About 11 per cent of Australians have given an enduring power of attorney to a family member or friend to manage their financial affairs and, with an ageing population, the number of people unable or unwilling to look after their own financial affairs is expected to grow.
According to new research, banks are not keeping up with the trend. Few financial institutions have effective policies for dealing with powers of attorney or other substitute decision-making instruments.
Researchers from the University of Western Sydney, working with the Council on the Ageing (NSW), assessed the effectiveness of using a power of attorney when dealing with a financial institution and have published a report of their findings – The Policies and Practices of Financial Institutions Around Substitute Decision Making.
The research confirmed the findings of an inquiry by the House of Representatives Standing Committee on Legal and Constitutional Affairs in 2007, which said that some financial institutions did not honour powers of attorney and many required the completion of separate documents.
Banks are not willing to rely on powers of attorney because they are concerned that they cannot verify them.
The researchers recommend that powers of attorney be registered in a central database that can be accessed by financial institutions.
There are problems with financial institutions using their own substitute decision-making tools. In most cases there are no checks to ascertain that the customer has the requisite mental capacity to give financial authority to another person.
Customers found it frustrating to have to complete extra forms, usually at a time when the principal has lost capacity, a transaction needs to be made or there is a financial problem.
Banks could make the process easier by helping their customers plan ahead, the researchers said.
The research also found that frontline bank staff were not well prepared to deal with power of attorney matters. A significant proportion of frontline staff were not familiar with the power of attorney form and did not know what to do with it when it was presented to them by an attorney.
Banks involved in the research acknowledged that their frontline staff experienced difficulties dealing with powers of attorney. They put this down to the infrequency of such situations.
Banks said they had information available for staff but conceded that they did not make training mandatory. Nor do banks provide any legal advice to customers.
Many survey respondents complained that they had to present the POA each time they needed to do banking on behalf of the principal.
The majority of banks appear to only partially grant the authority of a power of attorney. When it comes to credit cards, banks are unwilling to give the attorney "primary user" authority.
For their part, banks raised a concern about lack of recourse when they suspected that a power of attorney was being mismanaged. States (with the exception of Queensland) do not have a government body that banks can approach and the police have not been responsive.
The researchers recommended: "Financial institutions should make it a priority to establish policies in this area and review those policies regularly. They should make sure those policies are understood by frontline staff."