What Is the Best Way to Prevent Financial Exploitation?

March 22, 2017 at 9:23 am Leave a comment

The Senate Republican’s inclusion of a Financial Abuse Proposal in their house budget resolution means that the question of what powers New York banks and credit unions should have to prevent the financial abuse of the elderly and disabled is sure to be part of the negotiations as the legislature and governor move to put a budget in place by the April 1st deadline.

The core of the senate’s plan would authorize credit unions and banks to refuse to execute financial transactions involving suspected financial abuse of a vulnerable adult. For purposes of this new section, a vulnerable adult means an individual who because of mental and/or physical impairment, is unable to manage his or her own resources, or protect himself or herself from financial exploitation. This power would extend to accounts including trust funds in which the vulnerable adult is a beneficiary. Institutions would also be authorized to forward account information to social service departments and law enforcement officials.

All of the powers outlined in the bill are discretionary, meaning that credit unions couldn’t face liability for refusing to block transactions. Financial institutions and their employees would receive qualified immunity from civil or criminal actions if they act in good faith in reporting incidents. Finally the Department of Financial Services would be required to develop a voluntary education program for financial institutions.

Once again this is simply a proposal. Nevertheless, it appears more and more likely that credit unions will now have additional powers to block certain types of transactions. Keeping in mind that the opinions I express in this blog are mine and mine alone, yours truly has always been an unabashed dinosaur when it comes to bills such as this one. The senate’s proposal, however, goes a long way to addressing issues involving liability and the discretion institutions should have.

One area that needs further clarification is the interplay between fiduciaries, including persons given powers of attorney authority and the new statute. The legislature already has an extensive framework in place to ensure that vulnerable adults are adequately protected from unscrupulous fiduciaries. In contrast giving banks and credit unions the power to effectively override fiduciary powers could create a great deal of confusion about what fiduciaries can and can’t do. You can find the proposed section in Part RR of Senate Bill 2006-B.


Entry filed under: General, New York State. Tags: .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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