CFPA can’t arrive fast enough for the elderly
Odd that AARP is only just now throwing its support behind the proposed Consumer Financial Protection Agency, after the House watered down many key provisions in its reform bill. WSJ’s Michael Crittenden reports that the lobby group for retirees wrote a letter to Senators Dodd and Shelby of the Senate Banking Committee which said:
When seniors are defrauded or otherwise taken advantage of, the results are particularly devastating since they gernerally are beyond or near the end of their earning years. (no link)
The elderly are great targets for financial scam artists. The creeping fog of dementia is the obvious reason.
Less obvious is how many elderly fall victim simply because they’re lonely. In 2007, the NYT reported the poignant case of 92-year-old Richard Guthrie, whose name was sold to scam artists by a telemarketing firm:
”I loved getting those calls. Since my wife passed away, I don’t have many people to talk with. I didn’t even know they were stealing from me until everything was gone.”
Another reminder comes from a must-read article in yesterday’s Times about an elderly woman in California who was sold progressively filthier mortgage products by Herb and Marion Sandler’s World Savings, now a unit of Wells Fargo. “Elder abuse” and “predatory lending” are the key descriptive phrases and they are absolutely correct.
The same article quotes an AARP study saying 70% of the nation’s elderly have been solicited to take out a new mortgage in recent years. These are the kinds of folks who probably paid off their mortgage years ago and now own their house free and clear. Letting them take cash out can seem a good way to help make ends meet, but it can also be a fast-track to foreclosure and homelessness.
The problem is that many elderly aren’t capable of making a rational decision because they don’t understand the financial products they’re being sold. Hell, folks with all their faculties don’t understand option ARMs. The salesmen/mortgage brokers didn’t understand the products either, but they didn’t care, since they get paid by the volume of loans originated.
It seems obvious that AARP would throw its considerable weight behind a strong CFPA that can act as an FDA for financial products. But why now?
The House Financial Services Committee already gutted many of the key features of the CFPA in its reform bill. Among other things, the requirement for “plain vanilla” products was dropped. And dealer-based auto lenders won a big loophole. Rep Ed Perlmutter did his darndest to water-down the bill, and was bought for only a few thousand bucks by the financial lobby. Could AARP have bought his support?
Bankers celebrated, since some were worried they wouldn’t be able to sell balloon-note loan terms to high risk or low income customers, for instance.
Well, thank goodness for that. Wouldn’t want to take a meal ticket away from folks selling confusing, dangerous financial products.
Update: Previously this post was titled “…for the baby boom” instead of “…for the elderly,” but reader Dorothy H. makes a very good point that senility is still a long way off for the boomers!