A frequent difficulty for staff of financial service providers is identifying the validity and scope of a power of attorney and whether an attorney is acting against the interests of an elderly or incapacitated principal and for their own benefit.

A new report, Policies and practices of financial institutions around substitute decision making, by the University of Western Sydney (UWS), Cognitive Decline Partnership Centre (CDPC) and Council on the Ageing NSW (COTA NSW) looks at the arrangements in place when someone appoints another person to make financial decisions on their behalf. It highlights the problems that occur with legislation differing between states and territories and how this impacts on consumer awareness and interaction with financial institutions.

The reports highlights the need for training for frontline staff and to develop national policies for the recognition of powers of attorney.

Once a power of attorney has been produced, unless there is obvious fraud or theft, often frontline staff can do nothing but make enquiries or refer the matter to their supervisor or the relevant state Guardianship Tribunal.

FOS Bulletin 56 Financial Abuse of the Vulnerable Older Person usefully discusses the areas of potential liability for financial services providers:

• firstly the obligation to be alert for fraud and to reduce fraud related losses for the FSP and its customers;
• secondly potential legal liability for the FSP.

FOS points out that a FSP may be liable to reimburse losses to a customer who has been the victim of financial abuse under a number of legal and equitable principles including:

• If the customer is unable to read owing to blindness or illiteracy;
• If the customer’s signature on withdrawal instructions or other transaction documents has been forged;
• If an unauthorised electronic transaction has been performed and liability is allocated to the financial institution under the ePayments Code;
• If it is on notice of mental incapacity on the part of the customer;
• If it is on notice of undue influence;
• If it has, with knowledge, assisted in a breach of trust
• If it has itself taken advantage of a vulnerable older person so as to have engaged in unconscionable conduct.