Financial fraud is, unfortunately, a common practice in America that costs individuals and businesses billions of dollars each year. And research shows that people underreport financial fraud, which can also be difficult to investigate and prosecute.[i] As a result, staying aware of different scamming techniques is an important way to proactively protect yourself and your family. Here are a few common financial scams that can especially target seniors.
1. Reverse Mortgage Scams
A reverse mortgage is a type of loan that people aged 62 and over can use to help them have access to money. When you do a reverse mortgage, you tap into the equity of your home for cash.[ii] This loan may make sense if you expect to live in your home for additional years and want access to additional money.
A reverse mortgage scam occurs when fraudsters in real estate, financial services, and related companies do one of two actions: 1) steal your property’s equity or 2) use you to unknowingly aid them in stealing equity from a flipped property. When these criminals victimize seniors, they typically offer free homes, investments, and assistance with a foreclosure or refinance.[iii] They can also try to use you as a “straw buyer” — someone who purchases on behalf of someone else, which is illegal in cases of fraud — in scams that flip properties.[iv] [v] If you are considering a reverse mortgage loan, you can check if the organization is an FHA–approved lender in the HUD database.[vi]
2. Funeral and Cemetery Fraud
For many retirees, paying ahead on your funeral and cemetery expenses can help ease the burden for your family during a time of grief. Unfortunately, these prepaid contracts can also come with unexpected outcomes: Deceptive operators can overcharge you for services and list themselves as your financial beneficiaries.[vii] Even though regulatory standards are in place to protect people during these transactions, the laws vary by state — which can leave openings for people to defraud unsuspecting customers.[viii]
When entering into these arrangements, you will want to ensure that you closely scrutinize your contract details and compare costs between providers, so you understand the market. And since different states require you to purchase different goods and services, ensure you know which laws apply where you or your loved one intend to hold your funeral and burial.[ix]
3. Grandparent Scams
Another common way that people can try to defraud you is by calling you and claiming to be a relative in need of money. When doing so, the con artist will pretend to be a family member like a grandchild or someone representing that relative like a lawyer. They typically call late at night and claim that they need you to wire them funds immediately to help them out of a troubling situation.[x] They could claim the money is for bail, hospital fees, or another pressing financial need. To keep up the ruse and avoid suspicion, they will also request that you don’t tell any other relatives, like their parents, who wouldn’t approve of the trouble they are in.[xi] By doing so, they create this emotional bond that you are the only person they can trust and who can help.
If you receive a call from someone claiming to be your relative and asking for you to wire them money, do not do anything. First, contact your relative’s other family members to validate the person’s story. If you cannot verify the story, you may be a victim of attempted fraud.
You can report Grandparent Fraud to:
• Local police department
• Attorney general of the state you live in
• Fraud.org, a project of the National Consumers League
These financial frauds are just a snapshot of the various ways criminals can try to take advantage of you and your money — and seniors are especially vulnerable. We encourage you to continue educating yourself and your family about fraud and stay aware. If you would like to discuss any financial concerns you may have or simply revisit your personal financial details with us, we are more than happy to talk. Contact us at (518) 581-1642 today.