For Americans ages 60 and up, the reports on how many have fallen prey to financial fraud are pretty staggering. Seniors lost more than $2.9 billion to scammers in 2011, according to a MetLife report, a figure that’s up 12 per cent since 2008 and would most likely be higher if all fraud was actually reported. In Maine alone, the Consumer Financial Protection Bureau projects more than 80 per cent of senior scams go undocumented.
The problem is so severe the CFPB set up an entire office to handle consumer issues faced by elder Americans, deploying teams to some areas of the country that have been hardest hit.
The most disheartening part about “grandparent” scams is that the elderly are targeted so heavily by crooks for reasons that are often beyond their control – both economical and biological.
They rely on family and friends. In a recent report, The Associated Press’s David Carry points out that 5 per cent of seniors who fell victim to scams in 2009 were duped by their own relatives. This is a soft spot fraudsters love to take advantage of and is commonly used in investment schemes, the CFPB notes:
“Unfortunately, older Americans are often the targets of investment scams such as Ponzi schemes and illegal offshore investments. Knowing how to spot ‘fraudsters’ can often be challenging, especially when they have been referred by a friend or family.”
They’re on fixed incomes. Gen Xers might not see much in the way of Social Security when (and if) they retire, but today’s seniors are mostly living on fixed incomes that are ripe for scammers’ picking. “Seniors tend to rely more on the assets they’ve accumulated, as they may no longer be earning a steady income,” says Deborah O’Malley of Investing Answers. “Combined with being intellectually vulnerable, this makes them attractive prey for would-be scammers.”
They’re often lonely. Some older consumers would be thrilled if their granddaughter or grandson suddenly lavished them with emails and phone calls – even if they only wanted cash. “That’s why telemarketing scams are so successful,” Karen Turner, head of a newly formed elder fraud unit in the Brooklyn District Attorney’s Office in New York City, told Carry. “They’re delighted to have someone to talk with – they almost welcome the calls.”
They love their country. It seems patriotism has put some elder Americans at greater risk, since they often trust authorities and anyone calling from a “government agency” gets a quick pass, AARP’s Sid Kirchheimer tells Carry.
They have a harder time sniffing out fakes. As Harvard University economics professor David Laibson, told O’Malley, cognitive abilities begin to deteriorate with age, making it tougher for the elderly to make financial decisions. “No matter how well-educated we are, financial literacy and savvy decrease as we age,” Laibson said.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.