By Linda Stern
WASHINGTON (Reuters) - Federal financial regulators on Wednesday created a new Office of Older Americans to focus on the financial abuses they say cost seniors some $3 billion a year.
The Consumer Financial Protection Bureau named Hubert H. "Skip" Humphrey III, who is on the board of the AARP, to direct the office and focus on such issues as reverse mortgages and retiree bankruptcies.
The CFPB, created by the Dodd-Frank financial reform legislation, is still awaiting the Senate-stalled confirmation of Richard Cordray, nominated to be its director.
"Seniors have become targets of those using unscrupulous practices who want to defraud them out of their savings and the equity in their homes, which by some estimates is more than $3 trillion," said Raj Date, a senior Treasury adviser who has been running the CFPB in the absence of an official director.
"Seniors are losing an estimated $2.9 (billion), almost $3 billion a year to financial abuse," said Humphrey, 69, who is the son of former vice president Hubert Humphrey, Jr. He told reporters he would hit the ground running, focusing first on gathering information about the effects on seniors of home-improvement scams and questionable financial advice, and of the impact of high-fee investment products like reverse mortgages.
"I seem to be getting all of these invitations to free-lunch investment seminars," Humphrey said. "I have a sneaking suspicion they are not free."
Bad investment advice is a key issue affecting older Americans, in part because they have more assets than younger people and thus must make more financial choices, Christina Martin-Firvida of the AARP told Reuters. And older Americans often find themselves making complex and difficult financial decisions while in the midst of life crisis, such as the long -term illness of a mate.
"We've heard about some folks being talked into taking reverse mortgages and then using the money to buy an annuity," she said. "Frankly that's a very poor financial decision."
Of concern to both Humphrey and the AARP are the growth in financial advisers who are "senior certified."
Humphrey said he intended to work with other regulators to make sure seniors "are not misled by advisers who say they specialize in seniors when they are not certified to do so."
Martin-Firvida said she would like to see the agency get tougher on what certification in that field means.
"That designation is very spotty," she said. "You could be a financial adviser, sign up for a golf weekend in Palm Springs with a seminar thrown in on top, and walk away with a certificate that says you have a senior designation."
She said that the rules for how one earns a senior certification vary from state to state, and in some "it means next to nothing."
QUESTIONING REVERSE MORTGAGES
The CFPB already has said that it is conducting a study of reverse mortgages, which many older homeowners use to get cash while they stay in their homes. There are about half a million reverse mortgages already outstanding, said the AARP, and many of them have high fees and complex terms.
Seniors who take out reverse mortgages through the government-sponsored Home Equity Conversion Mortgage program are required to have counseling before they finalize the loan. But the details of how that counseling is conducted and what it includes could be more firmly established, according to the AARP.
Humphrey also mentioned home improvement scams, sweepstakes problems, telephone scams and fraudulent lotteries in his first conversation with reporters as a representative of the consumer agency.
In addition, the AARP is asking his office to review the broad area of debt and credit and how it is affecting seniors now. Retirees carry more debt than they used to, and more than 27 percent of bankruptcy filings now come from a person over 55, according to the Institute for Financial Literacy.
(This story corrects the headline to billion not trillion, and in first graph and adds new quote in fifth paragraph.)
(Additional reporting by Tom Brown; Editing by Beth Gladstone and Walden Siew)