Guide for Senior Consumers
on Financial Services Tips to Prevent Fraud, Abuse and Inappropriate Marketing of Financial Products and Services
This document was developed by the State Financial Regulators Roundtable (SFRR), a group
of State Regulators’ Membership Associations including banking, consumer lending, credit unions,
insurance, money service businesses, mortgage lending institutions, savings institutions, and
securities. The associations that make up the State Financial Regulators Roundtable are listed at
the end of this document.
Fraud Targeted at Senior Citizens – Why should senior citizens be
concerned? It has been the experience of the Federal Bureau of Investigation (FBI) that the elderly
are targeted for financial fraud for several reasons:
1) Older American citizens are most likely to have a “nest egg,” own their home and/or
have excellent credit all of which the con man will try to tap into. The fraudster will focus
his/her efforts on the segment of the population most likely to be in a financial position to
2) Individuals who grew up in the 1930s, 1940s and 1950s were generally raised to be
polite and trusting. Two very important and positive personality traits, except when it
comes to dealing with a con man. The con man will exploit these traits knowing that it is
difficult or impossible for these individuals to say “no” or just hang up the phone.
3) Older Americans are less likely to report a fraud because they do not know who to
report it to, are too ashamed at having been scammed, or do not know they have been
scammed. In some cases, an elderly victim may not report the crime because he or she
is concerned that relatives may conclude that the victim no longer has the mental
capacity to take care of his or her own financial affairs.
4) When an elderly victim does report the crime, they often make poor witnesses. The
con man knows the effects of age on memory and he/she is counting on the fact that the
elderly victim will not be able to supply enough detailed information to investigators such
as: How many times did the fraudster call? What time of day did he/she call? Did he
provide a call back number or address? Was it always the same person? Did you meet
in person? What did the fraudster look like? Did he/she have any recognizable accent?
Where did you send the money? What did you receive if anything and how was it
delivered? What promises were made and when? Did you keep any notes of your
The victim‟s realization that they have been victimized may take weeks or, more likely,
months after contact with the con man. This extended period will test the memory of
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5) Lastly, when it comes to products that promise increased cognitive function, virility,
physical conditioning, anti-cancer properties and so on, older Americans make up the
segment of the population most concerned about these issues. In a country where new
cures and vaccinations for old diseases have given every American hope for a long and
fruitful life, it is not so unbelievable that the products offered by these con men can do
what they say they can do.
What to Look For and How to Protect Yourself and
Health Insurance Frauds Medical Equipment Fraud Equipment manufacturers offer “free” products to individuals. Insurers are then charged
for products that were not needed and/or may not have been delivered.
“Rolling Lab” Schemes Unnecessary and sometimes fake tests are given to individuals at health clubs,
retirement homes, or shopping malls and billed to insurance companies or Medicare.
Services Not Performed
Customers or providers bill insurers for services never rendered by changing bills or
submitting fake ones.
Medicare fraud can take the form of any of the health insurance frauds described above.
Senior citizens are frequent targets of Medicare schemes, especially by medical
equipment manufacturers who offer seniors free medical products in exchange for their
Medicare numbers. Because a physician has to sign a form certifying that equipment or
testing is needed before Medicare pays for it, con artists fake signatures or bribe corrupt
doctors to sign the forms. Once a signature is in place, the manufacturers bill Medicare
for merchandise or service that was not needed or was not ordered.
Some Tips to Avoiding Health Insurance Frauds
? Never sign blank insurance claim forms.
? Never give blanket authorization to a medical provider to bill for services
? Ask your medical providers what they will charge and what you will be expected
to pay out-of-pocket.
? Carefully review your insurer‟s explanation of the benefits statement. Call your
insurer and provider if you have questions.
? Do not do business with door-to-door or telephone salespeople who tell you that
services of medical equipment are free.
? Give your insurance/Medicare identification only to those who have provided you
with medical services.
? Keep accurate records of all health care appointments.
? Know if your physician ordered equipment for you.
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Counterfeit Prescription Drugs
Some Tips to Avoiding Counterfeit Prescription Drugs
? Be mindful of appearance. Closely examine the packaging and lot numbers of
prescription drugs and be alert of any changes from one prescription to the next.
? Consult your pharmacist or physician if your prescription drug looks suspicious.
? Alert your pharmacist and physician immediately if your medication causes
adverse side effects or if your condition does not improve.
? Use caution when purchasing drugs on the Internet. Do not purchase
medications from unlicensed online distributors or those who sell medications
without a prescription. Reputable online pharmacies will have a seal of approval
called the Verified Internet Pharmacy Practice Site (VIPPS), provided by the
Association of Boards of Pharmacy in the United States.
? Product promotions or cost reductions and other "special deals" may be
associated with counterfeit product promotion.
Funeral and Cemetery Fraud
Some Tips to Avoiding Funeral and Cemetery Fraud
? Be an informed consumer. Take time to call and shop around before making a
purchase. Take a friend with you that may offer some perspective to help make
difficult decisions. Funeral homes are required to provide detailed price lists over
the phone or in writing. Ask if their lower priced items are included on their price
? Be informed about caskets before you buy one. It is a myth that funeral providers
can determine how long a casket will preserve a body.
? Research funeral home service fees when shopping for products elsewhere.
Some of these charges are prohibited by the Federal Trade Commission.
? You should know that embalming is not legally required and that a casket is not
needed for direct cremations.
? Do not be pressured by high-priced pitches from funeral industry vendors.
? Require all proposed plans and purchases to be put in writing.
? Remember to read carefully contracts and purchasing agreements before signing.
Find out if agreements you sign can be voided, taken back or transferred to other
? Before you consider prepaying, make sure you are well informed. When you do
make a plan for yourself, share your specific wishes with those close to you.
Fraudulent “Anti-Aging” Products
Some Tips to Avoiding Fraudulent "Anti-Aging" Products
? If it sounds too good to be true, it probably is. Watch out for “Secret Formulas” or
“Breakthroughs.” ? Do not be afraid to ask questions about the product. Find out exactly what it
should do for you and what it should not.
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? Research a product thoroughly before buying it. Call the Better Business Bureau
to find out if other people have complained about the product.
? Be wary of products that purport to cure a wide variety of illnesses (particularly
serious ones) that do not appear to be related.
? Testimonials and/or celebrity endorsements are often misleading.
? Be very careful of products that are marketed as having no side effects.
? Products that are advertised as making visits to a physician unnecessary should
? Always consult your doctor before taking any dietary or nutritional supplement.
If you are age 60 or older, you may be a special target for people who sell bogus
products and services by phone. Older women living alone are special targets of these
scam artists. Telemarketing scams often involve offers of prizes, low-cost vitamins and
health care products, and travel offers.
There are warning signs to these scams, including promises of “free” or “low cost”
vacations and get rich quick schemes. If you hear these--or similar--"lines" from a
telephone salesperson, just say “no thank you,” and hang up the phone:
- “You must act „now‟ or the offer won't be good.” - “You‟ve won a „free‟ gift, vacation, or prize.” But you have to pay for “postage
and handling” or other charges.
- “You must send money, give a credit card or bank account number, or have a
check picked up by courier.” You may hear this before you have had a chance to
consider the offer carefully.
- “You don‟t need to check out the company with anyone.” The callers say you do
not need to speak to anyone including your family, lawyer, accountant, local
Better Business Bureau, or consumer protection agency. - “You don‟t need any written information about their company or their
- “You can‟t afford to miss this „high-profit, no-risk‟ offer.” Remember, if you hear the lines above, or similar “lines” from a telephone salesperson, just say “no thank you,” and hang up the phone.
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Some Tips to Avoiding Telemarketing Fraud
It‟s very difficult to get your money back if you‟ve been cheated over the phone. Before
you buy anything by telephone, remember:
? Do not buy from an unfamiliar company. Legitimate businesses understand that
you want more information about their company and are happy to comply.
? Always ask for and wait until you receive written material about any offer or
charity. If you get brochures about costly investments, ask someone whose
financial advice you trust to review them. But, unfortunately, beware -- not
everything written down is true.
? Always check out unfamiliar companies with your local consumer protection
agency, Better Business Bureau, state Attorney General, the National Fraud
Information Center, or other watchdog groups. Unfortunately, not all bad
businesses can be identified through these organizations.
? Obtain a salesperson‟s name, business identity, telephone number, street
address, mailing address, and business license number before you transact
business. Some con artists give out false names, telephone numbers, addresses,
and business license numbers. Verify the accuracy of these items.
? Before you give money to a charity or make an investment, find out what
percentage of the money is paid in commissions and what percentage actually
goes to the charity or investment.
? Before you send money, ask yourself a simple question. “What guarantee do I
really have that this solicitor will use my money in the manner we agreed upon?”
? You must not be asked to pay in advance for services. Pay services only after
they are delivered.
? Some con artists will send a messenger to your home to pick up money, claiming
it is part of their service to you. In reality, they are taking your money without
leaving any trace of whom they are or where they can be reached.
? Always take your time making a decision. Legitimate companies won‟t pressure
you to make a snap decision.
? Do not pay for a “free prize.” If a caller tells you the payment is for taxes, he or
she is violating federal law.
? Before you receive your next sales pitch, decide what your limits are –the kinds
of financial information you will and will not give out on the telephone.
? It is never rude to wait and think about an offer. Be sure to talk over big
investments offered by telephone salespeople with a trusted friend, family
member, or financial advisor.
? Never respond to an offer you do not understand thoroughly.
? Never send money or give out personal information such as credit card numbers
and expiration dates, bank account numbers, dates of birth, or social security
numbers to unfamiliar companies or unknown persons.
? Your personal information is often brokered to telemarketers through third parties.
? If you have been victimized once, be wary of persons who call offering to help
you recover your losses for a fee paid in advance.
? If you have information about a fraud, report it to state, local, or federal law
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As Internet use among Senior Citizens increases, so does their chances to fall victim to
internet fraud. Internet fraud includes non-delivery of items ordered over the Internet and
credit/debit card fraud. Please visit the FBI‟s “Internet Fraud” webpage for details about
these crimes and tips to protect yourself.
Senior citizens, as they plan for retirement, may fall victim to investment schemes.
These may include Advance Fee Schemes, Prime Bank Note Schemes, Pyramid
Schemes, and Nigerian Letter Fraud schemes. Please visit the FBI‟s “Common Fraud
Schemes” webpage for more information about these crimes and tips for protection.
In addition to fraudulent investments, seniors can also be sold investments that are
inappropriate based on their risk and maturity structure. Seniors should always ask the
following questions before making any investment decision:
1. Do you understand the product? If the product is too complex to be easily
and reasonably understood, you probably do not need to be investing in it.
2. Have you been provided with a clearly presented analysis of the risks of
this product, including the risk of loss of principal and the liquidity risk (the risk of
being able to quickly sell the product preferable on an established market, for a
cash value of at least the amount that you invested in the product?
3. Do you understand the maturity of the product and the investment return
characteristics of the product? Are the investment returns fixed or are they
variable, based on investment or market returns?
4. In the case of an investment product, what are the historic returns of the
product over the past twelve months, last five years and last ten years?
5. What are the total fees and commissions that are being received for the
sale of the product? If the seller is unwilling or unable to adequate explain the
compensation structure of the product, and then you need to question the
suitability of the product.
6. Were you exposed to aggressive selling tactics or are you being told that
this opportunity will only exist for a short period and that you need to purchase
this investment today? If this is a sound decision, you should be able to fully
consider your decision, consult with a subject matter expert and otherwise
exercise due care and discretion in the consideration of this investment. Mortgage Fraud
Mortgage fraud is one of the most rapidly growing segments of fraudulent activity and
seniors may be targeted due to the fact that they often have large amounts of equity in
their homes and may need funds to make home improvements or to provide
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supplemental income. It is important that senior take precautions to prevent being the
subject of mortgage fraud and having equity stripped from their homes
1. Always check with your State Agency in charge of mortgage supervision
(in most States it is the State Banking or Financial Institutions Department) to
determine if the mortgage broker or lender that you are dealing with is properly
licensed. Under a new federal statute adopted in 2008 known as the SAFE Act
(Secure and Fair Enforcement for Mortgage Licensing Act of 2008), residential
mortgage loan officers will be licensed or registered through a Nationwide
Mortgage Licensing System and Registry which will eventually provide for
broader information on lenders, including their licensing or registration status and
any regulatory sanctions that may be outstanding.
2. Shop around for your mortgage just like you would for any other product
or service. Ask to be provided a good faith estimate that provides an estimate of
the interest rate and charges associated with the mortgage you are shopping for.
3. Educate yourself as a consumer and protect you credit rating by using
credit appropriately. A poor credit rating could result in lower cost mortgage
alternatives not being available to you.
4. Be aware of the characteristics of adjustable rate, interest only mortgages
and option adjustable mortgages. Adjustable rate mortgages are subject to an
increasing mortgage rate and higher monthly payments. Interest only mortgages
typically have an adjustable interest rate and start paying principal after a period
of time, often five or ten years, resulting in sharp increases in payments. Option
Adjustable mortgages may have features that result in negative amortization,
which could actually increase the principal balance on your mortgage over time.
5. Be on the lookout for features that could be viewed as predatory in nature.
These include excessive loan fees, prepayment penalties or features that require
arbitration of disputes and limit legal remedies for consumers.
6. If a mortgage lender or broker encourages you to place any information in
the mortgage application that misrepresents your status as a borrower, your
employment status or conditions of employment or the condition or value of the
property, you should not proceed with the application and should contact
7. If you go to a loan closing and the terms of the loan are at substantial
variance with the good faith estimate you should not hesitate to postpone the
closing until these issues are resolved. Do not sign loan documents that contain
material discrepancies from the good faith estimate, since in many cases, there
is not a right of rescission from these loan contracts.
Perhaps no recent financial product has been more specifically marketed to senior
citizens than reverse mortgage products. Reverse mortgages can be appropriate
products for seniors who have accumulated equity in their homes and require funds for
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home maintenance or to enhance retirement income. It is however important for seniors
to recognize the characteristics of this product, including the following:
1. Seniors should carefully review all disclosures related to a reverse
mortgage transaction and consider obtaining independent homeowner
counseling to assist them in making this important decision.
2. Reverse mortgages are borrowing transactions and the lender will have a
lien against the homeowner‟s residence. Although the borrower will typically not
have to make payments during their lifetime, the residence may ultimately have
to be sold in order to liquidate this obligation, unless there is some other source
3. Although the characteristics of a reverse mortgage, which may have a
lump sum payment, a series of annuitized payments to the homeowner or a
combination of the two is different than a traditional mortgage, it is still a
borrowing transaction. Many financial advisors recommend to seniors that they
avoid debt in retirement rather than borrowing money.
4. Reverse mortgages have relatively high fee structures. Like other
financial products it is important for seniors to comparison shop for these
products from different companies, in order to obtain the best deal.
5. The reasons for entering into a reverse mortgage are extremely important.
Home equity is an important resource and a financial backstop for seniors. It is
important for seniors to make certain that they don‟t outlive their financial
resources and reverse mortgages taken out in order to gift funds to children or
grandchildren or used for temporary lifestyle enhancement may not represent a
sound financial strategy.
Contact Information for Seniors on Financial Products and
There are a number of additional resources that can assist seniors in making
sound decisions regarding financial products and services. These include:
? The American Association of Retired Persons (AARP), money and financial
? The Administration on Aging
? USA. Gov Government Made Easy
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? U.S. Senate Special Committee on Aging
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Contact Information for Regulatory Associations
? For issues related to State Charter Savings Institutions: The American Council of
State Savings Supervisors
? For issues related to State Chartered Banks and related financial institutions: The
Conference of State Bank Supervisors
? For issues related to State Chartered Credit Unions: The National Association of
State Credit Union Supervisors
? For issues related to Insurance and the supervision of insurance companies: The
National Association of Insurance Commissioners
? For issues related to the supervision of Mortgage Lenders and Brokers: The
American Association of Residential Mortgage Regulators
? For issues related to the supervision of consumer lenders (consumer finance
lenders, deferred presentment lenders and other consumer lenders): The
National Association of Consumer Credit Administrators
? For issues related to the supervision of money transmitters (Check Cashers,
Check sellers, money transmitters and stored value card issuers): The Money
Transmitter Regulators Association
? For issues related to State supervision of securities, investment advisors, and
related issues: the North American Securities Administrators Association
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