No Good Deed Goes Unpunished. The Unintended Consequences Of Protecting Elderly Customers
Many banks have programs to protect elderly customers against financial abuse. SARs are required and being filed – 68,000 from 2012 to 2017. Reporting elder abuse does not violate federal privacy rules. DFS has provided guidance and a list of red flags and recommends reports to Adult Protective Services (APS). However, some banks refuse to complete transactions or completely freeze accounts when elder abuse is suspected.
Although well-meaning, freezing accounts may expose the bank to risks. Bouncing a check on an account frozen for elder abuse may be “wrongful dishonor” under the Uniform Commercial Code if it turns out there is no elder abuse. Refusing a pre-authorized withdrawal may also create liability to the customer.
The Elder Law Section of the New York State Bar Association is seeking to amend the banking law on these issues. Although the proposal would allow banks voluntarily to refuse transactions when elder abuse is suspected, the proposal imposes too many administrative burdens on the good Samaritan bank. I am spearheading an effort of the Banking Law Committee of the Bar Association to modify the proposal to protect banks from risks and reduce administrative burdens if the bank refuses or delays a withdrawal. I will report developments on this blog. With the governorship and both houses of the state legislature controlled by the same party, approval could happen at any time.
Today’s Takeaway? If you suspect elder abuse, file a SAR and report to APS. However, don’t refuse a transaction unless you are 1,000% certain that it is not authorized by your customer. And, check back here periodically to see if we are able to protect banks from liability without creating undue administrative burdens.