Prevalence of Fraud Victimization in the Elderly

Fraud and the Elderly

Elderly Fraud Victimization

Prevalence and Predictors of Fraud Victimization among the Elderly

Prevalence and Predictors of Fraud Victimization among the Elderly

Applied Research and Consulting (ARC, 2013) conducted a recent national online survey for the FINRA Investor Education Foundation, with the goal of quantifying the prevalence of fraud victimization among the American adult population. Any American over the age of 40 was invited to participate, but for the purposes of meeting the 2010 Census distribution for age, ethnicity, and geographic location the sample was limited to 2,364. The primary focus of the study was financial fraud, including red flag persuasion tactics, cold calls, free lunch seminars, oil and gas scams, promissory note scams, pump and dump, pre-IPO scams, multi-level marketing, digital currency, lottery scams, and affinity (relatives) fraud. On a scale of one to ten, with one representing the most risk averse, persons over the age of 65 averaged 3.72 for willingness to make risky investments, which was lower than the average for younger adults (ARC, 2013, p. 9). The characteristics predicting risk aversion were Caucasian, low-income, and having a high school, but no college education. This finding suggests that as a person ages the aversion to financial risks increases.

The increased risk aversion characterizing the elderly is important because the elderly are exposed to fraudulent solicitations more often than their younger counterparts (ARC, 2013, p. 18). Among adults over the age of 65 a full 93% reported being solicited within the past year, compared to 78 and 83% of adults between the ages of 40 and 49, and 50 to 64, respectively. These solicitations came in the form of telephone calls (17%), mailings (41%), emails and the internet (43%), and face-to-face encounters (16%) (ARC, 2013, p. 11). Unfortunately, 49% of survey respondents over the age of 65 invested and 16% lost money, compared to about 35% of younger adults investing and 10% losing money. Older Americans are therefore more susceptible to financial fraud than adults between the ages of 40 and 64. The personality traits found to be associated with financial fraud victimization was extroversion, conscientiousness, and openness (ARC, 2013, p. 23). For fraud victims who reported losing a substantial amount of money the personality trait that best predicted victimization was openness.

Holtfreter and colleagues (2014, p. 52-55) conducted a similar study, but instead of looking at financial fraud among adults over the age of 40 they focused on consumer fraud among adults 60-years and older residing in Florida and Arizona. The choice of these locations was based on the high percentage of retirees living in these states. The number of adults recruited to participate in the telephone survey was limited to 1,000 from each state. The mean age of the combined sample was 72.5 years and ranged up to 99 years. Close to 60, 23, and 15% were married, widowed, or divorced, respectively and two-thirds were women. Among this demographic nearly 60% reported being solicited by a fraudulent offer in the previous year and nearly 14% were victimized. These statistics are a bit misleading because 25.3% of all older adults who were solicited lost money to the scam.

Holtfreter and colleagues (2014, p. 56-72) also quantified consumer fraud victimization by fraud type. Shopping/purchasing fraud consisted of paying for unnecessary repairs (1.2%), paying for but not receiving repairs (3.5%), faulty product or service (1.1%), and phony subscriptions (10.1%). Financial fraud was broken down into paying to improve finances, business opportunities, and solicitation of financial information, while the rates of victimization for these categories were 0.4, 0.5, and 0.8%, respectively. The rates of victimization for other types of consumer fraud were 2.6, 0.5, 0.2, and 2.7 for phony charity/religious organizations, phony prize, refinancing mortgages, and identity theft, respectively.

The characteristics associated with consumer fraud victims over the age of 60 were racial minority status and still working (Holtfreter, Reisig, Mears, & Wolfe, 2014, p. 79-83). The other demographic variables that did not predict victimization were age, gender, marital status, and education, although less than a high school diploma and being between the ages of 73 and 79 may have been identified as risk factors if a larger sample had been surveyed. If the sample is limited only to the participants who reported being targeted by a fraud scheme then the risk factors for victimization become 73-years or older and racial minority (Holtfreter et al., 2014, p. 83). If a larger sample had been recruited for the study then female gender, still working, married, and no high school diploma would probably also have been identified as significant risk factors.

The risk factors for elderly fraud victimization are similar to the risk factors associated with elder mistreatment (Forum on Global Violence Prevention; Board on Global Health; Institute of Medicine; National Research Council, 2014, p. 19, 73). These risk factors include female gender and financial assets, along with shared living arrangements, social isolation, health problems, and/or disability. The risk factors for elder neglect were low-income, social isolation, racial minority status, and poor health.