Purported to strengthen elder and dependent adult financial abuse protections by clarifying the duties of banks and financial institutions to safeguard against fraud, SB 278 was introduced earlier this year by Senator Dodd (SD 3). The measure is sponsored by the Consumer Attorney’s of California, a group representing trial attorneys who have filed numerous lawsuits against banks for “assisting” in elder financial abuse. In his press release introducing the measure, Dodd, who represents parts of Sacramento, Solano, Yolo, and Napa counties, stated that “banks must do a better job of preventing the most vulnerable Californians from getting ripped off. This bill clarifies that if these institutions assist in financial elder abuse – either knowingly or otherwise – they can be held liable. It will motivate them to detect predatory practices before victims are robbed of their resources, dignity and quality of life – losses from which they may never recover.”

A coalition of organizations in opposition this measure, led by the California Bankers Association, strongly disagrees with the notion that SB 278 is a mere clarification of existing law. This measure fundamentally changes the way businesses engage in commerce with seniors by establishing a de facto fiduciary or conservator relationship. It requires insurance providers, caregivers, technology service providers, real estate agents, banks, and credit unions to question their senior customers’ financial decisions and reject those decisions when they find them unwise. The problem, of course, is that these businesses are ill-equipped to second-guess their customers’ decision. Financial institutions, for example will be forced to make very conservative decisions about transactions initiated by seniors and this may lead to processing delays that will impair anything from the most routine transactions to time-sensitive wire transfers. Because the measure imposes the same civil liability on banks as the actual perpetrator of the crime, banks will be forced to apply enhanced scrutiny of transactions.

The measure also raises several questions about how financial institutions could even operationalize the measure’s requirements. There are numerous situations where a financial institution could not identify fraud. A senior could transfer money to an exploiter using online financial services. In this scenario, the mere fact that an institution provided the online financial platform could expose them to civil liability under this measure. Similarly, if a senior provided credential information and the exploiter uses the senior’s own device, a financial institution would have no way to detect that fact and could be deemed to have assisted.

While the proponents of this measure contend that it helps seniors, we believe it is discriminating because it is based on the premise that, as a class, people 65 and older are not as capable of making wise financial decisions as other customers. It forces financial institutions to treat seniors differently and requires a heightened scrutiny on their financial decisions- all so that trial attorneys can sue banks and exhort settlements from them under the guise of consumer protection