Editorial: Info scam bilking retirees

Tuesday, June 17, 1997 | 11:59 a.m.

A legal loophole that's allowing scam artists to bilk seniors out of their savings deserves congressional attention.

The loophole has spawned a rash of companies through the nation charging seniors for information and services that the Social Security Administration provides without cost. The same holds true for Medicare services, handled by the Department of Health and Human Services.

It already is illegal for firms to misrepresent themselves as affiliated with a federal agency. But a loophole allows them to charge for services.

This scam, like a seemingly endless number of others targeting the elderly, could no longer masquerade as a government-sanctioned activity under a bill sponsored by Sens. Tom Harkin, D-Iowa, and Richard Bryan, D-Nev.

Companies with official sounding names -- such as Federal Document Services or Federal Record Services -- send letters to retirees warning them that, without their services, they could lose their benefits. Eligibility information, new numbers or cards or changes of names require fees from these companies that are provided free by federal agencies.

The bill would require these companies to display a consumer alert that the services need not be paid for.

This certainly would help. It's unfortunate that many seniors are not well informed about how benefits are administered. But many of them are nervous about losing benefits and can be frightened into paying fees. Loss of medical coverage and retirement can terrify someone on a limited income.

Seniors already are the most susceptible group to scam artists. Telemarketing fraud has bilked millions from them, promising free gifts in exchange for worthless or overpriced goods and services. In most cases, they can't get their money back from operators who keep moving and changing company names. Telemarketers have been the target of a two-year law-enforcement crackdown.

We doubt if this bill will entirely stop the benefit scam, but it may quiet it a bit. The problem is that many recipients remain uninformed on what services are available despite a mountain of public service information.

Even with a mandatory warning, no doubt some seniors will still be frightened into hiring these firms. Senior groups could do much to protect their peers by disseminating more straight talk in seminars and by distributing information to shut-ins.

But this law will certainly help. At least, seniors be less susceptible to scare tactics than they are now.