Many bank tellers know a lot about their customers — their grandkids, their hobbies and their spending patterns.
Now, if those spending patterns change in ways that suggest someone might be taking advantage of them, employees of banks, credit unions and other financial institutions can feel free to speak up. No longer do they need to worry that reporting their suspicions to authorities violates a federal privacy law, federal regulators say.
Financial exploitation of the elderly is rampant, costing seniors $2.9 billion in 2010, according to a MetLife estimate based on news accounts.
Financial institutions are well positioned to detect exploitation of elderly customers, but they and other financial advisers might be reluctant to report their suspicions out of fear that they will violate the Gramm-Leach-Bliley Act, regulators said last week.
The act establishes how and when a financial institution is allowed to disclose nonpublic personal information to third parties not affiliated with the institution.
“The central point is that reporting suspected elder financial abuse to the appropriate law-
enforcement authorities is typically the right thing to do, and generally will not violate the Gramm-Leach-Bliley Act,” said Richard Cordray, director of the Consumer Financial Protection Bureau and a former Ohio attorney general.
Cordray and other regulators said banks and credit unions often can be instrumental in preventing fraud against older customers.
“For example, many older consumers are known personally by the tellers in their local banks and credit unions,” he said. “These employees may be able to spot irregular transactions, abnormal account activity, or unusual behavior that signals financial abuse sooner than anyone else can."
Financial institutions and others have an obligation to bring it to the attention of authorities when they see potentially fraudulent or other illegal activity going on, said Martin Gruenberg, chairman of the Federal Deposit Insurance Corp.
“Privacy protections are important for everyone, but those privacy protections provide clear exceptions in the case of addressing fraud or other legal misconduct,” he said.
Ohio Attorney General Mike DeWine, who has worked to educate seniors and their families about scams, said the clarity from regulators can help investigators.
“We encourage common-sense solutions to the serious problem of financial abuse of older adults,” he said. “Privacy is an important concern, but financial professionals are often the first to spot patterns of abuse, and reporting abuse to law enforcement can help protect victims from further harm.”
Banking groups also support the move.
“Taken at face value, this is a good idea,” said James Thurston, spokesman for the Ohio Bankers League. “It gives financial institutions a certain level of comfort in working with law-enforcement officials to prevent elder abuse.”
The guidance especially helps smaller banks that have long-standing relationships with customers, said Richard Riese, a senior vice president for the American Bankers Association.
“You know what people’s routines are, and so you are in a position at times to sense if something might be out of the ordinary,” he said.
Riese said he is not worried about banks getting into trouble for reporting suspicions that turn out to be baseless.
“Bank employees use their best judgment,” he said. “They’re not trying to be nosy. They recognize that there are all sorts of possible explanations.”