CFPB Targets Practices Impacting the Elderly

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On July 13, the Consumer Financial Protection Bureau (CFPB) Director Richard Cordray delivered remarks at the White House Conference on Aging and signaled the CFPB’s plans to issue an advisory later in 2015 to assist financial institutions with preventing, recognizing, and reporting elder financial abuse. He noted that the CFPB’s “Office for Older Americans has done much great work around elder justice” and has “issued studies, guides, and advisories to arm seniors and their caregivers with the information and tools they need to protect themselves and their precious retirement savings.”

The Office for Older Americans has already released results of a focus group study on reverse mortgage advertisements and issued an advisory expressing concern about such ads. A reverse mortgage is a home loan that allows older homeowners—usually age 62 or older—to borrow against the accrued equity in their homes and defer payment of the loan until they die, sell, or move. The loan proceeds are generally provided to the borrowers as lump-sum payments, monthly payments, or as lines of credit.

The Office for Older Americans’ study involved a review by focus groups of 97 advertisements for reverse mortgages on TV, radio, in print, and on the internet. The results showed that the focus groups were confused about whether reverse mortgages were indeed loans. There was a misguided impression that the loans related to a government program and allowed participants to stay in their homes “as long as they want.” A more objective complaint was that the fine print in the ads was illegible, despite the fact that it conveyed critical details.

The study made it clear that the CFPB is concerned about the marketing efforts surrounding reverse mortgages and their effect on the elderly. Many of the ads in use were identified as problematic, and the study concluded that “lender advertisements undoubtedly contribute to consumers not understanding that taking out a reverse mortgage in their early eligibility years has risks.” The study, along with Cordray’s recent comments highlighting the susceptibility of the elderly to abusive practices, indicate the CFPB’s escalated focus on issues affecting older consumers. Companies offering financial products and services to such consumers should thoroughly assess their business and advertising practices and work to minimize the risk of consumer confusion, thereby reducing the risk of CFPB scrutiny.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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