Freezing Grandma's Credit
March 22, 2013
American Public Media's Marketplace segment is a popular—and informative—radio broadcast. One of its hosts, David Lazarus, who is also the Los Angeles Times' consumer columnist, often takes calls from listeners and tries to help them with their money dilemmas.
But one regular listener of the show, Marcia Walker of North Carolina, was "horrified" by a suggestion Mr. Lazarus made in a recent segment.
"As a member of the public that cares very much for the elderly population, I was horrified by the recent recommendation of one of your journalists that adult children circumvent the legal power of attorney process by freezing a parent's credit 'without their consent' and without legal authority," wrote Ms. Walker. "I believe the show should issue both an apology and a retraction, after investigating whether this advice is even legal. I am quite sure it is not ethical."
The episode in question concerned a call from Joseph in Greenwich, Conn. who was in the process of getting his mother into assisted living and discovered that , despite no assets except a 1995 Toyota Corolla and her Social Security payments, she had accumulated 10 credit cards with a $20,000 credit line.
Joseph wanted to know how it is that someone like his mother who had limited income could get so many credit cards and what would happen to that debt now that her assets would be going to Medicare and Medicaid.
Here is a transcript of the remainder of that conversation:
LAZARUS: Well, first of all when it comes to that balance, you wanna get rid of it. I mean, do what you can. Pool your resources as a family. Do what you can to get mom off the hook. That's the last thing that somebody living on Social Security needs to be worrying about. Now more to the point, I'm guessing what happened here, and it's just insidious, is that every time mom went to some retailer that she likes, those guys said, "Oh and jeepers, if you open up a store card, we can give you a 10 percent, we can give you a 15 percent discount," and she probably jumped at it, thinking that it was a smart play that she was gonna save some money. And not thinking about the consequences that she was racking up all this plastic, and in the eyes of creditors therefore, she starts looking like a bigger and bigger risk to them, which can play havoc with her credit score, and as you've noticed, it makes it much easier to start running up balances. It's a real dangerous game and I always encourage people not to fall for it. I mean if you can afford something at your favorite retailer, great. If it's the kind of store that you're just going back to time and time again, yeah maybe get their plastic. But, by and large, you don't need store plastic. Now, if your mom is the state that you say she's in, have you talked about power of attorney with her?
JOSEPH: Yeah, my older brother has power of attorney. We're ahead of that part of the game. I mean basically, she will kind of be out of the consumer game from here on out.
LAZARUS: Joseph, your mom's in assisted living, why?
JOSEPH: Well, mild dementia. She just doesn't take her medication, forgets to eat. That kind of stuff.
LAZARUS: Now when you say mild dementia that can be kind of scary. Is she still functional?
JOSEPH: Yes, she's still functional. But she needs 24/7.
LAZARUS: Can she look after her finances in any way, shape or form?
JOSEPH: Basically, that's what we're all doing.
LAZARUS: So it's a team effort now?
JOSEPH: It's a team effort. Basically, she's lucky that she has five kids and we're all pitching in.
LAZARUS: And I think it's great that you guys are all circling the wagons around mom, because that's the best way to transition her into this part of her life.
JOSEPH: Right, reluctantly. [laughs]
LAZARUS: OK. And another way of dealing with something like this as well, is you can put credit freezes on her credit files and then, this might sound sneaky, don't tell her the password. And thus, anytime someone wants to issue her new credit, they come knocking at the door, the files are frozen, nothing happens, and you're in the driver's seat without having to go through all the rigmarole of the power of attorney.
LAZARUS: Just another way of dealing with a situation like this if mom or dad is a little reluctant to give up power of attorney but you wanna get in there and start closing the doors on creditors, that's another thing to think about.
JOSEPH: OK great.
LAZARUS: Alright I hope that works out for you, Joseph. Thank you very much for calling.
JOSEPH: Thank you.
Everything Joseph and his family did was appropriate because they had power of attorney. What troubled Ms. Walker is that Mr. Lazarus appeared to suggest that those who did not have power of attorney could circumvent the legal issues by freezing an elderly person's credit files and changing the passwords.
"Even if this were legal — and how can it be, to freeze the credit of another adult without their consent? — it certainly isn't moral," Ms. Walker posted on the Marketplace website. "How would Mr. Lazarus react if he found out that his sister or brother or any other person took it upon themselves to freeze HIS credit without his permission and without legal authority to do so? If the person no longer has the mental capacity to manage their own finances, there are legal avenues to address this, such as court-ordered guardianship. Sneaking behind someone's back and freezing their credit without their consent is unforgivable.
"I have found the advice on this show over the past several episodes to be of increasingly questionable value but now that it has crossed the line into questionable legality and ethics I will certainly stop listening altogether."
In response to this complaint, Mr. Lazarus said that "it certainly wasn't my intention to suggest any behavior that might constitute elder abuse." Instead, Mr. Lazarus said he was thinking of all the seniors who have been taken advantage of by predatory business interests as well as scams and rackets designed to separate senior citizens from their money.
"My advice to the caller, therefore, was intended as a possible response to such practices," said Mr. Lazarus. "As I said at the time, my suggestion 'might sound sneaky', and indeed it would be. That said, I've heard from many families who were frustrated by the refusal of an elderly parent to agree to financial safeguards. My credit-freeze idea was a possible remedy for a situation in which a senior would not want to give a family member power of attorney. In the caller's case, he said his mother had mild dementia and was unable to attend to her finances. She had already given one of her kids power of attorney. My suggestion was offered as an afterthought to other listeners who might be facing similar situations. In hindsight, I wish I had couched things a little differently, underlining that it's never okay to take advantage of an elderly relative. But my advice was offered in an attempt to be helpful, or to at least get others thinking about steps they can take to protect loved ones from financial fraud."
Two business school ethicists were contacted about this segment and asked if they saw any problems with the exchange between Joseph and Mr. Lazarus.
"How can you put credit freezes on someone else's credit cards if you don't have power of attorney over their finances?" asked John Dobson, a professor of finance at California Polytechnic State University. "This sounds like more of a question for a lawyer than an ethicist. I would think the law would be pretty clear in a situation like this and I can't imagine it would be ethical to break the law."
John R. Boatright, professor of business ethics at Loyola University Chicago, said that suggesting a credit freeze to someone who has a power of attorney is a good one, but to do so without a POA is a bad idea.
"My main justification for this position is that the situation is a common one, and the law has crafted a carefully thought out way of dealing with it, namely creating provisions for POA," said Mr. Boatright. "Two points: the law is good on this matter, and one ought to obey the law.
"Someone who says, 'I'm going to ignore the law and craft my own solution to this problem,' is substituting his judgment for that of generations of lawyers and judges. Bad idea, you're probably mistaken. Second, such a person is also saying, 'I don't have to obey the law. The law be damned.' Also a bad idea.
"Bottom line: Go get POA and then use it to (legally) act in the best interests of the mother.
"So David Lazarus's suggestion is excellent for someone who already has POA (as occurs in this case), but bad if he is indeed suggesting that one do it without POA."
Paddy Hirsch, senior producer at Marketplace, said he welcomes Ms. Walker's complaint and personally believes that Mr. Lazarus' proposal for dealing with parents in similar situations "falls into a moral gray area."
He declined to opine on whether the advice was legally questionable because he is not a lawyer nor is Mr. Lazarus.
"He's a consumer columnist at the Los Angeles Times, something we state very clearly at intervals throughout the show," he said. "We're using him as a fill-in host while we search for a permanent presenter.
"All of that said, I'd be very interested to hear a debate about the legal issues that surround arranging power of attorney for a reluctant elderly parent, so I welcome the listener's comment. It could seed a valuable conversation on this issue online and it gives me an idea for a segment that we could include in the show. That would hopefully go towards addressing the listener's final comment that the advice given on the show is of 'increasingly questionable value.' Because that's the kind of comment that worries me most of all."