FOS has published its Approach to Financial Elder Abuse which sets out how it will consider disputes involving financial elder abuse.

It explains that elder abuse can take many forms and appropriate safeguards need to be put in place to help protect vulnerable consumers when they obtain a financial service or conduct a financial transaction with a financial services provider (FSP).

FOS says that when it considers disputes where issues of financial elder abuse are raised, in particular it will ask:
• Were there warning signs known as ‘red flags’ which may have been indicators of financial abuse of a vulnerable elderly person?
• Did the FSP exercise its duty to take reasonable care and skill and question the customer’s authorisation of a transaction?
• If so, should the FSP have delayed the transaction or taken other preventative action?

Red flags
The red flags are warning signs that indicate the need for inquiry and caution, including, where appropriate, delaying the transaction or taking other preventative action.

The red flags potentially visible to FSP employees include that the elderly person may:
• engage in financial activity that is unusual, erratic or uncharacteristic;
• be accompanied by a new acquaintance to make a large or unusual withdrawal of cash;
• be accompanied by a family member or other person who seems to coerce them into making transactions;
• transactions by a caregiver that do not seem to be in the interests of the customer, for example a holiday or a car;
• not be allowed to speak for themselves, or the other party does all the talking (particularly in combination with either of the two above situations);
• start to appear fearful (particularly of the person accompanying them) or withdrawn;
• have withdrawal slips signed by the elderly person where the rest of the slip is filled out in different hand writing presented by a third party;
• adding a person to the account followed by the balance being transferred out;
• have large withdrawals or transfers made on behalf of the elderly person without prior direct contact from them;
• not understand or be aware of recently completed transactions;
• give implausible explanations about or appear confused about what they are doing with their money;
• suddenly register for internet banking when prior financial activity has been branch based and there has been no preliminary contact with the FSP;
• have unpaid bills that they should be able to afford to pay – eg complain of having no heating despite the fact that they can afford to have it, or that they are being evicted;
• be concerned about missing funds or financial service related documents;
• indicate that mail, such as account statements, is no longer being delivered to their home.

FOS says that more often than not, one of these factors has been present in the disputes that have come to FOS.

The FSP-customer duty
FOS acknowledges that generally, the FSP does not have a duty to advise a customer that a transaction or product is not in their interests, nor is it obliged to put the customer’s interests ahead of its own.

However, the FSP does have a duty of care to exercise reasonable care and skill in carrying out transactions for its customer. FOS points to good industry practice FSPs that subscribe to the Code of Banking Practice have an obligation to exercise the care and skill of a diligent and prudent lender. As a financial services licensee, the FSP will also have a statutory obligation to provide its services covered by the licence efficiently, honestly and fairly.

What FOS Expects a FSP to do
FOS expects an FSP to talk to the elderly person separately and in private about the financial transaction.

FOS says FSP employees should escalate their concerns to the appropriate senior person before conducting the financial transaction.

An FSP may consider declining or delaying the transaction, for example by asking the customer to come back the next day if they still want to proceed.

FSP employees should follow their internal policies and procedures whenever they see warning signs of financial abuse. If there are no policies and procedures are in place, FOS expects the FSP to explain why.

FSP employees are not expected to be detectives and are entitled to proceed on the assumption they are dealing with honest people.

However, FOS says an FSP’s duty to exercise reasonable care and skill includes an obligation to question the customer’s authorisation of a transaction. This means FSP employees are not entitled to turn a blind eye to known facts or circumstances. This includes where there may be a serious possibility that a customer is being financially abused or the use of funds is not consistent with the customer’s wishes or for their benefit.

FOS says the FSP may be liable for any loss if it is on notice of the:

• customer’s incapacity, or

• influence of a third party and proceeds with a transaction which is not in the best interests of the customer.