Why do we make it so easy to steal money from the elderly?

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Regulators trying to combat financial fraud certainly have their hands full lately.

They scored a rare victory on Dec. 20 when Wells Fargo & Co. announced it will pay $3.7 billion to settle a consumer fraud allegation by the Consumer Financial Protection Bureau — $1.7 billion in civil penalties and $2 billion in consumer restitution.

The settlement reveals just a few ways thieves lie to people to get their money. In this case, it was a large bank that exploited customers for mortgages, car loans and overdraft fees. According to the CFPB, “consumers were illegally assessed fees and interest on auto and mortgage loans, had their cars wrongly repossessed, and payments on auto and mortgage loans were misused by the bank.”

The fact that a well-established bank like Wells Fargo was forced to reimburse its customers should raise fears of other, newer types of financial fraud. Independent fraudsters have also been busy lately, in some cases taking advantage of new financial products, like Venmo and Zelle, or situations like Covid incentive checks.

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

The nation’s 401K system is partly to blame. It asks retirees to manage large financial accounts right around the age when cognitive decline has the highest risk of onset. Malicious people know this. Unlike a traditional pension or annuity, where a retiree receives a regular check but doesn’t have access to the capital, the 401(k) system essentially attaches a thousand-dollar bill to grandma’s jacket and only puts her on the bus. 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 fraud and scams targeting seniors. The predatory schemes have been around for decades, but the pandemic has made things worse as thieves have attempted to isolate the elderly and check the motivations of families.

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 — that make it easier to cover their tracks. Sometimes, scammers do both: Retired school bus driver and widow Aurelia Costigan of Pittsburgh, Pennsylvania, was defrauded of $1,800 (she got it back) by a man posing as the bank teller who alerted her to an unauthorized charge from in Tennessee and said she needed a Zelle account and her social security number to protect her account.

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, scammers often pose as would-be lovers to gain access to an elderly person’s money, explained Marti DeLiema of the University of Minnesota. Romance scams lead the pack in terms of cost to seniors. the average person over 70 loses $10,000.

Financial companies should do more to prevent all of this. For example, the gift card industry knows when money is loaded onto a gift card by a customer in one place and then immediately redeemed by someone in another place. But being flagged as suspicious activity – or applying lower transaction limits – would cost them money.

The government and regulators could also do more than go after the bad guys after they’ve stolen the money. They could make the elderly less of a target: Investing in Social Security and other safe, reliable forms of annuity-like retirement income would take that thousand-dollar bill out of grandma’s pocket.

The CFPB has done a good job cracking down on fraud at Wells Fargo. Unfortunately, there is still much work to be done.

More from Bloomberg Opinion:

• Holiday Shoppers, Skip the Store Credit Cards: Alexis Leontis

• The best gift you can give your kids is in a boring envelope: Stuart Trow

• Should You Trust TikTok, YouTube’s Finfluencers?: Erin Lowry

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Teresa Ghilarducci is the Schwartz Professor of Economics at the New School for Social Research. He is the co-author of “Rescuing Retirement” and a board member of the Economic Policy Institute.

More stories like this are available at bloomberg.com/opinion

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