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?