CFPA can’t arrive fast enough for the elderly

January 9, 2010

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)

Too true.

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!

4 comments

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/

The baby boom is traditionally dated 1946-1964. That makes the oldest boomers turning 65, and the youngest are under 50. Hate to tell you, Rolfe, but we aren’t in the grips of creeping dementia just yet. Baby boomers aren’t synonymous with ‘seniors’ or the ‘elderly’, and using the terms interchangeably just show you up for the young whippersnapper you are ;-)

Posted by Dorothy Hunt | Report as abusive

It is true that CFPA can’t arrive fast enough, but at least it did arrive. Just open your email inbox every morning, you will find that 97% (a conservative estimate) are spam and scams.

I am definitely not doubting the capabilities of our seniors. Most have 20/20 visions indeed! But it is good that the CFPA protects those that may be too busy to notice the scammers’ acts.

[...] CFPA can’t arrive fast enough for the elderly | Rolfe Winkler [...]

One of SF’s most prestigeous banks brokered reverse mortgages for seniors, the reps noting that they weren’t the actual lenders, just the facilitators. However, all documents were emblazoned with the prestigeous bank’s nmae. The actual lender: Indy Mac. When IM went under, much was made of the FDIC’s quick response in reimbursing depositors. However, most scribes neglected to mention that seniors now living in bank-owned homes were not receiving their expected monthly income checks. The proposed soluntion, they were told? Talk to your lawyer.

You are 100% correct in calling the ARM loans sold to many by World Savings as FILTHY Mortgage products. Not to sure that I agree with you that the brokers selling these loans for/with the bank didn’t understand them, although I will agree that most probably didn’t care. They were making money hand over fist,from the front end to the back. Why would the majority of them concern themselves with quality or integrity when they could line their pockets so easily?

Posted by Carolina Bagnarol | Report as abusive