Moneymakeover Irish Times: "Life loan proves a millstone for 97 year old"

TomEdison said:
ven in 2003, the late middle ages, the sellers of financial products did have certain obligations towards their customers. While this woman did take independent legal advice, that's not the same thing as financial advice.
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One wonders how the solicitor was hired. But solicitors are legal, not financial. Article says:

So what “advice” the solicitor provided, I have no idea. I can see them saying they advised only on the legal and contractual issues rather than the wisdom of taking the loan but that seems a very narrow and unhelpful interpretation of their role.

So if the legal advice was, you can borrow this money, the interest rate is this, do you understand that, that could be it.

It was easy enough in the Wild West of that Ireland to get anyone to sign anything for you. I'd imagine an easy fee and bob's your uncle.
 
How much is her house worth?

If she took out 130K and it was the max amount allowed that would suggest her home at the time as worth approx. €500K.

What is it worth today? The fact that it was not included in the article, would have me think it is more than the loan owed.
 
I found a bank account my dad had opened 30:years ago… we found the paperwork about 10 years ago and update it all making it joint with mum. there was a few thousand on deposit, it had increased nicely. This family found the opposite.
 
I came across a similar case recently with Seniors Money.
An elderly couple took out a loan some years ago.
They planned to use the money to enjoy their retirement and go on holidays.
Perfectly reasonable to borrow money for these purposes.
But he died shortly after borrowing the money.
She just left the money on deposit as she didn't want to travel on her own.

Again, I don't think that Seniors Money did anything wrong.
 
ClubMan said:
As mentioned in the article some of these loans also have a negative equity guarantee such that if the sale of the property doesn't cover the outstanding loan amount then the lender doesn't chase the estate for the shortfall. That could be a great deal in some circumstances. But would probably be unusual if only 20% LTV can be borrowed at the outset.
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Addressed in the article:

interest could, and in some cases did, swallow up all the equity in a home. However, where the debt was greater than the eventual sale price, the bank committed not to chase the estate for any payment over and above the sale price.

How very kind of Bank of Ireland. A 'commitment' not to chase payment if the amount borrowed was more than the house value. In the UK it's the law, they don't rely on banks 'commitments'.
 
Bronte said:
How very kind of Bank of Ireland. A 'commitment' not to chase payment if the amount borrowed was more than the house value. In the UK it's the law, they don't rely on banks 'commitments'.
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Are you sure? According to Google (AI).
No, not all UK lifetime equity release loans are strictly non-recourse by default, though plans meeting Equity Release Council (ERC) standards include a No Negative Equity Guarantee (NNEG). [1, 2]
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ClubMan said:
Are you sure? According to Google (AI).
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We discussed it in the last month on here. Can't remember where, but as far as I recall I posted up from a UK newspaper article that it is the law, because of the previous crash, that these loans can not exceed the value of the house. And that law was brought in specifically for that purpose.
 
TomEdison said:
Even in 2003, the late middle ages, the sellers of financial products did have certain obligations towards their customers. ...Surely the Bank had an obligation to know their customer's circumstances, to understand her investment objectives and her reasons for entering into the transaction, and to satisfy themselves that the product the were selling her was the right product?

The fact that she borrowed €130,000 and immediately put €100k on deposit is a huge red flag. Once she had a line of credit approved, her ready access to funds if she needed them was established. It's almost impossible to think of any plausible investment objective this woman could have had that would make "draw down borrowings of €100k, secured against your house, put them on deposit, and leave them there" a sound strategy for her to adopt.
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If someone walks into a bank and says "I want to borrow €130k. I will spend €30k on refurbishing my bathroom and will put the other €100k on deposit" then the bank should refuse it.

So yes, the Bank has questions to answer but I would be fairly sure that they have good answers to these questions. They may not have and so the Ombudsman will find against them.

According to AI, the minimum amount she could have borrowed was €20k so she could have borrowed €30k and not €130k.

But she chose to borrow another €100k. She probably did have plans for it and never got around to it.

But if she applied to borrow €30k and some slick salesman encouraged her to borrow another €100k just in case..., then BoI would be at fault.

As the person who sent in the question says:

(It is not clear why she took out €130,000 when she only needed €30,000.)
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Come on! Of course, they have asked this question but they don't want to disclose the answer as it ruins their case.

If the answer was "I told them I only wanted €30,000 but the BoI manager said I should borrow an additional €100k because everyone is doing it." we would have been told this.

So what answer did the borrower give when her nieces and nephews asked? Why are we not told?

By all means ask BoI questions. But you also have to ask questions of the borrower.
 
I feel sorry for this lady. This story has a whiff of where there's a will there's a relative about it.
They likely feel that she has squandered their inheritance and are probably just as angry with her as the bank.
Last thing she needs at this stage of her life.
They should have left this righteous crusade until after she had died.
 
getting_on said:
I feel sorry for this lady. This story has a whiff of where there's a will there's a relative about it.
They likely feel that she has squandered their inheritance and are probably just as angry with her as the bank.
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That was the gist of many of the stories on the infamous week of Liveline programmes on this topic a while back.
 
Brendan Burgess said:
So yes, the Bank has questions to answer but I would be fairly sure that they have good answers to these questions. They may not have and so the Ombudsman will find against them.
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Banks always have good answers. Any of us who have had dealings with banks for decades, especially during the Celtic Tiger know how all that worked out.

From the article:

They were, as you say, popular in the early years of this century and heavily marketed by the lenders offering them, including Bank of Ireland.

That interest could, and in some cases did, swallow up all the equity in a home.

Your friend’s story is almost a textbook case study of what can go wrong.
The first alarm is that, as you tell it, she never proactively sought this loan; instead, she was simply targeted with marketing material by the bank.

2003 was very much the Wild West, which is when this lady was 72 and borrowed money she did not need.

This was certainly not unusual back in the wild west of the early noughties in the credit markets. People regularly got letters at that time telling them they had been pre-approved for loans they had never sought and found their credit card borrowing limits had been increased without any contact from or with them.

Was any of this ethical, including love-bombing a pensioner with offers of “easy-to-access” money? In my view, certainly not.
 
I suspect they found the account with 100k plus interest in it and figured she owned her house, had no mortgage and also had 100k+ in the bank (a multiple of that is likely). Maybe it was part of a fair deal application.

Anyway they thought auntie was ok for cash, bear in mind they might be well into their 70s and worried about funding her care.

Then found the true tale…

Or maybe one of them has been doing the minding in return for a promise of a house… ouchy
 
Brendan Burgess said:
But she chose to borrow another €100k. She probably did have plans for it and never got around to it.

But if she applied to borrow €30k and some slick salesman encouraged her to borrow another €100k just in case..., then BoI would be at fault.
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Well, possibly the truth is somewhere in between.

A salesperson could encourage her to apply for approval for the max loan, €130k. After all, she doesn't have to draw down more than she needs, and if she does need more later on then having the approval in place will avoid the need for a second application.

But, having been approved for €130k, she then draws it all down, for reasons we don't know. Perhaps she has plans for it that get frustrated but, if so, why doesn't she relodge the €100k? Perhaps she draws it all down because she think that she has to — use it or lose it.
Brendan Burgess said:
Come on! Of course, they have asked this question but they don't want to disclose the answer as it ruins their case . . . So what answer did the borrower give when her nieces and nephews asked? Why are we not told?
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She's 97. It's possible that, now, she's not in a position to answer questions like this.
 
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