Probe exposes financial abuse of older Australians

Older Australians vulnerable to family pressure and poor lending practices.

Inquiry exposes extent of abuse

The banking royal commission has already had a profound impact on the financial services sector with dodgy and sometimes unlawful practices revealed on an almost weekly basis.

A key take-away for older Australians has been to show how vulnerable many are to financial abuse.

Loans were a particular area of concern at the royal commission, including irregular lending practices by banks, pressure to lend existing money to family members and pressure to borrow on their behalf or guarantee loans.

Examples presented to the inquiry included an elderly woman who had been paying off a $1000 debt she incurred in the 1990s, and a nurse in her 70s who was allowed to borrow more than $3 million to buy a series of investment properties.

Madness you might say, but no red flags were raised. So how to better protect against such practices? Two possible solutions are:

  • greater access to independent legal and financial advice before any loans are sought or guarantor agreements made
  • tougher penalties for banks that provide unsuitable loans to older people.

On World Elder Abuse Awareness Day on Friday, the tougher question is how to protect against pressure from family members seeking financial assistance.

Curtin University’s Professor Eileen Webb, describes this as “emotional lending” in an article in The Conversation.

She says: “Of particular concern is when an older person is persuaded to enter into a joint loan with a third party, such as their son or daughter. These loans are invariably secured by the older person’s property, with the younger person agreeing to pay off the debt.

“If the adult child does not pay off the debt, the older person – who is often asset-rich but income-poor – may be unable to service the loan.

“The older person’s property will be repossessed by the lender, forcing them to relocate, enter the rental market or even become homeless.”

Karen Cox, of the Financial Rights Legal Centre, told the banking inquiry that such loans were “outright exploitative” and that elderly persons were left in dire circumstances as a result of a loan for which they were likely to receive no benefit.

Most parents want to help their adult children financially, especially if they are going through a difficult time, but as Professor Webb says: “Such loans often arise within an atmosphere of crisis ­– real or exaggerated – in which the adult child pressures the older person into entering into the loan.

“In extreme cases, older people have been told that they will be unable to see their grandchildren if they do not enter into loans.

“The reality is that it is often difficult for the older person to refuse.”

The extent of financial elder abuse is difficult to measure as most is under-reported. Even the World Health Organisation can only estimate that it affects between one and 10 per cent of older people worldwide.

A 2016 study by the Australian Institute of Family Studies noted that older women were more likely to be victims than older men, and that most abuse was intergenerational with sons more often being perpetrators than daughters.

In response to a YourLifeChoices report on Tuesday, members provided the following feedback on elder abuse:

“Never lose control over your finances. If anyone has doubts then it is time to visit a lawyer to set up a Testamentary Trust to protect oneself.” – MICK

“Even if any agreements or intentions were agreed in writing and formally noted, it would still be ‘an expensive and emotional battle for an older person to get their money back’. And it would not solve the problem that it is an adult child doing the abusing in the full knowledge that their parent is unlikely to want them prosecuted.” – KSS

“There needs to be a complete overhaul in mentality about all types of abuse. I’ve tried to report being a victim under different circumstances and was told that no police officer was interested in assisting as it’s a lot of paper work for little result.” –TW

Seniors Rights Victoria provides support and advice on elder abuse through a confidential helpline (1300 368821), specialist legal services, short-term support and advocacy.

Would you attempt to report elder abuse if it occurred to you? Would you insist on legal safeguards if you lent money to a family member?



    To make a comment, please register or login
    15th Jun 2018
    The electricity prices issue is on the same page as this, and it has come up again. (cant comment there).
    I have to keep saying again and again, there is no competition between electricity providers in North Queensland. Ergon Energy has a monopoly on it, because they are the only provider and nothing is being done to give us the price control that competition would otherwise provide.
    15th Jun 2018
    On the banking issue, I had two relatives both deceased now, who got tangled up with bank debt.

    The woman ended up with huge debts that had to be carried by their son because the bank kept lending money on the house and charging interest on a maxed out credit card.

    At the time the man was in the late stages of Alzeimers in nursing care, while his wife was early stages of dementia, borrowing money to keep her husband in care until he died.

    All of these debts were passed on to the son who then had to keep his mother in nursing care until she died, then pay her debts plus interest on the house mortgage plus credit card, as she just let everything go and made no repayments.

    So why did the bank keep lending her money when clearly she had no means of paying it back? The last I heard the son was trying to get the bank to drop some of the interest charges, because of the unfair conditions of how the money was loaned. He will inherit the house but he may have already paid out more than it is worth.
    15th Jun 2018
    The electricity item is an ad nothing more which is why you can't comment on it!!!

    Deceptive advertising content masquerading as journalism.
    15th Jun 2018
    Yes, Charlie, the energy prices going out of control with the Govt watching on is yet another way elders who are struggling are effectively being abused. Just today, I got a Gas bill (LPG) which shows prices (rates) went up by 3.4% since Sep 2017 (that bill also showed a similar rise over the previous bill). I remember around Sep 2017 Turnbull & Frydenberg claiming (and smirking) that they had got Gas prices reduced! What a huge LIE!
    Mad as Hell
    15th Jun 2018
    I’m presently receiving elder abuse from the LNP and Greens in the form of stolen pension entitlements. Tony Abbott promised no cuts to pensions before the 2013 election then from 2017 the LNP have been stealing entitlements from 330,000 pensioners.
    John Howard did not legislate the GST until he had a mandate from the electorate.
    Negative gearing for housing needs changes, but any changes should be grandfathered.
    Why weren’t changes to the Pensioner Assets Test Test grandfathered? Because they could abuse 330,000 pensioners and get away with spin.
    15th Jun 2018
    Absolutely agree with the above, Mad as hell!

    In fact, around 420,000 pensioners were affected (including the 90,000+ who lost it all together) after a BROKEN PROMISE by Abbott!
    Any such change (while not sensible at all) should at least have been grandfathered at least over 10 years to avoid impacting people who already planned their retirement. Also,one has to add to the numbers above the thousands who are added to it every year since 2017.
    15th Jun 2018
    At least we know now never to believe anything they say.
    15th Jun 2018
    "Tony Abbott promised no cuts to pensions before the 2013 election then from 2017 the LNP have been stealing entitlements from 330,000 pensioners."

    Well, they're not call LIEberals for nothing!
    16th Jun 2018
    Who gives you your welfare knows nothing I think it's the liberal party

    15th Jun 2018
    Lenders have an obligation to ensure that loans are adequately secured and that repayment can be met without undue hardship. To advance funds involving pensioners, even as a guarantor, would not be considered prudent as the repayment angle could not be considered as being able to be met without undue hardship. Should the principal borrower abscond, go bankrupt or die then the guarantor would be responsible. Any lenders responsible for this type of lending should absolve the pensioner from any residual debt .

    15th Jun 2018
    Yes, it is World Elder Abuse Awareness Day today! The article above has ignored the major abuse of retirees by this Govt (after BREAKING THEIR PROMISE) by introducing the disgusting Asset test changes from Jan 2017 - severely affecting over 420,000 pensioners who already planned their retirement, with more numbers being added to it each year since then.

    It must be reminded as noted in the other article the week " abuse, which accounted for 75 per cent of their abuse cases."
    So, what did this Govt do? This Liberal Govt destroyed the retirement (financial) planning of 420,000 part-pensioners when they changed the Asset Test rules from Jan 2017 - if they wanted such a drastic change, it should have been grandfathered and only changed over 10 years or so. Disgusting abuse by the Federal Govt, with Centrelink adding to it by chasing pensioners using a defective robo-debt software tool.

    The Govt and Opposition needs to recognise the above abuses, and rip out and replace the entire defective Age Pension system, by implementing Universal Pension for all with NO tests except Age (65 yrs) and Residency (say 15 yrs), and only then worry about those who did not qualify for any special limited benefits. Also, the Special Pensions of Politicians must be scrapped and they should also get benefits under the SAME RULES as anyone else so that they don't have the temptation of fiddling others pensions without affecting their own.
    Then, all will have incentives to do better than that through savings / woking harder without being penalised.

    If your MPs are not willing to push for the above reasonable change to Universal Pension, all retirees and pre-retirees MUST join in and VOTE OUT your current seat-warmer MPs (by putting them last in preferences) and vote for any reasonable alternatives. Your opportunity is coming in the by-elections for a few seats now as well as in the Federal election next year!