Older consumers in the marketplace:

issues and trends

Office for Older Americans | October 2017

Consumer Financial
Protection Bureau
Disclaimer

This presentation is being made by a Consumer Financial Protection Bureau

representative on behalf of the Bureau. It does not constitute legal interpretation,
guidance or advice of the Consumer Financial Protection Bureau. Any opinions or
views stated by the presenter are the presenters own and may not represent the
Bureaus views.

This document was used in support of a live discussion. As such, it does not
necessarily express the entirety of that discussion nor the relative emphasis of topics
therein.

Consumer Financial
Protection Bureau
About the CFPB

The CFPB works to make consumer financial markets work for

consumers, responsible providers, and the economy as a
whole.

Consumer Financial
Protection Bureau
3
Office for Older Americans

Protect older consumers Help older consumers

from financial harm make sound financial
decisions as they age

Learn more about us at consumerfinance.gov/older-americans

Consumer Financial
Protection Bureau
 Comparison of dollars spent on financial
marketing versus financial education

$17 billion spent annually on marketing financial

products and services
(not counting retirement products, college loans, and
investment products)

compared to

$670 million spent on financial education.

Consumer Financial
Protection Bureau
5
Background
Older Americans: a growing and diverse
population

Consumer Financial 6
Protection Bureau
A growing population
120.0
96.7
100.0 90.8
84.2
80.0 68.3
Millions

60.5
60.0

40.0

20.0

0.0
2016 2020 2030 2040 2050

The number of older consumers 62+ is expected to grow

from 60.5 million in 2016 to 96.7 million in 2050.

Source: Census Bureau, National Population Projections

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Protection Bureau
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An increasingly diverse population

65+ Population 2005 2015

% non-white 14.7 16.9

% non-married 43.9 44.8

% living with grandchildren 4.6 5.1

% that speaks other language than English 13.8 14.9

at home
% in the labor force 14.7 17.6

Source: Census Bureau, American Community Survey 2005/2015

Consumer Financial
Protection Bureau
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8 in 10 consumers who are 65 years or older own their
homes
Homeownership rate by age group, 2016
90
79.5
80 74.8
69.8
70
58.7
60
Percent

50

40 34.7

30

20

10

0
Under 35 years 35 to 44 years 45 to 54 years 55 to 64 years 65 years and over

Source: Census Bureau, Current Population Survey Housing Vacancy

and Homeownership, 2016
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Protection Bureau
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Home equity is the most valuable asset for the largest
number of older consumers

Home Equity 21%

IRAs/Keoghs 11%

Stocks 3%

401(k) and
employer-based 2%
plans

Auto 2%

CDs 1%

0% 5% 10% 15% 20% 25%

Source: Fed. Reserve Board, 2016 Survey of Consumer Finances

Consumer Financial
Protection Bureau
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Many consumers have not saved enough for retirement

Percent of consumers with a projected savings shortfall by generation, 2014

100%

80% 43% 42% 42%

With a Savings
60% Shortfall

40% Without a
59% 58% Savings Shortfall
57%
20%

0%
Early Boomers (born Late Boomers (born Generation X (born
1946-1955) 1956-1964) 1965-1976)

Source: EBRI 2014 Retirement Security Projection Model

Consumer Financial
Protection Bureau
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Social Security is an important source of income as
people age
Average share of income from Social Security and
other sources by age group, 2014

100%

90%
33% 29%
80% 39%
45%
70%

60%

50%

40%
67% 71%
30% 62%
55%
20%

10%

0%
6569 7074 7579 80 or older

Social Security Other sources of income

Source: Social Security Administration, 2014

Consumer Financial
Protection Bureau
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Claiming age affects monthly benefits

Monthly payments can increase by as much as 75% if an eligible

worker claims at age 70 instead of age 62. 132%
140% ($1320)
124%
116% ($1240)
120% 108% ($1160)
100% ($1080)
93% ($1000)
100% 87% ($930)
80% ($870)
75% ($800)
80% ($750)

60%

40%

20%

0%
62 (earliest 63 64 65 66 (full benefit 67 68 69 70 (maximum
claiming age) claiming age) claiming age)

Consumer Financial
Protection Bureau
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 Planning for Retirement: Before you claim

Easy to use, interactive tool

Three simple steps to help
consumers navigate their Social
Security claiming decision
Optimized for mobile use
Created with the support of
SSA
Available in Spanish
consumerfinance.gov/retirement
consumerfinance.gov/jubilacion

Consumer Financial
Protection Bureau
Issues and trends
Debt and retirement security

Consumer Financial 15
Protection Bureau
Older households are carrying debt into their later
years, and in greater amounts
Percent of older households with debt (2001 to 2016)
80%
70%
66% 65% 66%
70%
57% 59%
60%
50%
50%
40% 41%
39%
40%
31%
29%
30%

20%

10%

0%
2001 2004 2007 2010 2013 2016

65-74 75+

Source: Fed. Reserve Board, 2016 Survey of Consumer Finances

Consumer Financial
Protection Bureau
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Other key facts about increasing debt load held by
older consumers

Mortgage debt is largest type of debt

In 2016, half of older households owed $80,000 or more
(age 65-74)
Credit cards are the most common type of debt
Held by 40% or more of older households (age 65-74)
Student loans are the fastest growing type of debt
Number of borrowers age 60+ increased from 700,000 to
2.8 million between 2005 and 2015
Amount owed increased from $12,100 to $23,000 between
2005 and 2015

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Protection Bureau
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Older borrowers student loans
Beneficiaries of student loan debt owed by consumers
by age group, 2014 Majority of older borrowers
100% 4% 5%
student loans are for children and
7% 5%
90% 3%
grandchildren
20%
80%
70%
61%
Also using home equity,
60% 68%
retirement savings, credit cards,
50%
40%
93%
and paying out of pocket.
73%
30%
20% Older borrowers save less for
34%
27%
10% retirement.
0%
30-39 40-49 50-59 60+

Self/Spouse only Child/Grandchild only Self/Spouse + Child

Source: Federal Reserve Board Survey of Household Economics and

Decisionmaking 2014.

Consumer Financial
Protection Bureau
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Many older borrowers are behind on their student loan
payments
SHARE OF FEDERAL STUDENT LOAN BORROWERS
IN DEFAULT BY AGE GROUP (2015)

37% In addition:

29%
The number of older federal
loan borrowers with Social
Security offsets has
increased from 8,700 to
17%
40,000.

Under 50 50-64 65+

Source: Government Accountability Office 2016.

Consumer Financial
Protection Bureau
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 Tips to help older student loan borrowers navigate
common problems with their student loans

Read more:
consumerfinance.gov/about-us/blog/OAStudentLoanTips

Consumer Financial
Protection Bureau
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Complaints
Submitted by older consumers to the
CFPB

Consumer Financial 21
Protection Bureau
CFPB Complaints

CFPB began handling

complaints on July 21, 2011.
About 1.2 million total
complaints received, over
100,00 from consumers 62+
Age is voluntarily reported:
Approximately 54 percent of
consumers report their age, about
17 percent report their age as
being 62 and older.

Consumer Financial
Protection Bureau
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Most complaints from older consumers relate to
mortgages and debt collection
Total number of complaints for top 5 products

Mortgage (including reverse

27,847
mortgages)

Debt collection 27,150

Credit or consumer reporting 15,491

Credit card 15,475

Checking or savings 12,955

(as of October 2017)

Consumer Financial
Protection Bureau
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Insights from CFPBs complaints

Compared to their younger counterparts, older consumers

complain at higher rate about mortgages and bank account
products.
Generally, older consumers often experience similar issues
as their younger counterparts.
There are some unique issues that affect older Americans
disproportionately:
Successor in interest in mortgages
Co-signing issues in student loans
Authentication in credit reports
Social Security garnishment in debt collection

Consumer Financial
Protection Bureau
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Find more information in our Snapshots

Analyze market trends

and complaints
submitted to the CFPB
by older consumers on:
mortgages
32%
30%
student loans
28%
reverse mortgages
26%
24%
and debt collection
22%
20%
2001 2003 2005 2007 2009 2011 2013

0% 5% 10% 15% 20% 25% 30%

Consumer Financial
Protection Bureau
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Consumer Complaint Database

Consumer Financial
Protection Bureau
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Issues and trends
Reverse Mortgages

Consumer Financial 27
Protection Bureau
What is a reverse mortgage?

https://www.youtube.com/watch?v=L89d3faoFGw

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Protection Bureau
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Monitoring consumers problems with reverse
mortgages

Some issues covered:

- non-borrowing spouses
- foreclosures
- problems with loan servicing

Consumer Financial
Protection Bureau
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Many consumers are confused about reverse mortgages,
reverse mortgage marketing contributing factor

Some common misconceptions about

reverse mortgages that consumers
have as a result of ads:
Reverse mortgages are a
government benefit, not loans that
need to be repaid
Cannot lose your home with a
reverse mortgage
Because reverse mortgage
proceeds are tax free, borrowers
do not pay property taxes.

Consumer Financial
Protection Bureau
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Aging in place - blog

A growing number of businesses are increasingly using the phrase

aging in place to market financial products and services to
homeowners in the baby boom generation.
The blog provides a list of things to consider if youre thinking about
aging in place in your current home.

Read more at:

consumerfinance.gov/about-us/blog/dont-let-marketers-tell-you-
how-age-place/
Consumer Financial
Protection Bureau
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Reverse mortgage marketing:
Using a reverse mortgage to delay collecting Social Security

Many financial professionals

and writers are promoting
this strategy, often without a
discussion of the risks and
costs involved.
Read more at:
consumerfinance.gov/data-
research/research-reports/issue-
brief-costs-and-risks-using-
reverse-mortgage-delay-
collecting-social-security/

Consumer Financial
Protection Bureau
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Potential downsides to using a reverse mortgage to
delay collecting Social Security

Our findings:
In general, the reverse mortgage
loan costs exceed the additional
increase in Social Security that
homeowners would receive in
their lifetime by delaying Social
Security benefits.
This strategy generally diminishes
the home equity available to
borrowers later in life.

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Protection Bureau
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Issues and trends
Financial exploitation

Consumer Financial 34
Protection Bureau
Older adults are frequent targets of financial abuse

Most common form of elder abuse.

Only a small fraction of incidents are reported.
Estimates of annual losses range from $2.9 billion to $36.48
billion.
A FINRA commissioned study found that:
Respondents age 65 and over were more likely to be solicited to
participate in a potentially fraudulent offer (93%),
more likely to engage (49%), and
more likely to have lost money (16%) than younger respondents

Consumer Financial
Protection Bureau
Most older consumers are banked

Banking status by age group, 2015

15-24 86.9 13.1

25-34 89.4 10.6

35-44 91.1 8.9

45-54 93.3 6.7

55-64 94.2 5.8

65+ 96.9 3.1

Banked Unbanked

Source: FDIC National Survey of Unbanked and Underbanked Households, 2015

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Protection Bureau
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Financial institutions play a key role in protecting older
account holders.

Recommendations for financial

institutions:

Train staff to recognize abuse

Establish protocols
Use fraud detection technologies

Offer age-friendly services and

products

Report suspicious activity to

authorities

Read more at:

consumerfinance.gov/f/201603_cfpb_recommendations-and-report-for-
financial-institutions-on-preventing-and-responding-to-elder-financial-
exploitation.pdf
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Protection Bureau
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Use of technology by financial institutions

Key issues and trends

Financial institutions have increasingly adopted sophisticated
automated fraud detection systems using machine learning
technology.
Some indicators of elder fraud risk may not match
conventionally accepted patterns of suspicious activity.

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Protection Bureau
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Resources for older consumers and their caregivers

Consumer guides on important financial

decisions such as reverse mortgages, lump
sum payouts and choosing a financial
adviser

Placemats with consumer protection tips

Consumer advisories on pension lump-

sums

Community education programs to prevent

financial exploitation

Available in Spanish

Consumer Financial
Protection Bureau
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Learn more about our work:
consumerfinance.gov/older-americans

Consumer Financial 40
Protection Bureau