Michigan Legacy Takes A Scientific Approach To Spotting Elder Financial Abuse

Credit unions can’t stop America’s population from aging, but they can make the process easier.

In 2010, the U.S. Census recorded the highest number of people age 65 or older in the record’s history, making up 13% of the population, and this “Boomer Generation” effect is only expected to continue. Some estimates predict that figure will nearly double by 2050.

This has led many financial institutions to consider phenomena like the Great Wealth Transfer, but there’s another trend to consider as well: the steady rise of elder financial exploitation (EFE). This form of fraud gets expensive fast for the victims, their families, and their financial institutions. Earlier this year, a report by the AARP estimated that victims of EFE lose $28.3 billion annually.

After seeing members go through this firsthand, Carma Peters, CEO of Michigan Legacy Credit Union ($217M, Wyandotte, MI), began looking for solutions.

“When an older individual loses their entire life savings, who’s going to care for them? That’s been our heart behind it,” she says.

A few years ago, Michigan Legacy launched a pilot program with the Institute of Gerontology (IOG) at Wayne State University in Detroit to identify potential fraud and exploitation of vulnerable adults. Today, every employee undergoes training on the topic, and the number of incidents the credit union sees has decreased dramatically.

“It was actually one of the easiest implementations we’ve ever done,” Peters says.

Half Of Surveyed Members Were At Risk

The partnership began when Peters was introduced to Dr. Peter Lichtenberg, a national expert in financial capacity assessment and financial exploitation of older adults.

“He was telling me about all his research and that he had been trying to work with a financial institution, but nobody would work with him, which blew my mind,” the CEO recalls. “I said, ‘I’ll do it!’”

As a starting point, the IOG provided free training to all MLCU staff on how to recognize and respond to EFE. Then it became a question of how to implement this among members.

That year, the credit union decided to introduce Lichtenberg’s elder financial exploitation risk assessment during its annual Money Smart Week. MLCU hosted a giveaway where any member who voluntarily completed the assessment and shared their score with the credit union would be entered to win a $250 Visa gift card.

The results were shocking.

“We are a low income-designated credit union, and half of the members that completed the risk assessment over the age of 50 were at moderate to high risk for financial exploitation,” says Peters.

In response, the IOG’s Financial Vulnerability Survey was adopted as routine but optional for members age 50 and older. MLCU also worked with its core processor and internal auditing team to introduce a due diligence code. When a member is identified as being at higher risk, a code is entered into their account so that internal auditing can better watch for abnormal activity.

“It’s not going to stop all [financial exploitation], but it’s another tool in our tool chest,” says Peters.

MLCU also worked with Lichtenberg to develop a training program for financial institution employees to learn how to identify and discuss cognitive risk factors before exploitation occurs. That training is mandatory for all MLCU employees regardless of their role or department, and is repeated each year with applicable updates.

PERCENTAGE REPORTING A FRAUD LOSS & MEDIAN LOSS BY AGE
FOR U.S. ADULTS
SOURCE: FEDERAL TRADE COMMISSION 

From Obstacles To Improved Outcomes

Peters says one of the most valuable takeaways of the IOG’s training is how to have conversations with members who push back against concerns.

“When an older individual is a victim, they’re ashamed and embarrassed, and sometimes they don’t talk about it or report it,” Peters explains. “Even if they’ve been a member for 30 years, they might believe the person manipulating them over their financial institution. We were able to learn to ask questions in a different way to get them to stop and think more often.”

MLCU also keeps subject matter experts in each branch who can clearly explain the vulnerability assessment’s purpose to apprehensive members.

“They tell the members, ‘I know you want to believe it won’t happen to you, but we’ve seen it over and over again. It’s a tool in our toolbox to help you. It is strictly voluntary. You do not have to take it, but we strongly encourage it.’”

In addition to offering the assessment to new members, the credit union will also advise members to take it whenever major life changes occur, such as the death of a spouse. Peters says those types of events can further put someone at risk.

MLCU also met with representatives of Michigan’s Adult Protective Services department to understand why the agency was closing cases the credit union submitted.

“We were reporting the financial things like the money that they’re losing, but Adult Protective Services is not a financial services enforcement division. It’s more about emotions and behaviors to them, so that’s been helping us have a higher rate of cases reviewed at the state level,” Peters says.

Though Michigan doesn’t require financial institutions to report potential exploitation to authorities, 26 states, D.C., and Guam all have some form of mandated reporting.

Peters says year-over-year data captured by MLCU’s internal auditors confirms the partnership has shown positive, measurable results.

“Like many credit unions, our size can make it difficult for us to respond when an incident of fraud like this occurs,” the CEO says. “Since its adoption, the number of reported incidents has dropped by more than 50 percent.”

No Gatekeeping Here

Data voluntarily collected from MLCU’s members over the years has enabled further research and grant work by the institute, and the training and resources are not exclusive.

“There are a couple other credit unions that he has also helped, and he will absolutely do this for any credit union throughout the country – and it’s completely free,” Peters says.

In addition to working with financial institutions directly, Lichtenberg also created the SAFE Program, or Successful Aging through Financial Empowerment, a resource for older adults and their caregivers who have experienced some form of EFE and need help filing police reports, contacting credit agencies, closing accounts, and more.

Stopping Member Fraud Before It Starts. When fraud surged, Langley FCU didn’t just respond — they restructured. Hear how a dedicated fraud-mitigation council helped reduce incidents and improve member trust. Watch now.