Swanson warns of financial scams
Jennifer Brookens — Staff WriterArticle Photos
Fact Box
Tips to avoid scams:
o Never disclose your credit card number, check routing information, or other banking information to telemarketers or other solicitors.
o Do not believe claims that you need to pay in order to "collect your winnings" from a contest or to obtain a line of credit.
o If you receive correspondence claiming that your financial institution or account has been jeopardized, do not immediately disclose your account or other information. Contact the company directly.
o Be wary of solicitations asking you to wire money or send payment to a foreign country. It may be difficult for law enforcement officials to pursue lost funds outside the jurisdiction of the United States.
o Never respond to correspondence regarding a foreign lottery. These lotteries are illegal.
o Don't be rushed. People often make poor decisions when they are hurried.
FAIRMONT - Sometimes "Minnesota nice" can work against us.
Many seniors grew up in a time when business was conducted on trust and reputation. Unfortunately, crooks and con artists often prey on that trust and politeness.
"As the population ages, we're seeing more and more seniors," said Minnesota Attorney General Lori Swanson during a recent trip to Fairmont. "Seniors are also targets for financial fraud. They are more likely to listen to a sales call instead of just hanging up."
Fraud can financially devastate older citizens. Many live on a fixed income such as a pension. According to the attorney general's office, about one-fifth of Minnesotans over the age of 60 live solely off of Social Security.
Four areas of concern Swanson highlighted are insurance companies that sell policies that are not appropriate for seniors, living trust mills, predatory mortgage lending, and federal banking regulations regarding credit card companies.
"I have filed four lawsuits against insurance companies who have sold long-term deferred annuities to seniors," she said. "We have reached settlements with two of those cases, where about 10,000 seniors lost about $500 million. The companies would get a senior to take out a long-term annuity, and the insurance company would tie up that money for years. For example, if an 80-year-old took out an annuity (with these companies), the company would not allow the money to be touched until they were 95. If they tried to make any withdrawals, they would be heavily penalized, and likely would not have any money left."
Allianz, a company that settled with the state, sold more than 4,900 deferred annuities to citizens over the age of 70 since 2000, with a total worth of nearly $259.4 million.
Another target for Swanson is living trust mills. Living trust mills target seniors and use hard-sell and scare tactics to sell investment products. Benefits of the products and the negative consequences are usually exaggerated in order to scare or manipulate the senior into a sale.
Swanson warns seniors to be wary of companies that sell living trusts along with annuity products or other investments. Ask about any tax consequences or penalties that are incurred if the investment is transferred or principal is withdrawn.
Along with these "financial planning" scams, the old-fashioned scams are just as prevalent today, and technology provides con artists with a new arsenal of tools.
"Consumer education is important," Swanson said. "With the technology advances and the economy the way it is, everyone is looking for a quick fix. But you have to remember the age old advice that if it sounds too be good to be true, it probably is. And usually once that money's gone, it's gone."
But seniors are not the only ones being targeted by scam artists. Predatory mortgage lending, exploding interest rates and a tight economy all are contributing to a mortgage crisis. During the housing boom, many homeowners were urged to refinance with an adjustable mortgage rate with a low introductory rate. After the initial rate ends, the interest rate skyrockets, in some cases doubling the monthly payments.
To add insult to injury, scams such as equity stripping and mortgage foreclosure consulting pretend to offer a lifeline to a homeowner facing foreclosure. Either the homeowner is convinced to sign his home over to the con in exchange for a loan that never appears, or an organization or individual offers to counsel the homeowner with financial advice or help negotiate payments.
Then, once the upfront fees are collected, no service is provided. Under Minnesota law, a foreclosure counselor is prohibited from collecting fees until after it has provided services.
Finally, Swanson also is going after federal banking regulations.
"These credit card companies are out of control," she said. "Last year, they charged Americans more than $17 billion in just fees alone. They also look for any reason to raise the rates on consumers. Just one late payment can cause a low initial rate of 7 or 8 percent to jump up to 22 percent."
There is an estimated $900 billion in credit card debt today, compared to $8 billion in 1968. Unfortunately, many of the stakes are stacked against the consumer, and states are limited in their ability to regulate the practices of national credit card companies.
"There need to be more laws to regulate these credit card companies," Swanson said. "Our office has received about 30,000 complaints from consumers who have had their interest rates increased, even on pre-existing balances."
Swanson has addressed the Federal Reserve System, Office of Thrift Supervision and the National Credit Union Administration with proposed rules that target the unfair deceptive acts and argue for truth in lending and savings.
If you or someone you know has been targeted by a possible fraud, or would like to file a complaint, contact the Minnesota Attorney General's office at 1-800-657-3787, or at www.ag.state.mn.us.
