse to show identification
• Before beginning any home repair project, ask if the contractor has the required licenses (note license numbers) and is bonded. Seek out references from neighbors or members of your affinity groups (e.g., place of worship).
• Check with your state licensing agency’s website or hotline to make sure the licenses are valid. Ask the licensing agencies if the contractor has a history of complaints.
• Get several references from previous customers. If possible, visit them to see the work done.
• Require the contractor you choose to provide you with a contract that contains clearly written payment terms.
• Don’t pay in advance.
• Never pay with cash.
• Don’t provide personal financial information, such as your checking account, credit card or debit card numbers.
• If you need to borrow money to pay for repairs, don’t let the contractor steer you toward a particular lender.
• Do not make a final payment until you are satisfied with the job, all debris is removed from your property, and any necessary building inspections have been completed. If a contractor shows up at your door and pressures you to go to the bank with him to get cash to pay for a job you do not want done, if you ask to speak with the branch manager, the manager can call the police for you, who can show up at the branch. Being in public place with video cameras and witnesses should reduce your risk.

To get more information on home improvement, including: how to hire contractors, how to understand your payment options, and how to protect against home improvement scams, read the FTC brochure titled Home Sweet Home Improvement. The brochure is available at www.ftc.gov. Enter home improvement in the search field. You can also call the FTC to request the brochure at 1-877-FTC-HELP (382-4357).

Source: Money Smart for Older Adults, June 2013

Older adults are increasingly the targets of scam artists on the telephone who use lies, deception, and fear tactics to convince the elder to send them money or provide personal account information.

One common example is the “Grandparent Scam.” With this scam, the grandparent receives a call from a person claiming to be a grandchild in trouble. The scammer may even know the grandchild’s name. The scammer will sound distressed and may not speak clearly. He or she will ask that money be wired immediately and that the parents not be told, for fear of upsetting them. Scammers know that many people will immediately jump to the assistance of the grandchild and won’t ask questions until later. They also know that many older people will have experienced a hearing loss and won’t detect any differences from their grandchild’s voice. Or they may attribute the differences they do hear to the stress of the situation.

Source: Money Smart for Older Adults, June 2013