Enact Mandatory Financial Elder Abuse Reporting in PA

On December 11, 2013, Professor Katherine C. Pearson, of Penn State Law (The Dickinson School of Law, Carlisle, PA Campus), posted a four-page article entitled Law Financial Abuse and Exploitation in Pennsylvania: The Importance of Early Response and Clearer Lines for Recovery, available as a PDF download on the Social Science Resource Network.

On January 15, 2014, Professor Gerry Beyer referenced the article on the Wills, Trusts & Estates Prof Blog in a posting entitled Article on Financial Abuse in Pennsylvania.  He included the SSRN abstract of the article:

Protection of older adults from exploitation requires a careful balance. On the one hand is the concern for individual autonomy; on the other hand, there is increasing recognition of the potential for vulnerability to influence, manipulation or outright fraud. 

Pennsylvania is considering amendment of its Older Adult Protective Services Act. Professor Pearson's written testimony for hearings in December 2013 addresses measures to encourage early reporting of suspicions of abuse by banks and other financial institutions. 

Further, to assist in early recovery, Professor Pearson recommends adoption of a private right of action under the Act to provide statutory grounds for recovery of money or other property, or appropriate injunctive relief.

Katherine's suggestions are set forth on page two of her written testimony, which was presented during a hearing held by the Aging and Older Adult Services Committee, of the Pennsylvania House of Representatives, in Harrisburg, PA, on December 11, 2013.

1. That to facilitate early reporting, Pennsylvania take additional measures to create an environment where banks and other financial institutions are more likely to report suspicions of financial abuse, and 
2. That to facilitate early recovery, Pennsylvania create a private right of action under the Older Adult Protective Services Act (OAPSA), permitting the victim of exploitation (or the victim's legal representative) to allege statutory grounds against the perpetrator in order to seek recovery of money or other property, or other appropriate injunctive relief.

Her first recommendation mirrors one that I have advocated since 2007, and again referred last year to the Pennsylvania Bankers Association for consideration.  Seven years ago, California first mandated financial institutions to report suspected financial abuse of an elder or a dependent adult.

James P. Bessolo, a senior attorney with Northern Trust, N.A., summarized and then explained in great detail (with extensive citations) California's then-new law in his article entitled Mandatory Reporting Requirements for Financial Elder Abuse (October, 2007; Vol. 30, No. 7), published in the Los Angeles Lawyer.

In an effort to combat financial abuse, California law requires individuals in certain positions, who are known as mandated reporters, to report incidents that reasonably appear to constitute elder or dependent adult abuse.  The reports are generally made to the local Adult Protective Services (APS) agency or to local law enforcement.

Effective January 1, 2007, officers and employees of financial institutions became mandated reporters of suspected financial abuse of an elder or dependent adult. 

The [California] Elder Abuse and Dependent Adult Civil Protection Act defines "financial abuse" as occurring when a person or entity takes, hides, appropriates, or retains real or personal property of an elder or dependent adult for wrongful use and/or with the intent to defraud, or assists in doing so. * * *

I recall reading articles at that time about the initial opposition to that proposal, and the subsequent concerns during the phase-in period from financial institutions after Governor Arnold Schwarzenegger signed the legislation on August 29, 2005.  

Under that expansion of California's Elder Abuse and Dependent Adult Civil Protection Act, originally enacted in 1982, California banks and other financial institutions would become liable if they would fail to report suspicions of financial elder abuse, beginning January 1, 2007. For example, see: Financial Institutions Need to Know Elderly Customers (January 2006), by Steven Wasserman and Sunny Shapiro.

Since then, the California experience seems to have worked.  Indeed, the mandatory reporting was streamlined in 2011 to enable quicker reporting through the Internet.  See: Regulatory Compliance Bulletin: Elder Abuse Law Extended; Internet Reporting Now Permitted, posted on November 2, 2011, by the California Bankers Association.  It stated, with citations, the modifications to the system established in 2007 affecting banks:

Pursuant to a new California bill SB 718, mandated reporters of elder or dependent adult abuse, including banks, may submit mandatory reports through a confidential Internet reporting tool if the county or long-term care ombudsman implements such a system. * * *

If the initial report is made through this tool to APS or ombudsman, as applicable, rather than by telephone then the reporter is not required to follow up with a written report. This would represent a significant reduction in the reporting burden on all reporters. * * *

Our neighbor state, Maryland, joined the movement by its new mandatory reporting law, which took effect in October, 2012, as reported by Eileen Ambrose in The Baltimore Sun in her article, New Md. law aims to halt financial abuse of the elderly (05/14/12).

Maryland banks and credit unions are likely to be among the first to notice that an elderly customer is being financially exploited by a con artist or an unscrupulous relative.

So it makes sense that these institutions take part in an effort to protect older Marylanders from being ripped off. Thanks to a new state law, they will.

Starting in October, banks and credit unions here will be required to report suspected financial exploitation of Marylanders age 65 and up. They must convey their suspicions within 24 hours by phone to Adult Protective Services — part of the state's Department of Human Resources — or law enforcement and must follow up in writing. Financial institutions that fail to do so will face a penalty of as much as $5,000.

Financial institutions usually aren't keen on more regulation. But many are on board in this case, saying the mandate will raise awareness of a serious problem. * * *

The articles notes:

Many other states already have such a reporting mandate, and it's about time Maryland joined them. * * *

Around 20 states require the reporting of such cases, including California since 2007. By the end of 2010, California banks reported that more than 26,000 cases of potential elder abuse had been turned over to authorities.

The Maryland Legislature adopted the House bill and the companion Senate bill, unanimously.

I support both of Katherine's recommendations.  

However, I believe that the first priority is for Pennsylvania to join the states that have enacted statutes to mandate potential financial elder abuse reporting by financial institutions.  

Such a law in Pennsylvania could be crafted as an amendment to the existing Older Adult Protective Services Act using statutory models from those other states.  The effect, after implementation, would be to uncover much more financial elder abuse, earlier.

Such mandatory reporting by banks and financial institutions is workable, would have a substantial and immediate effect to reduce financial elder abuse, and therefore should be pursued by legislators in Pennsylvania.