Report: Arizona among states with numerous financial complaints from older consumers

Photo of Wells Fargo bank in downtown Phoenix on Feb. 11, 2015. (Photo by Domenico Nicosia/Cronkite News)

PHOENIX – Arizona ranks among the top states for financial complaints by older consumers, a consumer group said in a report released Thursday.

Seniors are more likely to be financial prey than members of other age groups, whether the target of advertising that glosses over the downsides of reverse mortgages with soothing celebrity testimonials, dealing with mounting pressure over debt collection or succumbing to credit reporting agencies that have inaccuracies or inconsistencies, according to the Consumer Financial Protection Bureau.

“Scammers may look to take advantage of their savings, home equity, or guaranteed income. Older consumers facing a savings shortfall may be harmed by low-balance or overdraft fees at banks, or be tempted to take on credit or use products such as reverse mortgages, whose risks may not be fully understood,” the report said.

Nationally, three out of 10 consumer complaints are about mortgages, the report said. And the major credit reporting agencies account for 95 percent of credit report complaints.

The report, based on a database of 72,000 complaints, came from the Public Interest Research Group, known as PIRG.

“Older consumers can make for tempting targets for scammers,” said Diane Brown, executive director of Arizona PIRG. “We find they can often face unique challenges and threats.”

Brown said older consumers might become targets because scammers are aware that many retirees have Social Security or fixed incomes, as well as potential equity in their homes.

Alex Juarez, Arizona AARP spokesman, said the elderly are often targeted in phone calls and email, including people claiming they’re from the IRS or another agency that requires immediate debt payment.

“Education is the number one factor to prevent these types of scams,” Juarez said. “If the deal is too good, it may not be true.”

Arizona is a state where a significant number of older people come to retire, which is likely why it is ranked number 10 in complaints per person, he said.

The report said of the 31 percent of complaints received about mortgages, most issues are about traditional loans while some complaints involve reverse mortgages, which are home equity loans specifically offered to households with members over the age of 62.

Businesses tout reverse mortgages as a way for people to get access to money through their homes while still living in them.

But “reverse mortgages also can be marketed as an easy way to access cash for retirement, while glossing over the obligations of the borrower,” the report said, with potential downsides like the loss of home equity or the inability to leave the house to family.

“Consumers need to be careful with predatory lending,” Juarez said. “When dealing with a large or a small bank, always do your homework.”

Brown said she doesn’t think banks are intentionally taking advantage of older consumers, but sometimes information from lenders can be lacking and unclear, and often explained with complicated wording.

Juarez said AARP runs a fraud watch network and hotline to help seniors recognize and report fraud and scams.

The report from PIRG, which works to protect consumers, recommended that policy makers “extend protections from unfair treatment by debt collectors,” set protections against inaccurate and unfair credit reports and crack down on exorbitant and unfair bank fees, such as overdraft fees.

-Cronkite News video by Trevor Fay