According to the U.S. Government Accountability Office, elder financial abuse and fraud costs older Americans $2.9 billion annually. This abuse ranges from scam emails and phone calls to loved ones pressuring elders into financial transactions they would not otherwise perform. Banks, financial advisors, and insurance providers are often in the best position to spot suspected financial abuse and help to stop it before it devastates seniors. Thus, state legislatures and the federal government are increasingly encouraging them to report suspected abuse or fraud by offering protection from litigation.
The latest effort to encourage reporting of elder exploitation came in May 2018, when the U.S. Congress passed the Senior Safe Act [Pub. L. No. 115-174, § 303 (2018), the “Act”] as part of a larger financial services overhaul, The Economic Growth, Regulatory Relief, and Consumer Protection Act. The Senior Safe legislation had been introduced in the last several sessions of Congress and won bipartisan support as well as the backing of several trade groups.
The Act protects financial institutions by granting immunity to certain individuals and institutions when they voluntarily disclose suspected financial abuse of a senior citizen to law enforcement and appropriate government agencies. The Act applies to all banks, federal, state, and state-chartered credit unions, insurance companies and agents, investment advisers, broker-dealers, and transfer agents. The Act is effective as of May 24, 2018.
To qualify for immunity, certain conditions must be met. First, the individual who reports abuse must be an employee of the covered financial institution. Second, the financial institution must train the employee and keep records of this training. This training should include how to identify and report suspected exploitation of a senior citizen both internally and to government officials, and the need to protect the privacy of each individual customer. The institution may provide its own training, or it may contract with an outside entity to do so. Third, the disclosing individual must serve in a supervisory, compliance, or legal capacity at the time of disclosure. Fourth, the individual must disclose the suspected exploitation in good faith and with reasonable care. Finally, the report must be made to a “covered agency,” which includes state financial regulatory agencies, the SEC, law enforcement agencies, or adult protective services. Although not required, the report should be made in writing in the event that immunity is challenged. If these conditions are met, the individual and covered financial institution are granted immunity from civil and administrative proceedings for reporting this abuse.
Reporting by individuals in supervisory, compliance or legal functions will force investigation of suspected abuse cases through the chain of command before official reports are made. While this provision of the law limits the types of employees who can obtain immunity for reporting, it allows financial institutions to implement a process with a paper trail to ensure that the requirements of the Act are met in case a report is later challenged.
One important change from the first draft of the bill to the final version is the addition of “legal function” to the definition of employees who may qualify. Granting immunity to employees in a “legal function” opens up the possibility of the Act applying to attorneys. However, it is unclear whether this section applies only to in-house counsel. As the Act limits immunity to “employees” of a covered institution, reports by outside counsel on behalf of a financial institution may not be protected.
Importantly, reporting suspected financial abuse under the Act is voluntary, not mandatory. Nevertheless, the Act only establishes the minimum rules, and states are not preempted from having stricter requirements. According to a Consumer Financial Protection Bureau report in 2016, over 25 states and D.C. required some form of mandatory reporting by financial institutions. Although current Alabama law only mandates reporting by broker-dealers and investment advisors, future legislation could broaden this requirement.
One thing to keep in mind going forward is the potential for federal regulations to clarify or change the requirements for financial institutions under the Senior Safe Act. The Act does not specify a single regulatory agency with power to enforce the act, but regulations are always a possibility as several agencies, including FINRA, govern financial institutions.
Now that the Senior Safe Act is the law of the land, financial institutions and certain employees are better protected if they report suspected elder exploitation. However, potential regulations, state statutes, and some ambiguous terms have the potential to change the requirements and protections for financial institutions going forward.
Maynard Nexsen’s Elder Care Practice is conducting training programs to help financial institutions protect their senior customers and comply with the new law. Please contact one of the attorneys below to learn more or to schedule training.
John is a Shareholder and member of the Health Care practice at Maynard Nexsen.
John represents clients in the health care industry in navigating regulatory and compliance projects. He routinely provides counsel in matters ...
Jennifer is a corporate lawyer who focuses her practice on business planning, estate & trust planning, general counsel services, and tax planning. Her clients include closely-held businesses and their owners, as well as ...
One of the Firm's founding Shareholders, Kirby is a member of the Firm’s Estate, Trust, & Business Planning Group. He is also a former member of the Firm's Executive Committee.
Kirby has practiced in the area of wills, estates, and ...
Doug is a member of Maynard Nexsen’s Public Finance Practice, and he serves as Co-Chair of the firm's Senior Living & Long-Term Care Practice group. He represents clients in all aspects of public finance transactions, including ...
Gaines focuses his practice in the health care sector, counseling clients regarding regulatory, compliance, certificate of need, Medicaid and Medicare, and HIPAA issues. In addition to his health care focus, Gaines serves as ...
Cynthia is a Shareholder and serves as Chair of the Estate Planning, Fiduciary Advisory Services, and Fiduciary Litigation practice groups at Maynard Nexsen, in which she has practiced since 1989. She also has served two terms on the ...
- Joshua Duvall Publishes Article for Law360 on DOD's Proposed Rule for its Cybersecurity Maturity Program
- FAR Council Publishes its Semiannual Regulatory Agenda
- Joshua Duvall Quoted by Law360 on Recent OMB Guidance Impacting Small Business Contracting
- White House Announces OMB Guidance to Increase Small Business Contracting Opportunities
- Recent GAO Decision Highlights GAO's Jurisdiction Over Protests Involving Task Orders
- SDVOSB Self-Certification Grace Period to Expire: Submit Applications by Dec 31 To Remain Eligible While Applications are Pending
- Recent FCA Settlement Highlights Small Business Certification Issues in Private Equity Transactions
- 4 Takeaways: GAO Bid Protest Annual Report to Congress for FY 2023
- FCC Space Bureau launches its Transparency Initiative
- Joshua Duvall Quoted by Law360 on Federal Court Decision Impacting the SBA 8(a) Program
- February 2024
- January 2024
- December 2023
- November 2023
- October 2023
- August 2023
- July 2023
- June 2023
- February 2023
- January 2023
- December 2022
- November 2022
- October 2022
- July 2022
- June 2022
- April 2022
- March 2022
- February 2022
- January 2022
- December 2021
- November 2021
- October 2021
- September 2021
- August 2021
- September 2019
- August 2019
- July 2019
- July 2017
- May 2017
- March 2016
- January 2013