ASIC finds risk of financial elder abuse


ASIC finds risk of financial elder abuse

We’ve been following the Royal Commission into the finance sector closely over the past 12 months, and now reverse mortgages have come under the microscope.

A recent report by ASIC has found reverse mortgage lending standards need big improvements, as right now, they’re not fair to borrowers in their senior years.

Here’s what you need to know.

What’s the problem with reverse mortgages?

If you’re not sure what a reverse mortgage is, well, ASIC explains it for us:

Reverse mortgages allow older Australians to borrow against the equity in their home through a loan that does not require repayment until a later time, typically when the borrower has vacated the property or passed away.

Post GFC, demand for reverse mortgages has increased significantly, with lenders being exposed to $2.5 billion in product in December 2017 (up from 1.3 billion in March 2008). That’s a whole lot.

The problem for senior borrowers is that, according to the report, many are not understanding how a reverse mortgage could impact their future borrowing capacity. (Head to Finding 3 of the report for more on this.)

Problem 2: Elder abuse

The report also found that lenders need to reduce the risk of ‘financial elder abuse’, which occurs when a person, illegally or improperly exploits or uses the money or resources of an older consumer.*

Since borrowers taking out reverse mortgages, were found to be around 75 years old when they did so, this puts them at significant risk of elder abuse.

So, what can we do to combat this? Well, the report in question shines a light on an issue that appears to have been in motion for many years.

The report itself offers a list of possible signs of financial elder abuse, which include:

  • Loan repayments being made by an adult child of the borrower.
  • Money being transferred by someone who is not the borrower.
  • Money being provided to a child.
  • Children being involved in the application process.
  • People who are not the actual borrower being privy to mandatory independent advice. (Not the borrower themselves.)
  • Abuse by the borrower’s sibling indicated in the file notes.

Supporting seniors in Australia

If you know of someone who may be the victim of elder abuse, we recommend visiting this amazing resource by Uniting Care, which offers intervention options.

ASIC also offers a great resource, which provides case studies and information on how to identify financial abuse against elders and other individuals. [See below.] 


Organisation

What they do

Contact

1800 Respect

Free, confidential family violence and sexual assault counselling service.

 

1800 737 732, 24 hours a day, 7 days a week

 

Family Relationship Advice Line

 

Information and advice on family relationship issues and parenting arrangements after separation.

 

1800 050 321, 8am-8pm Mon to Fri, 10am-4pm Sat

 

Lifeline

 

Provides crisis support services.

 

131 114, 24 hours a day, 7 days a week

 

National Debt Helpline

 

Free information and resources that can help if you're struggling with debt.

 

1800 007 007, 9.30am to 4.30pm, Monday to Friday 

 

Relationships Australia

 

Counselling services, mediation, and family dispute resolution services.

 

1300 364 277 (call from anywhere in Australia for the cost of local call)

 

WIRE Women

 

Victorian free information support and referral service for women.

 

1300 134 130

 

Women's Domestic Violence Court Advocacy Services

 

Assistance to obtain legal protection from domestic violence and help with other needs including accessing support services. NSW only.

 

1800 938 227

 

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* Facts quoted in this blog were sourced from ASIC Report 586 – Review of reverse mortgage lending in Australia. August 2018.
Financial Advice Disclaimer: This information is general in nature. Mortgage brokers do not provide financial advice. Clients seeking financial advice or legal advice will be referred to a qualified financial planner.



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