The Federal Reserve, CFPB, FDIC, OCC, SEC, NCUA, FTC, and CFTC recently issued Interagency Guidance to clarify that banks and other financial institutions are generally free to report suspected exploitation of elderly customers to government authorities without violating federal privacy provisions of the Gramm-Leach-Bliley Act.
This guidance is good news to banks that were previously stuck between a rock and a hard place with respect to the tension, and sometimes conflict, between state and federal authorities. Nearly all states have passed legislation encouraging the reporting of suspected financial abuse of elderly, and some states, including Kansas, even require such reporting. Prior to the recent Interagency Guidance, many industry professionals had concerns that compliance with state and other federal voluntary and mandatory reporting laws would violate the privacy restrictions found in Gramm-Leach-Bliley and its regulations.
Generally, under Gramm-Leach-Bliley, before disclosing personal information to third-parties, financial institutions are required to notify customers and provide an opportunity to opt-out of the disclosure. The Interagency Guidance clarifies that the exceptions to this requirement generally extend to reporting suspected financial abuse of the elderly. Thus, financial institutions are free, and even encouraged, to report suspected financial abuse because financial institutions are often in a unique position to prevent and detect such financial exploitation.
According to the Interagency Guidance, possible signs of financial abuse include changes in banking habits, such as large and frequent withdraws of funds, uncharacteristic non-payment for services, and the closing of accounts and CDs without regard to penalties. Additionally, interactions and relationships with other adults or caregivers may indicate financial abuse. For example, financial abuse may be present where another individual shows excessive interest in the elderly customer’s finances or assets, the elderly customer does not or is not allowed to speak, or where the elderly customer exhibits unusual submissiveness toward another adult.
Banks should consider training staff and implementing policies and procedures to facilitate the identification and prompt reporting of suspected financial abuse of elders. This is especially true in those states (such as Kansas) where reporting is required.
If you would like to read the recently released Interagency Guidance, please click here.