Why do we make it so easy to steal seniors' money?

Regulators trying to crack down on financial fraud have certainly had their hands full lately.

They notched a rare win on Dec. 20, when Wells Fargo announced it would pay $3.7 billion to settle a consumer fraud allegation by the Consumer Financial Protection Bureau — $1.7 billion as a civil penalty and $2 billion for restitution to consumers.

The settlement exposes just a few of the ways thieves lie to people to take their money. In this case, it was a major bank taking advantage of customers on mortgages, auto loans and overdraft fees. According to the CFPB, "Consumers were illegally assessed fees and interest charges on auto and mortgage loans, had their cars wrongly repossessed, and had payments to auto and mortgage loans misapplied by the bank."

That a well-established bank like Wells Fargo has been forced to compensate its customers should raise fears about other, newer types of financial fraud. Freelance fraudsters have also been busy lately, in some cases taking advantage of novel financial products like Venmo and Zelle, or benefits like COVID stimulus checks.

A lack of adequate safeguards has made it too easy for criminals to prey on the unwary — especially on American senior citizens.

The nation's 401(k) system is partly to blame. It asks retirees to manage large financial accounts right about the time cognitive decline has the highest risk of setting in. Malevolent people know this. Unlike a traditional pension or annuity, where a retiree gets a regular check but doesn't access the capital, the 401(k) system essentially safety-pins a thousand-dollar bill to Grandma's jacket and puts her on a bus alone. It's a situation ripe for fraud.

The Senate Aging Committee, led by Bob Casey of Pennsylvania and Tim Scott of South Carolina, held hearings in September to zero in on frauds and scams that target seniors. Predatory schemes have existed for decades, but the pandemic made things worse as thieves preyed on seniors' isolation and families' stimulus checks.

Thieves have posed as federal and state agencies to steal government benefits. Others take advantage of mobile payment apps — think Zelle, Venmo, CashApp and PayPal — which make it easy to cover their tracks. Sometimes, the fraudsters do both: Retired school bus driver and widow Aurelia Costigan from Pittsburgh, Pennsylvania, was scammed out of $1,800 (she got it back) by a man posing as a bank official who warned her of an unauthorized charge from Tennessee and said that she needed a Zelle account and her Social Security number to protect her account.

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Old-fashioned gift cards are also ripe for fraud: In 2021, 27% of adults 60 and older who lost money paid a scammer using a gift card. In these scams, the fraudsters often pose as would-be lovers to gain access to a senior's money, Marti DeLiema of the University of Minnesota has explained. Romance scams lead the pack in terms of costs to seniors; the average person over the age of 70 loses $10,000.

Financial companies should be doing more to prevent all of this. For instance, the gift card industry knows when money is loaded onto a gift card by a customer in one place and then redeemed immediately by someone in another place. But flagging that as suspicious activity — or implementing lower transaction limits — would cost them money.  

The government and regulators could also do more than just chase after the bad guys after they've stolen the money. They could make older people less of a target: Investing in Social Security and other safe, reliable forms of annuity-like retirement income would take that thousand-dollar-bill off of Grandma's lapel.

The CFPB has done good work in cracking down on fraud at Wells Fargo. Unfortunately, there's still a lot of work left to do.