AFCA determinations: Banks, financial abuse and powers of attorney

Powers of attorney (including enduring powers of attorney) are an accepted form of appointment by bank customers for a third party to operate their bank account.

But at the same time the Banking Code of Practice commits banks to taking extra care with customers who are experiencing vulnerability, including elder abuse and financial abuse.

Achieving a balance between complying with valid powers of attorney and protecting vulnerable customers has been a long-term concern (see here).

AFCA has published a series of determinations of complaints by elderly customers against banks related to transactions by the customers’ attorneys. See also The AFCA Approach to financial elder abuse (pdf)

AFCA has no jurisdiction to deal with claims against attorneys.

A key obligation is for banks to ensure that the power of attorney satisfies the formal legal requirements and to keep a copy.

Financial elder abuse occurs when a third party uses the funds or assets of an elderly person to the detriment of the elderly person.

A bank’s obligation to verify that a customer is not a victim of elder abuse arises only if the bank is on notice of unusual circumstances or “red flags” indicating possible abuse or influence.

When dealing with a complaint by a customer against a bank, for AFCA to conclude the bank ought to have been on notice of financial abuse, it must be shown that there were matters known to the bank that raised one or more warning signs indicating the need for further vigilance by the bank.

Age, by itself, is not an indicator of potential financial elder abuse. There must be some other unusual circumstances known to the bank.

AFCA Determinations

Here are a sample of AFCA decisions.

Its decisions are based on fairness having regard to the facts.

Record keeping is therefore critical.

Case number 888903 Westpac Banking Corporation
23 June 2023

The complainant was aged in his eighties and lives in a nursing home.

The complainant says the bank should have been aware he was a victim of financial elder abuse and should have stopped transactions from occurring.

His daughter was a third-party signatory to the account. At the relevant time, his daughter was also the complainant’s attorney appointed under an enduring power of attorney.

On 16 November 2020, an amount of $154,434, representing the complainant’s half share of the proceeds from the sale of his former home, was deposited into the account.

The complainant’s representatives alleged the attorney performed many transactions from the account that were the result of financial elder abuse, comprising the disputed house proceeds transfers,
online transfers and debit card transactions.

AFCA was satisfied that the bank, based on what it knew at the time, took reasonable steps to address any possible concern of financial elder abuse.

It did not act in error or breach any obligations when it later processed the disputed transactions, as authorised by the customer.

However, AFCA decided that the bank’s inability to retain and provide a copy of the POA fell short of the standard of accountability set out in the Code of Banking Practice.

AFCA awarded the complainant $500 for stress and inconvenience.

Case number 930953 National Australia Bank Limited
29 June 2023

On or around 28 October 2021, a third party (Ms G) presented at a branch of the bank with a power of attorney document (POA).

Ms G purported to have been appointed the complainant’s attorney under the POA she presented to the bank.

The bank gave Ms G information about the complainant’s accounts. The complainant said the bank breached the complainant’s privacy by releasing her financial information to Ms G.

AFCA found that the bank did not comply with its POA policy which says if the bank accepts a POA, it must:
* establish a personal customer profile for the attorney if not already held
* complete identification and verification for the attorney
* record specific details of the POA in its system
* scan and attach a copy of the POA to the customer’s profile.

In this case, the bank did not complete the above steps when it accepted the POA Ms G gave it.

Relevantly, the bank did not retain a copy of the POA and therefore could not provide it to AFCA. 

Ultimately VCAT made orders confirming the attorney was validly appointed.

However AFCA ordered the bank to pay $193.70 to the complainant in compensation for the legal costs the attorney incurred on the complainant’s behalf, because of the bank’s error.

Other AFCA decisions:

Case number: 873438
Commonwealth Bank of Australia
31 July 2023
This determination was in favour of the bank. The bank was not required to compensate the complainant or take any action. The bank was on notice the complainant was a vulnerable customer when a doctor’s letter was presented to it stating he had chronic health issues. However, AFCA did not consider the bank was on notice the complainant lacked capacity to make decisions.

Case number 921543
Commonwealth Bank of Australia
29 May 2023

This determination was in favour of the bank. The bank was not required to compensate the complainant or take any other action in relation to this determination. The bank acted fairly and reasonably by restricting the complainant’s online access to the account in accordance with its terms and conditions and its obligations under the Banking Code of Practice, which clauses are designed to protect the interests of vulnerable customers.

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David Jacobson

Author: David Jacobson
Principal, Bright Corporate Law
About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.

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