The Texas Banker's Association recently prepared their legislative agenda for the new session, and at the top of the list was work on legislative authorities for banks to protect elders from financial exploitation. A Focus Report of the House Research Organization of the House of Representatives details the issues before the legislature, which is tasked with examining issues related to financial exploitation, and the mechanisms that allow financial institutions and securities brokers to prevent and report financial exploitation.
Elders often do not report instances of financial exploitation. They are afraid they will be found not competent to manage their affairs after having been victimized. They fear retaliation or a family member is involved they want to protect. They do not believe they will live long enough, or are strong enough to deal with reporting a crime and dealing with litigation.
Adult Protective Services, APS, is the agency in Texas charged with protecting seniors and adults with disabilities from abuse, neglect, and financial exploitation. They do not, however, have the statutory authority to investigate episodes of consumer fraud or other financial exploitation from a stranger. APS uses a standard that includes an ongoing relationship with the elder. These statutory limits on the type of financial malfeasance APS can investigate are one area the legislature is considering changing.
Reporting suspected exploitation of an elder is required, but financial institutions are also under restrictions regarding privacy. The Consumer Financial Protection Bureau detailed in a report from March 2016 guidelines for financial institutions to act to prevent and report elder financial exploitation. Their conclusion was that generally, financial institutions were protected against liability from violations of privacy when reporting elder exploitation.
The Texas State Securities Board enforces reporting of evidence of fraud regarding securities; the same issues regarding privacy liability versus required reporting exist for financial agencies working with securities. The Legislature will look at tools and procedures for financial and securities institutions to protect and report instances of fraud and exploitation without risking liability over privacy disclosures.
The other measure being considered is a mechanism to hold financial transactions when fraud is suspected. Proponents of the measure suggest financial institutions are in a unique position to notice and stop fraud before it occurs. Concerns are that removing the ability to manage financial affairs will create a hardship for seniors, and recommend client contracts instead. A contract could detail instances under which a financial transaction could be held for review, agreed upon by the elder and the bank.
When an instance of financial exploitation occurs by a person who holds a valid power of attorney, financial institutions have few resources to refuse to honor the power of attorney without liability. Jake Posey noted, this issue of refusing to honor a valid power of attorney has been debated in the legislature previously, but a resolution that gives liability protection remains unresolved.
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