The U.S. House of Representatives passed the Financial Exploitation Prevention Act in a 414-2 vote last month, sending the legislation to the Senate. The bipartisan bill would permit investment companies, such as mutual fund providers and certain exchange-traded funds, to temporarily pause redemption requests from individuals aged 65 and older or those with mental or physical impairments. The pause would apply in cases where the institution reasonably suspects financial exploitation.
Under the proposed framework, financial institutions could delay fund disbursements for up to 15 business days while investigating potential fraud and notifying a designated contact person. This delay could be extended for an additional 10 days if necessary, or longer if mandated by a court or state regulator. While the bill does not require institutions to implement these pauses, it provides a legal framework for them to do so without immediate liability.
The legislation aims to address rising financial losses among older Americans, which the Federal Trade Commission reported reached nearly $2.4 billion in 2024. Supporters of the bill, including co-sponsor Rep. Andrew Garbarino (R-N.Y.), stated that the measure provides tools to stop abuse before permanent damage occurs. Critics and legal experts, such as Nina Kohn of Syracuse University, noted that while the bill fills a gap for self-managed investment funds, it does not apply to traditional banks or credit unions, which are often governed by varying state-level laws regarding account freezes.