Certain financial scams pose a particular threat to older investors. What are the latest warnings from consumer advocates?
A scammer will take anybody’s money, but older investors appear especially vulnerable to certain types of financial fraud, according to consumer advocates with the Federal Trade Commission.
Two “especially pernicious scams” - work-from-home scams and prize promotion or lottery scams – pose a particular threat to older investors, Charles Harwood, acting director of the FTC’s bureau of consumer protection, told Congress today.
Older Americans also tend to rely more heavily on financial professionals, according to research from Spectrem’s Millionaire Corner. Click here to learn more.
Work-from-home scams target vulnerable individuals who need money but are unable to work outside the home because they are frail, disabled or have family responsibilities. “Those conditions spell ‘opportunity’ for con artists who stand ready to ensnare them,” Harwood said in testimony before a House of Representatives subcommittee on commerce, manufacturing and trade.
Con artists perpetrating work-from-home scams may require their targets to pay for starter kits or useless certifications, and may charge their victims’ credit cards without their permission, according to the FTC. Some schemes may promise high pay for stuffing envelopes or assembling crafts or other products at home. The fraudsters typically collect fees and charge for equipment and supplies, but fail to pay once the work is completed.
Older investors also appear particularly vulnerable to scams promoting prizes and winnings. Some fraudsters tell consumers they can collect their winnings for a fee to cover taxes and services charges, typically collected through money transfer services, such as Western Union or Money Gram, or reloadable prepaid cards. Some perpetrators purport to be from legitimate companies and use digital technology to give the impression they are calling from a legitimate source, such as a state lottery headquarters.
A national study has tracked an increase in financial fraud against the elderly. Click here to learn more.
The FTC also anticipates an increase in health-care related fraud as scammers attempt to capitalize on confusion surrounding changes in health-care laws and consumers’ fears of losing vital benefits, Harwood said. “We know from experience that any publicized changes in Medicare present ripe conditions for unscrupulous telemarketers.” The FTC has recently moved against scammers offering phony prescription drug discount products. The fraudsters posed as representatives of Medicare, the Social Security Administration or the consumer’s bank in attempts to obtain account information. The FTC has also moved against the deceptive sales of online placements services for senior care facilities and misrepresentation of Medicare Part D prescription drug benefits that resulted in seniors overspending on drugs and falling into the “donut hole” sooner than planned.
“The commission anticipates that as the Affordable Care Act is implemented, scammers will exploit changes in Medicare to sow confusion and trick consumers into paying for worthless products or providing their financial account information,” Harwood said. The agency combats fraud against seniors through aggressive law enforcement combined with consumer education, some in partnership with other federal agencies and the advocacy group, AARP, a nonprofit that aims to improve the quality of life for Americans over 50.