I heard both reports. In both cases the elderly adult were fully informed of what they were signing up for. Not only that in Orla's case they actively went looking for the money. Because I listen to these stories with a cocked ear and because of my experience on here I take notes to try and figure out the facts
Orla's mother.
Background
She was 80 in 2005 and needed money to pay off the father to leave the house as there was a problem between them. They got 165K at 6.5 % compound interest. There was no other option to get the money other than BofI. The mother was fully with it and Orla was involved in helping her get the loan. They knew what they were signing up for. This product was particularly suitable because there were no repayments. So it would seem to me they were grateful to get the loan.
Today 2015
Orla is now livid with the bank, because she feels that the repaymount amount at 300K is too high. Her logic on this is that because interest rates were so low then ergo she's paying too high a rate, an incredible rate. Even though that is what they signed for. She wants to pay, but not that amount. It's not fair. She also doesn't understand why the bank won't negotiate a reasonable rate now. That paying 100% interest is not fair. (ie doubling of original amount borrowed, she was ignoring the compound interst to suit her argument). She also is upset with the inflexibility of the bank and doesn't understand why older people were charged so much.
Questions
1. Was the interest rate fair.
2. Was everything done above board
3. Was everybody aware of what they were signing up for
4. Did they understand compound interest
My opinion to those questions is yes.
Inheritence
On day 2 Orla was asked by Burgess did she need the money for the care of her mother who now lives with her, one would get the impression from her reply that she did, but the previous day she stated that her mother was upset, distraught, at the fact that her grandchildren's inheritence is gone
Bank
Why was the interest rate 6.5%. Well it's not a mortgage, they are getting zero repayments, they take the risk of property going down, because if the mother lived long enough or property tanked, the only amount they could ever get was the value of the property. So that risk is factored into 6.5%.
18K Breakout clause
If the loan is repaid before the borrower dies there is an 18K penalty. I presume this is to cover the bank in the situation of a quick repayment, they need a few years go go by to be making money on the loan. It is not uncommon a clause in any loan product. Also there is no penalty if the mother went into a care home (someone might clarify this is what she said) Now that the mother is living with the daugher I would argue this 18K should be waived by the bank because it's equivelent to going into a care home.
Note: Bronte hates banks, but I try to be fair. Do I think banks are unscrupulous. Absolutely. Do banks mis sell. Absolutely. Will bank staff do anything for commissions. Absolutely. None of those applied to the first two cases were heard on RTE radio. The third case was different and it was also a different product.