I 111th CONGRESS 2d Session H. R. 6305 IN THE HOUSE OF REPRESENTATIVES September 29, 2010 Mr. Baca introduced the following bill; which was referred to the Committee on Financial Services, and in addition to the Committee on Ways and Means, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned A BILL To require financial institutions to offer services to protect seniors from affinity scams, to report suspected affinity scams, and for other purposes.

1.

Short title

This Act may be cited as the Preventing Affinity Scams for Seniors Act of 2010 or the PASS Act of 2010.

2.

Findings

The Congress finds the following: (1)Financial exploitation of the elderly is becoming an increasingly familiar problem. Regular review of news headlines reveals that elders and vulnerable adults are victimized routinely by frauds and scams at the hands of strangers as well as loved ones. (2)Older individuals may be targeted merely because they possess more assets, such as savings, annuities, and retirement accounts, stocks and bonds, insurance policies, and property than younger people. People over 50 years of age control at least 70 percent of the net worth of the nation’s households. (3)Those elders with cognitive impairments, mental health conditions, or physical disabilities may be dependent upon others (family members, friends, formal and informal caregivers, or court-appointed representatives) for assistance in making financial decisions or carrying out daily transactions, and therefore may be even more vulnerable to theft, exploitation, or undue influence. (4)Affinity scams on seniors involve transactions in which a person trusted by the senior uses the relationship to defraud the senior. Millions of elderly are scammed each year, losing at least 2,600,000,000 a year to thieves, many of whom are in their own families (conservative estimate given of the schemes left unreported). (5)Elder financial abuse is commonly linked with other forms of abuse and neglect and threatens the health, dignity, and economic security of millions of older Americans. Elder financial abuse has received limited attention because it is not regarded as visible, life-threatening, or newsworthy as is the physical or sexual abuse of elders. (6)Financial exploitation can be devastating to the victim and is often traced to family members, trusted friends, or caregivers. Financial abuse often occurs with the implied acknowledgment and consent of the elder person and can be more difficult to detect. (7)Elder financial abuse affects elders and their families in significant and long-lasting ways by putting enormous emotional duress on the elders, increasing their risk of depression, decreasing their quality of life, and increasing unnecessary institutionalization. (8)The financial services industry is often the first to detect a change in the pattern of customers with whom they have regular contact. This puts institutions in a unique position to assist in protecting customers and upholding the inherent trust relationship with clients.

3.

Definitions

For purposes of this Act: (1)

Affinity scam

The term affinity scam means a transaction in which a person trusted by a senior, such as a caregiver, relative, guardian, new friend, or service provider, claims to share similar interests or values with the senior, establishes a relationship with the senior (either on the person’s own initiative or through some other method, such as a court-appointed guardianship), and then uses the relationship to defraud the senior. (2)

Financial institution

The term financial institution means— (A)an insured bank (as defined in section 3(h) of the Federal Deposit Insurance Act (12 U.S.C. 1813(h)); (B)a credit union; and (C)a thrift institution. (3)

Senior

The term senior means an individual who is at least 65 years of age.

4.

Affinity scam education and training

(a)

Staff education and training

Each financial institution shall— (1)educate the staff of the financial institution about affinity scams and how to identify transactions that may be part of an affinity scam; and (2)train staff members on educating seniors about affinity scams. (b)

Senior customer education

Each financial institution shall provide educational materials and other information to seniors who maintain a deposit account with the financial institution about affinity scams and how to identify transactions that may be part of an affinity scam. (c)

Education and training oversight

The Bureau of Consumer Financial Protection shall— (1)issue such regulations as are necessary to carry out this section; and (2)periodically audit financial institutions to ensure compliance with such regulations.

5.

Senior protection accounts

(a)

In general

Each financial institution shall offers seniors a type of checking account to be known as a senior protection account. (b)

Senior protection account requirements

(1)

In general

With respect to a senior who maintains a senior protection account with a financial institution, if the financial institution receives a transaction request to debit such account and, before processing the transaction, the financial institution identifies the transaction as possibly being part of an affinity scam, the financial institution shall— (A)not process the transaction; and (B)initiate an investigation in order to determine if such transaction is part of an affinity scam or is legitimate. (2)

Investigation

With respect to a transaction that is the basis of an investigation described under paragraph (1)(B), a financial institution shall— (A)notify the senior whose account the transaction would debit, if processed, that the financial institution— (i)has identified the transaction as possibly being part of an affinity scam; and (ii)has not yet processed the transaction, pending the result of an investigation; (B)if the financial institution determines that the transaction is part of an affinity scam— (i)notify the senior of such determination; (ii)refer such transaction to the appropriate law enforcement agency; and (iii)report such transaction to the Bureau of Consumer Financial Protection; and (C)if the financial institution does not determine that the transaction is part of an affinity scam— (i)notify the senior of such determination; and (ii)process such transaction not later than 7 business days from the date on which the investigation was started, unless instructed otherwise by the senior. (3)

Designation of staff person

Each financial institution shall designate a single staff person who shall be notified whenever a staff person identifies a transaction that is possibly part of an affinity scam. (4)

Liability

A financial institution that fails to process a transaction or that refers a transaction to law enforcement pursuant to the requirements of this subsection shall not be liable to any person under any law or regulation of the United States, any constitution, law, or regulation of any State or political subdivision of any State, or under any contract or other legally enforceable agreement (including any arbitration agreement), for such failure or referral. (c)

Rulemaking

The Secretary of the Treasury shall issue such regulations as are necessary to carry out this section. (d)

Tax deduction

(1)

In general

The Secretary of the Treasury shall by regulation establish a deduction to be allowed in computing the taxable income of financial institutions for purposes of the Internal Revenue Code of 1986. (2)

Amount of deduction

Such deduction with respect to any financial institution for a taxable year shall be an amount equal to 0.77 percent of the average of the amount of deposits held by such financial institution in senior protection accounts for each day during such taxable year. (e)

Civil liability

Any financial institution that fails to comply with any provision of this section with respect to a senior shall be liable to such senior in an amount equal to the sum of the following: (1)

Actual damages

The amount of any actual damage sustained by the senior as a result of such failure. (2)

Attorneys' fees

In the case of any successful action to enforce any liability under paragraph (1), the costs of the action, together with reasonable attorneys' fees. (f)

Nondiscrimination

A financial institution may not discriminate against seniors in any fees or other charges required by the financial institution in order to cover the cost to the financial institution of implementing the requirements of this Act.

6.

Adding affinity scams targeting seniors to the suspicious transaction reporting requirement

Section 5318(g)(1) of title 31, United States Code, is amended— (1)by striking The Secretary and inserting the following: (A)

Possible violation of law or regulation

The Secretary ; and (2)by adding at the end the following new subparagraph: (B)

Possible affinity scam targeting seniors

(i)

In general

The Secretary shall require each financial institution, and each director, officer, employee, or agent of such financial institution, to report any suspicious transaction relevant to a possible affinity scam. (ii)

Definitions

For purposes of this subparagraph: (I)

Affinity scam

The term affinity scam means a transaction in which a person trusted by a senior, such as a caregiver, relative, guardian, new friend, or service provider, claims to share similar interests or values with the senior, establishes a relationship with the senior (either on the person’s own initiative or through some other method, such as a court-appointed guardianship), and then uses the relationship to defraud the senior. (II)

Senior

The term senior means an individual who is at least 65 years of age. .

7.

Effective date

This Act, and the amendments made by this Act, shall take effect after the end of the 6-month period beginning on the date of the enactment of this Act.