CFG CFG Elder Financial Exploitation & Consumer Protection 2 — Questions and Answers
Question 1: Which of the following best describes 'undue influence' in the context of elder financial exploitation?
- A senior making independent financial decisions despite family objections
- A situation where a person uses their position of power or trust to override an elder's free will to gain financial control (Correct answer)
- Standard financial advice provided by a licensed advisor
- An elder voluntarily delegating financial decisions to a family member
Correct answer: A situation where a person uses their position of power or trust to override an elder's free will to gain financial control
Undue influence occurs when someone exploits a position of trust, authority, or dependency to manipulate an older adult into financial decisions that benefit the influencer rather than the elder.
Question 2: What is 'diminished financial capacity' and why is it important for a CFG to understand?
- A senior's decision to reduce spending in retirement
- A decline in the ability to manage financial tasks due to cognitive impairment, increasing vulnerability to exploitation (Correct answer)
- The reduced purchasing power of retirement assets due to inflation
- A legal designation that terminates an elder's right to manage investments
Correct answer: A decline in the ability to manage financial tasks due to cognitive impairment, increasing vulnerability to exploitation
Diminished financial capacity refers to a decline—often linked to cognitive impairment—in the ability to manage money and financial decisions, which makes older adults more susceptible to financial exploitation and errors.
Question 3: Which document legally authorizes a trusted individual to manage an older adult's financial affairs if they become incapacitated?
- A living will
- A durable power of attorney (DPOA) (Correct answer)
- A do-not-resuscitate order (DNR)
- A HIPAA authorization form
Correct answer: A durable power of attorney (DPOA)
A durable power of attorney (DPOA) designates an agent to manage financial affairs and remains effective even if the principal becomes incapacitated.
Question 4: What is a 'reverse mortgage' and what consumer protection concern is most associated with it for older adults?
- A loan where seniors pay extra principal monthly; concern is prepayment penalties
- A loan allowing seniors to borrow against home equity with repayment deferred until the home is sold or vacated; concern is aggressive marketing and misunderstanding of terms (Correct answer)
- A mortgage that reverses to a rental agreement after death; concern is eviction of heirs
- A refinancing product for lower rates; concern is credit score impact
Correct answer: A loan allowing seniors to borrow against home equity with repayment deferred until the home is sold or vacated; concern is aggressive marketing and misunderstanding of terms
A Home Equity Conversion Mortgage (HECM) lets seniors access home equity without monthly payments; consumer concerns include high fees, aggressive sales tactics, risk of displacement if taxes/insurance lapse, and heirs losing the home.
Question 5: Which type of scam most commonly targets older adults through unsolicited phone calls or emails claiming they have won a prize or lottery?
- Ponzi scheme
- Advance fee fraud (419 scam) (Correct answer)
- Affinity fraud
- Pump-and-dump scheme
Correct answer: Advance fee fraud (419 scam)
Advance fee fraud involves convincing victims they must pay fees or taxes upfront to claim a prize, inheritance, or lottery winnings that do not exist.
Question 6: What is 'affinity fraud' and why are older adults particularly vulnerable to it?
- Fraud targeting people based on their credit score
- Fraud where scammers exploit trust within a close-knit community or group to promote fraudulent investments (Correct answer)
- A scheme that uses fake insurance products sold through affinity groups
- Online fraud targeting seniors who affiliate with social media groups
Correct answer: Fraud where scammers exploit trust within a close-knit community or group to promote fraudulent investments
Affinity fraud exploits trust within religious, ethnic, professional, or social communities by having a trusted group member promote a fraudulent investment scheme to fellow members.
CFG CFG Elder Financial Exploitation & Consumer Protection 2
Which of the following best describes 'undue influence' in the context of elder financial exploitation?