Reporting Cases of Financial Abuse of Elderly Not a Violation of GLB

NORTHVILLE TOWNSHIP, Mich. – Credit unions and banks can help identify financial exploitation of vulnerable adults without violating confidentiality provisions of the Gramm-Leach-Bliley Act. Who says so? Alan Greenspan, chairman, Board of Governors of the Federal Reserve System; Dennis Dollar, chairman, NCUA; Donald E. Powell, chairman, Federal Deposit Insurance Corporation; John D. Hawke Jr., Comptroller of the Currency; James Gilleran, director, Office of Thrift Supervision; Harvey L. Pitt, chairman, Securities and Exchange Commission; and John Howard Beales III, director, Bureau of Consumer Protection, Federal Trade Commission. Their opinion, presented in a letter to U.S. Senator Debbie Stabenow (D-Mich.), is expected to encourage credit unions in Michigan, and probably other states, to participate in efforts to help prevent financial abuse. The Michigan Family Independence Agency’s Office of Adult Protective Services has been encouraging the state’s financial institutions to enter into agreements with local FIA offices to follow procedures for reporting cases of suspected exploitation. However, some financials have expressed concern that disclosing non-public personal information would violate GLB. So Sen. Stabenow’s office sought an answer from the seven relevant federal regulatory agencies. `It’s a green light for financial institutions,” says MCUL Regulatory Affairs Director Ken Ross. Ross recalls he was contacted more than a year ago by a credit union in western Michigan that had been approached by one of the county FIA offices about entering into an agreement. The credit union was concerned about possible regulatory implications. So the league obtained a copy of the protocols the FIA had developed and reviewed them in light of financial privacy requirements. “We came to the conclusion the agreement represented proper exceptions under the Gramm-Leach-Bliley rules,” Ross says. Now that has been reinforced by the response to Sen. Stabenow’s inquiry. Ross points out an investigation of possible financial exploitation may be launched in a couple different ways. The FIA may be alerted to a situation and approach the credit union with a consent signed by the member or guardian, or a court order. That would be covered under GLB. “The other situation would be where the credit union itself thought there may be some exploitation or fraud. Following the agreement and protocols, they would contact the FIA. In that situation, there’s also an exception to Gramm-Leach-Bliley when the financial institution believes there is fraud going on,” Ross says. Mike Sullivan, Adult Protective Services policy writer and trainer at the FIA, says he hopes the judgment from Greenspan, Dollar and others encourages more financial institutions to sign protocols with county FIA offices. “We had this stumbling block that lawyers for financial institutions had advised banks and credit unions they could not engage in that practice (protocol) because it would be in violation of Gramm-Leach-Bliley,” Sullivan says. “Our goal is to educate and find ways to learn about financial exploitation of vulnerable adults so we can get in there and do something about it,” he adds. It’s a growing problem, Sullivan continues. Each year Adult Protective Services in Michigan receives 8,000 to 9,000 referrals. About 3,500 are substantiated. Of that amount, some 15% involve financial abuse. “Nationwide, states are trying to find ways to combat financial exploitation. There’s wealth out there. In the 1990s especially many people acquired a lot of money in their 401ks and other investments. We’re finding more and more of that is being targeted,” Sullivan says. “Most of the perpetrators are relatives. Most of the victims are females over 75. Our biggest problem is by the time we get notified someone has taken someone else’s money, it’s gone. It’s spent,” says Sullivan. With cooperation from the financial institution and the victim, it’s not really difficult to follow the paper trail and figure out who took it, he says. In a typical case the victim signs a release. The FIA then goes down to the bank or credit union with the release and gets the data needed to figure out who took the money. However, at that point it’s usually difficult or impossible to get the money back. Michigan recently passed a law providing even if there is a joint account and you have legal access to the money, it’s illegal to withdraw the money and use it to unjustly enrich yourself if it’s not actually your money. Let’s say a parent puts a son’s or daughter’s name on the account in case something happens to the parent. The son or daughter decides it would be great to tap the money to buy a new car or pay for a trip to Cancun. That’s now criminal. “We’ve been trying to educate prosecutors around the state about this new law,” Sullivan says. “More and more states are passing similar laws. Oregon has a pretty strong one. Texas has one. We’re actually behind several states that have already done this kind of thing. “What we want to be able to accomplish is to have banks and credit unions feel comfortable calling Adult Protective Services when they suspect something is happening. The federal law was the barrier we were running into. “Financial institutions have been very, very concerned about releasing confidential information for fear of liability. But there’s something else you should fear. One of these days, when you know something is taking place and you don’t report it, somebody is going to turn around and sue you for not reporting. We’d like to see the best practice be, let’s protect vulnerable people,” says Sullivan. [email protected]