Do banks have a duty of care for their elderly customers?

jayne6mp

My Mum (76) rang me in tears on Friday. She is not very good at understanding money matters and my Dad is nearly 80 and a bit deaf. They already had a £20K loan from Barclays (instead of going for equity release). Anyway, several £K of this had been put in an ISA and a building society account for future use and to have a nice lump sum to draw on when they needed to.

A family member needed a loan last week for a new car so they offered to lend him £2,500. They went to bank and asked for advice but the bank employee told them she could not advise them. They thought they were getting a high rate of interest on their savings in the ISA. They came out of the bank not realising they had cancelled the first loan at 6.9% over 10 years and now had a new one plus the extra amount at 8.9% over ten years until they read the small print later.

My Mum said she had not known that they were signing up for a higher interest rate and that she could not see the small print on the printout she was shown or they would never have gone ahead. They have gone back to Barclays but it seems they cannot or will not help them and the end result is that the second loan has been cancelled but the first one of £20K cannot now be changed and their original rate of 6.9% has now been raised up to 8.9% over ten years.

Not that elderly people are incapable of understanding these things, but how can Barclays suggest to someone, who may not understand money matters so well, that it is a good idea to pay the bank back even more money than they were in the first place, or is that a stupid question?

I am going to write to Barclays on their behalf and take this further but any comments/suggestions would be helpful.:eek:

Xbigman

There is not a specific duty of care for the elderly but it is easier for the elderly to prove some types of complaints. Banks are also averse to publicity in these matters and if your first complaints fall on death ears then mention complaining to the newspapers IE Tony Hetherington at the daily mail.

However, the person at the bank was correct in one respect, they could not give advice. Bank staff are salespeople not any sort of adviser. They did their job and sold your parents a new loan. How it came to pass that your parents went in to make a withdrawal and came out with a loan is what your complaint will be about. You need to find out exactly what happened and post it here for advice. Also, what sort of loan is it? Are they making payments?

You might also have trouble talking to them yourself. Accompanying your parents to the bank for a meeting might be the first step, but you might need a power of attorney of some type. If it comes to that go to the CAB.
Regards



X

Astaroth

As xbigman says, a bank is not an independant advisor and therefore cannot (in most cases) actually advise customers on what to do.

It does however sound that your parents may no longer be fit (in your eyes) to run their personal affairs though are probably also too proud to say anything - hence not asking what something was/ asking for it in bigger print. It may be worth considering applying for power of attorney as the other post suggests but you need to discuss this fully with them before hand as to many parents it can be seen as insulting when their kids tell them they arent fit to make decisions and so they are going to do it for them.

Cannon_Fodder

As Astaroth says on another post, regarding "Cooling-off periods", maybe
http://www.moneyextra.com/dictionary/cooling-off-period-004050.html
will apply, check the papwerwork and talk to the Bank asap.

Good luck,
Mal

jayne6mp

Thank you for your replies. I don't think it has come to applying for power of attorney just yet as they are both compis mentis at the moment, just a bit naive perhaps.

My concern is that the woman in the bank did not explain to them in a way that they understood or made sure that they were aware that they were not adding £2 1/2K to the original loan at 6.9% but ending the original loan of £20K and starting a second one with the extra amount at 8.9%. My Mum said she was not given anything to read, only on the computer monitor, until after they had signed and she had thought she was increasing their first loan a little bit more, but at 6.9% not to 8.9%.

My parents went back to the bank the next day to try and sort it out but were told "It is not Barlcays, it's the Bank of England". The lady who dealt with them made two phone calls, to no avail, then she said to put in a complaint (which she did on their behalf) and said she thought it would be alright. They had to wait two working days for a response which was that the second loan could be cancelled but the first one (now raised up 2% more) had to stay as it was. I believe they are going to transfer money from their ISA into their current account to cover the loan already made to the relative.

They have been paying the first loan (taken out for a new driveway and a bit of a nest egg) off for 14 months with no arrears.

I'm not sure if the cooling off period applies as they went into the bank and signed on the premises, but I'll look into this. Anyway, I'm waiting for Mum to send me the documents and a chronology of what actually happened, so I can have a look before I start corresponding with the bank and anyone else who may be of help.

MarkyMarkD

Jayne

The original premise of this loan is fatally flawed, so I'm not sure that complaining about the later loan rearrangement is going to seem very sensible.

What in the world possessed your parents to borrow money at 6.9% APR to save in ISAs/building societies (as you put it)?

If they needed £10k (or whatever), they should have borrowed £10k (or whatever). Borrowing to save is madness.

Anyway, back to the topic.

It is very common for banks to consolidate an old loan and a new loan request, not least because they charge higher rates on smaller value loans. Whilst it might seem ridiculous to end up with £22.5k on 8.9%, instead of £20k on 6.9% and £2.5k on 16.9% or whatever (and in fact, it is, if these are the numbers and they are unlikely to be worse), it isn't always bad for the customer.

The stuff about "bank of England" is clearly cobblers, but it could be that Barclays' own lending rates have increased over the period. All that means, though, is that consolidating the old loan and the new loan made no sense.

I don't really understand why they borrowed the £2.5k on behalf of the relatives either. I wouldn't mind borrowing £2.5k from a grandparent or whatever if they had it lying around, but I'd be fairly upset if they told me they were lending it but actually BORROWED it on my behalf at their expense.

As you say they are now funding the loan to the relative from their ISA, heaven knows why they didn't do that in the first place.

jayne6mp

Yes. Thanks. I already knew that. As you say, the reason for the original loan was not a good idea - not my suggestion. However, that's what they did and its done and dusted now and I've no idea why they thought it was better to borrow money for someone else when they already had the money to lend them anyway.
I would be grateful for any helpful suggestions as to the way forward rather than a critique of the past.

MarkyMarkD

I see that you're quite new here - or haven't posted before - so, welcome.

If you ask for advice on MSE, you're going to get a variety of comments including questioning of the original motivation for illogical transactions - working out how to deal with a problem can be helped by a fuller understanding of what has gone wrong in the first place.

What I was trying to get at, was that your parents already had a track record of entering into financially illogical transactions. For all I know, when they took out the original loan, the bank member of staff may have advised them that borrowing at 6.9% to save in an ISA at 4% or so was illogical. For all I know, they may have failed to tell the truth about why they wanted to borrow £20k. I don't know!

And when they went to borrow a further £2.5k (which again, they didn't really need ) the conversation might have gone like this:

Bank: Why do you want to borrow £2.5k?
Customer: I want to give it to my nephew for a new car
Bank: Why don't they borrow it themselves?
Customer: Because I want to do it for them.
Bank: OK - we'll set up a new loan for £2.5k at 16.9% APR over 5 years and that's going to cost an extra £100 a month.
Customer: That's expensive. Can't you add it to the old loan?
Bank: OK, but then the whole new £22.5k loan would be at 8.9% APR and it would all be over 10 years.
Customer: OK then - I don't want the hassle of two loans and I can't afford the extra £100 a month.

Banks have a duty of care to ALL customers to make them aware of the transactions they are entering into. But they can't be held accountable for people doing things which are completely illogical, even when they've been advised so.

I'm playing devil's advocate - in your situation, I would seek your parents' written authority to deal with Barclays on their behalf, send that authority to Barclays (and keep copies because they'll doubtless lose the authority letter a few times) and then ask Barclays how they justify redeeming a 6.9% APR loan and making a new, larger, loan at a higher APR - but beware that they may, justifiably, say that the risk is higher because it's a larger amount and/or because the customers' ages means that they are very unlikely to repay.

And if your parents are incapable of making sensible financial decisions, someone trusted should seek a power of attorney to deal with them on their behalf, before they get themselves into more trouble.

Furthermore, if your mother couldn't read the small print, the bank should have given her explanatory documentation in large print - but it's your mother's responsibility to make them aware if she can't read small print. If she did so, this is a good angle to attack Barclays on.

regularsaver1

I'm not sure what has happened or why they borrowed it but ...

for all we know the £2.5k loan on its own could have been say 15.9% - sometimes amounts under say £5k the interest is higher. and so they may have given the option to put the two together for 8.9%

they would have signed an agreement - the APR would have been on there?

Cannon_Fodder

If there is no cooling-off period, and they remain stubborn, you might threaten them with the Office of Fair Trading who have already said in the past that loans should have cooling off periods...see below...


Office of Fair Trading response to Banking Code Review, 2004
26 February 2004
OFT699

III SPECIFIC COMMENTS ON THE BANKING CODE AND BUSINESS BANKING CODE
Reference is to specific paragraphs within each Code.

a) The Banking Code

7.1 An issue in relation to 'cooling off'. This paragraph only applies to current or savings accounts, not loans. In practice, it will be easier and cheaper to change savings or current accounts, whereas a customer who wants to change a loan will have to pay early redemption charges. Extension of the cooling off period to loans would be helpful for any customers who are persuaded into taking out loans and cards, possibly at uncompetitive rates, when they visit their branch, phone their call centres or log onto their websites to use their current account. They may be told that the loan is cheaper than their overdraft, which may well be the case, but information about cheaper loans elsewhere may be omitted.

http://www.oft.gov.uk/NR/rdonlyres/A1C4C9CB-078A-44EE-B3C4-4C4AFAAB7918/0/oft699.pdf in the conclusions...

Good luck...

jayne6mp

Yes. Thanks. The £2 1/2K would have been at 9.9%. The APR must have been on the agreement but they probably didn't or couldn't read it and anyway they already thought it was for 6.9% so probably didn't think they needed to read it all. Anyway, thanks for your input.