September 29, 2013

Federal Financial Agencies Issue Guidance Relevant to New N.C. Statute Protecting Older Adults from Financial Exploitation

You may recall that shortly after Senate Bill 140, which creates new mechanisms to protect older adults and disabled adults from financial exploitation, was enacted by the General Assembly, I summarized and analyzed the legislation on this blogJust a few days ago, several federal agencies jointly issued official guidance designed to make it easier for financial institutions to cooperate in those efforts.




Photo credit: Ed Yourdon / Foter
The CFPB, FRB, FDIC, OCC, NCUA, SEC, CFTC and FTC all came together to issue "Interagency Guidance on Privacy Laws and Reporting Financial Abuse of Older Adults" on September 24, 2013.  The guidance is meant to assure financial institutions that the Gramm-Leach-Bliley Act (GLBA), which controls the privacy of consumer financial information, will not prohibit the reporting of suspected elder financial abuse to appropriate governmental agencies.  It says that "reporting suspected financial abuse of older adults to appropriate local, state, or federal agencies does not, in general, violate the privacy provisions of the GLBA or its implementing regulations."  For example, the FDIC's privacy regulations, which apply to state-chartered banks that are not members of the Federal Reserve System, provides in Part 332, 15(a)(7)(i) an exception from the non-disclosure rules "[t]o comply with federal, state, or local laws, rules and other applicable legal requirements."  The guidance makes clear that the FDIC believes this would apply in cases where state law calls for the reporting of suspected elder financial abuse.

The guidance does not go as far as to sanction to disclosure of information to non-governmental persons, such as a suspected victim's family members or close friends.  Recall that the N.C. Act gives financial institutions permission to solicit a list of trusted individuals from older and disabled adults, and requires that those financial institution notify the named individuals when exploitation of the customer is suspected.  Despite this omission in the federal guidance, financial institutions may derive some relief from other language in the GLBA regulations that create exceptions for disclosure of consumer's information:
"With the consent or at the direction of the consumer, provided that the consumer has not revoked the consent or direction; or
To protect against or prevent actual or potential fraud, unauthorized transactions, claims, or other liability...."
The federal agencies' guidance closes with a reminder that the filing of a Suspicious Activity Report (SAR) by a financial institution may be appropriate in some instances of suspected elder financial abuse, and references a May 2013 FinCEN publication in which the CFPB's Office of Financial Protection of Older Americans discusses the use of SARs for elder financial abuse reporting and in which FinCEN points out the new box on the SAR form to indicate suspected elder abuse. 

When the N.C. Act becomes effective on December 1, 2013, financial institutions may be more willing to participate in the solicitation of lists of trusted individuals and to report suspected abuse given the federal agencies' statement of support in this new guidance. 

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