Rob Stock: Powers of attorney have no place in personal loan contracts
OPINION: Humanity has gone through a lot of ages.
We've had the stone age, iron age, the age of enlightenment, atomic age, space age, and even a few (possibly imagined) golden ages.
How would we characterise our current age?
Maybe the internet age, or given the rapid greying of the population, the age of ageing.
* Searching for the 'chunk of change' that can make you wealthier
* Should you buy your teenager a car?
* Don't fall for "shoppers exhilaration" and other marketing induced emotions
* The Moose's head, and the slow death of laybys
Or perhaps tomorrow's historians will call it the debt age.
It is not just the size of our debts that's shocking, nor the fact that young executives and bankers tell me they can't afford houses, nor the useless stuff (TVs, mag wheels, holidays, etc) we go into debt for.
It's also the gruesomeness of some of the lending terms we are signing up to.
I saw one the other day that left me speechless, and a little depressed.
It gave the lender an irrevocable power of attorney over the borrowers' property, which it could use to protect its interests and make sure it got its money back (plus interest and fees).
And, if there was a guarantor of the debt (parents, bother, sister, auntie, etc), the lender got power of attorney over their property as well.
It turns out the power of attorney clause is common.
Demanding one may be a sensible move by the lender, but in my book only a trusted loved one gets power of attorney over your property, and then only if you're in a coma.
The Citizens Advice Bureau's advice is worth noting: "Think carefully about who you want to choose as your attorney, as the role can be misunderstood or abused. The ideal attorney is someone you really trust, someone who will keep your best interests at heart and who cannot benefit financially from the decisions they may have to make."
Okay, that's your wife, husband, sister, son, daughter, maybe even trusted legal adviser, not the guys who lent you three grand.
Powers of attorney are powerful things. People commonly use two types.
The first is enduring power of attorney for personal care and welfare, which allows someone else (a wife or husband, for example) to step in and make decisions over your medical care, should you no longer be able to.
The other is for property, which gives the attorney power over your property, again should you ever be incapable of managing it yourself.
Whenever you take on debt, you give power to someone else over you and, by default, your loved ones. Banks can sell your home. Car financiers can repossess the car.
But granting a lender irrevocable powers of attorney so they can control your finances crosses a line for me.
Lyn McMoran from the Financial Services Federation representing lenders (including at least two with power of attorney clauses) says lenders would use powers of attorney only as a last resort, and generally don't use them.
I can only think these clauses exist because of poverty, desperation and desperate ignorance.
- Powers of attorney are important
- But grant them with extreme caution
- Never give them to a lender