Protect residents from financial abuse

The federal Consumer Financial Protection Bureau (CFPB) recently published a guide for long-term care (LTC) and assisted living (AL) facilities Protecting Residents from Financial Exploitation provides case studies and recommended actions when abuse is suspected.

The CFPB was created by the federal government in the wake of the 2008 financial meltdown and has wide authority to deal with the financial abuse of American consumers.

As the guide points out, a facility receiving federal funding is responsible to report “any reasonable suspicion of a crime,” and this would include financial crimes (42 USC 1320b-25). This law also includes protection for employee whistleblowers.

What the law does not specify is the duty and authority to investigate, that is, how much the facility must delve into resident financial and family matters. This guide certainly implies a significant duty to protect residents. Consult your legal counsel for the exact requirements in your state.

When the possible abuse is being committed by a facility employee, there is a duty to discover and correct. But as the guide makes clear, much of the abuse is committed by family members and financial surrogates (next of kin, powers-of-attorney [POAs] and guardians) over whom the facility has very little authority. This point matches the findings of a decade of my research into financial abuse of the elderly.


The three major categories of abusers are listed as:

  1. trusted persons/financial surrogates,
  2. strangers, and
  3. facility personnel

Facilities often are placed in the middle of family conflicts, some of which might center around financial matters. Getting into the middle of family battles is not a rewarding position, but at some point protecting the residents might require investigation and referral to authorities (be especially aware of state laws requiring referral to human services agencies).

Facilities have no specific investigative powers, and interfering in family relationships has its own dangers. The facility is charged with being aware and alert to the condition of the resident, but at the same time there can be problems with diving into the middle of family or financial relationships.

Often the abuse is taking place far away from the facility, and often the abuse is carried out slowly over a period of time. Picking up the warning signs might be difficult, if not impossible.

One of many questions for your attorney is, “What is our liability if we miss criminal activity by a trusted person or stranger?”  Another is “if we make a report and it turns out not to be true, or cannot be proven, do we get sued for defamation?”


The mental alertness and orientation of residents will vary from 100 percent functional to near 0 percent cognitive abilities, and while every one of the residents has some vulnerability to scams, the low-functioning residents may be especially vulnerable.

Even the most alert and oriented resident in the building may have trouble comprehending complicated financial transactions. All of us who have ever explained health insurance to a family understand how confusing modern financial transactions can be.

Is an appointed guardian a guarantee of financial integrity? Unfortunately, many jurisdictions are now wrestling with a sad reality: most guardians are not being monitored, and this situation allows some to misuse guardianship funds, so the answer is no. And persons holding financial powers of attorney get almost no scrutiny until somebody notices a problem.

The administrative and nursing staff should be trained to be vigilant, particularly when asked to witness or notarize legal documents, such as POA forms and  “deathbed wills.” Generally these requests should be refused by staff and referred to the administrator.


The CFPB offers an outline for facility action:

  1. prevent,
  2. recognize,
  3. record, and
  4. report.

Prevention is difficult because the facility has more responsibility than authority. The facility has a major duty to prevent theft and abuse by facility staff and its contractors, but family members and financial surrogates are difficult to monitor and control.

And if a resident wants to give his/her money to a church group, when is this genuine religion and when is it grand theft? Who wants to make that call?

For example, the pastor and members of a church visit one of your residents frequently. Does your resident have the right to give all of her property and money to the church? If she is legally “competent” she may well be within her rights, but does this situation seem to take advantage of the resident and, therefore, bear the taint of abuse? If so, how does a facility prevent such conduct?

Recognition is often difficult, but sometimes signs do appear. Administrators would seem to work under a “reasonable professional” assumption: If a trained and licensed administrator sees untoward conduct, then there should be recognition of abuse.

Often the abuse comes on the radar in a more obvious way; the resident is unable to pay the facility bill. This situation allows the facility to contact family and financial surrogates and inquire about payment. If no answer is forthcoming, or multiple answers are forthcoming, more investigation is prudent.

The CFPB guide lists many signs and symptoms and case studies, a review would be helpful for senior facility staff.

Record whatever observations raised the alarm. Copy and safeguard any relevant documents, clinical notes and administrative records as appropriate. Reporting is the act of contacting the appropriate law enforcement agency; adult protective services; city police, sheriff or state police; and presenting your documentation.

These are difficult issues, and the CFPB documents provide guidance while also creating an expectation of increased vigilance by the facility.

Tom Ealey has long-term care experience as a CPA (Ohio), management consultant and regulatory compliance expert and author. He is a professor of business administration at Alma College in Alma, Mich. Reach him at He is the author of Consumer Protection Series: Protecting Seniors from Financial Abuse, which is available as an e-book.

Disclaimer: This article is not an attempt to provide legal, accounting or consulting advice. Such advice should be obtained from licensed and qualified professionals.

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