A power of attorney is an authority given by one person (the donor) to another person (the attorney) to act on his or her behalf. This authority is detailed in a document that, once signed by both parties, becomes legally binding.
A person will typically give such an authority because he or she:
- is going overseas for some time
- is suffering a period of ill health
- is unable, for one reason or another (including potential mental incapacity), to manage his or her affairs.
The attorney needn’t be a lawyer, but he or she should be someone the donor trusts implicitly. The donor is giving this person important powers to manage his or her affairs. Legally, the attorney’s actions are regarded as if the donor had performed them (as long as the attorney’s actions are within the scope of the power given him or her).
We sometimes get complaints about how a power of attorney has been used in banking matters. This guide explains our approach to such complaints.
Types of powers of attorney
There are two types: a general power of attorney and an enduring power of attorney. Both become invalid on the death of the donor.
General power of attorney
Here, a person appoints someone to help look after his or her affairs. The donor can continue to manage his or her own affairs, but is assisted by the attorney. The extent of that assistance is up to you, as the donor. You could choose to give your attorney the power to look after all of your property, or you could limit it to, say, managing your bank accounts.
You can have more than one attorney, but be sure to spell out how they are to exercise their powers. (Do you want them to make decisions together or separately?) You can amend or revoke the power of attorney document at any time. If you do, be sure to advise those people or organisations (such as banks) relying on the document, because they are entitled to assume its contents remain valid unless told otherwise.
A general power of attorney ceases to have effect once the donor loses mental capacity.
Enduring power of attorney
Here, an attorney is able to act for you even if you lose mental capacity, as long as you arranged it while still capable. This type of authority is very useful in helping to protect your future circumstances, including your financial situation. If you become mentally incapacitated and have no enduring power of attorney in place, a court may appoint someone to make decisions for you.
There are two types of enduring powers of attorney. One relates to a donor’s personal care and welfare, the other to a donor’s property. The first enables an attorney to make decisions about a donor’s personal care and welfare if the donor loses the mental capacity to make decisions (such as through dementia or as a result of an accident). This type of enduring power of attorney comes into effect only if the donor becomes mentally incapable.
The second type, the property-related authority, includes houses, vehicles, business interests, personal effects, bank accounts and investments. A donor has a choice about when this type of enduring power of attorney comes into force: it can be as soon as the document is signed, or only when mentally incapacity occurs.
Only a medical professional can decide whether a donor has lost capacity to make his or her own decisions.
Any bank customer who has mental capacity can complain to us. However, when a customer has lost mental capacity, only a duly authorised person can complain on the customer’s behalf. This is usually a person with an enduring power of attorney that covers the customer’s banking affairs, or a property manager appointed by the courts. In such cases, we will ask to see a copy of the power of attorney or the court order.
Types of complaints
From a customer who has granted power of attorney
A customer may complain that a bank accepted instructions outside the power given to an attorney. In these cases, we will first check the wording of the power of attorney document. A third party, such as a bank, should accept only those instructions that fall within the powers granted in the document.
A customer may also complain an attorney did something wrong and the bank should have been aware of it. A customer may, for example, say that a bank should not have allowed the withdrawal of funds that the attorney subsequently spent on him or herself. We would not be able to uphold such a complaint if the power of attorney document allowed the attorney to operate the customer’s bank accounts. Customers must approach attorneys directly about improper use of powers. It would be a different matter, however, if there was evidence to suggest a bank was aware an attorney was breaching his or her duties.
From an attorney about a bank
An attorney may complain about a delay by a bank in accepting instructions, even after receiving a copy of the power of attorney document. A bank may, for example, want extra information to assure itself that the power of attorney has not lapsed or been revoked. Or, if a power of attorney has taken effect because the donor has lost mental capacity, a bank may seek evidence of this. A bank may also stipulate that an attorney meets its identification requirements. In all such situations, we expect banks to clearly explain their requirements to attorneys.
An attorney may also complain that a bank is denying certain requests, such as for an eftpos card or access to internet banking. We will look at the power of attorney document and whether the donor has placed any limits on what the attorney has the power to do. We will also look at the bank’s policies and procedures when dealing with powers of attorney.
Note that banks cannot replace an account holder’s name with that of an attorney because the account holder is the legal owner of the funds in the account.
From an attorney on a customer’s behalf
Occasionally, we get complaints from an attorney after the donor has lost mental capacity, about matters that occurred before the loss of mental capacity. An attorney may complain that the bank should have declined an application for a loan because the customer could not afford repayments or that the bank recommended an unsuitable investment product for the customer. These cases are often difficult to assess because the donor may not be able to recall his or her interactions with the bank. However, we can look at documents such as loan applications, diary notes and contracts to see that the bank followed the law and good industry practice.
An attorney may complain that a bank should have taken steps, even before being advised of a customer’s mental incapacity, in order to prevent certain transactions because it was obvious the individual was mentally incapable. Our response is that bank staff are not medically trained to detect deterioration in mental capacity, especially if not visible or obvious. Even so, if there were clearly sufficient indications that something was wrong, we may find that the bank should have taken some further steps before processing transactions.
Other sources of information
You should get professional advice before granting a power of attorney. You can find more information at:
Privacy & confidentiality
Banks have a legal duty to protect the confidentiality of existing and former customers. Banks also have obligations under the Privacy Act 1993, which contains 12 privacy principles about personal information. In the banking sector, these principles govern:
- banks’ collection and storage of customer information
- customers’ rights to access and correct information about themselves
- the disclosure of personal information.
We can consider complaints about breaches of privacy and duty of confidence. Sometimes we refer a privacy complaint to the Office of the Privacy Commissioner if we consider it would be better dealt with by that office. An example would be if a customer sought compensation that exceeded our limit.
Concepts similar, but not the same
A duty of confidence and the legal obligation to protect privacy are similar, but not the same. The former applies to information about individuals and businesses, the latter to information about individuals only (and that includes bank staff). If a complaint requires us to look into the behaviour of a staff member, we can ask the bank to tell us what systems or process changes it has put in place to correct a problem, but we cannot seek information about any disciplinary or other action the bank may have taken against that individual.
Disclosing confidential information
There are four broad situations in which a bank can lawfully disclose confidential information:
- When the law compels it to: Banks sometimes have to give evidence about a customer’s affairs in court. Banks can also be required to give information to the Inland Revenue Department (under the Tax Administration Act 1994), to the Ministry of Social Development (under the Social Security Act 1964) and to a company liquidator (under the Companies Act 1993). Banks are also required to report suspicious transactions to Police (under the Financial Transactions Reporting Act 1996 and Anti-Money Laundering and Countering Financing of Terrorism Act 2009).
- When it has a public duty to: This applies when there is a danger to the state or when the wider public needs protection against crime. A bank needs to balance the public interest with respecting a customer’s right to privacy when it considers providing information about that person to a third party.
- When a bank must disclose information to protect its interests: This applies when a bank takes legal action against a customer (such as to recover a debt), or defends an action from a customer and needs to provide information about the customer’s affairs.
- When a customer agrees: A bank can disclose customer information if the customer agrees. A bank must ensure the information is correct and within the scope of the customer’s consent. A customer may, for example, agree to the bank’s disclosure of information about one account only. If the bank releases information about other accounts, it has breached its duty of confidence.
When a bank breaches confidentiality or privacy
If we consider a complaint about breach of confidence or privacy to be valid (whether accidental or deliberate), we assess whether this has resulted in a direct financial loss to the customer and, if so, award compensation. We also look at whether the customer has suffered distress, embarrassment or inconvenience. We must be satisfied any distress, embarrassment or inconvenience warrants a compensation payment. Sometimes customers submit substantial claims for minor frustration or inconvenience. We are unlikely to award compensation for minor mistakes that have little or no harmful effects company liquidator (under the Companies Act 1993). Banks are also required to report suspicious transactions to Police (under the Financial Transactions Reporting Act 1996 and Anti-Money Laundering and Countering Financing of Terrorism Act 2009).
Common scams targeting bank customers
You always need to be on your guard when it comes to banking and money matters. That doesn’t mean being suspicious or paranoid. Rather, it means exercising care and maintaining a healthy scepticism towards individuals or companies when you’re online. We recommend you take the following precautions:
How to bank safely
- Find out something about the company or individual you are dealing with. Do an internet search, look for reviews, ask for a physical address you can check, and look up the company on the Companies Register.
- Check Consumer Protection’s scam alert website.
- Check with someone independent and trustworthy before you commit to anything.
- Do not give out account details unless the business is established and trusted.
- Never accept money into your account for subsequent transfer to others.
- Never give out your PIN or internet banking password.
- Check your accounts regularly to ensure money is going to the right places.
- Report any likely scams to your bank.
- When emailing people about making a payment, confirm the payment details using another form of communication (such as by phone). You may not be communicating with the person you imagine, because fraudsters hack into email accounts and assume the account holder’s identity. A quick phone call can foil such deception.
- Contact your bank immediately if you suspect you have been scammed. It may be able to reverse a payment (but that’s unlikely if you’ve authorised the payment and it has gone through).
If you find you've become the victim of a scam and you complain to us, our job is to determine whether your bank is liable for the loss.
Scammers try to trick customers into giving out personal information such as bank account numbers, passwords and credit card numbers. This is called a phishing scam. Typically, customers receive an email from what looks like their bank. It will say they need to confirm some personal details, usually their internet banking username and password. It will contain a link to a website that looks like the bank’s but is fake. Customers who enter these details will soon find scammers have accessed their accounts and cleared out their money.
Be extremely wary of emails that appear to be from your bank and that ask you to confirm your personal details. Banks will never ask you for your password in emails. Don’t click on links within any email if you have the slightest suspicion about its authenticity. Simply delete the email. If you need to go to your bank’s website, type the address into your browser.
If you enter your internet banking password and other details into a fake website, it’s likely you will be liable for any losses because you disclosed this crucial information.
Fraudsters may also make phishing phone calls pretending to be your bank, telephone company, government department or a computer company. They may ask you to turn on your computer and download software that gives them access to everything on your computer. A fraudster who has gained access to your computer may be able to steal money from your bank accounts. Be very cautious about unsolicited phone calls, no matter how plausible the caller sounds.
Sending money to scammers
Scammers can also trick bank customers into sending money to them. How they do this varies. A common way is to ask customers to send a processing fee in order to receive an inheritance or the proceeds of an investment. Another is for someone met on an online dating site to seek financial help. Losses from such scams can run into tens of thousands of dollars.
Always be careful if someone you don’t know or have met only online asks for money. It can seldom be recovered. Your bank is very unlikely to be liable for losses you suffer if you give it instructions to send money to someone, it follows those instructions and you later find out that the individual was a scammer.
Another scam is to ask a bank customer – the mule – to accept and forward on money stolen from another victim’s bank account. Scammers convince people there is a legitimate reason for the transfer, such as paying a fee associated with a job application or helping someone with whom they have an online relationship.
A bank may reverse a payment from a mule’s account if the money is found to have been stolen. This, in turn, can cause the mule’s account to be overdrawn if there isn’t enough money in the account. The bank will ask the mule to repay the overdrawn sum.
In such cases, we consider whether the bank’s terms and conditions allow it to reverse a payment from a mule’s account. We also assess whether the bank had sufficient information to conclude the money was stolen before it reversed the payment. If so, the customer will be held liable for the loss.
These aim to get customers to disclose their PIN. Scammers have usually already stolen a customer’s wallet, but to use any credit or debit cards they need the PIN.
Scammers use different techniques to get intended victims to disclose their PIN. Scammers may, for example, say they are from the bank and have noticed suspicious transactions that indicate a card has been stolen. They will suggest cancelling the card, but doing that, they add, will require the customer to verify his or her PIN in order to authorise the cancellation. The giveaway here is that banks never ask for a customer's PIN.
Another technique is to contact a customer and say he or she has won a prize. The customer is asked to make up a four-digit number for identification purposes when collecting the prize. The scammer may be making the call from an ATM and will tap in the number. If not the PIN, the scanner will say that number has been taken, and to pick another. Subconsciously or otherwise, many customers will eventually give out their PIN.
By disclosing your PIN to anyone, you are breaching the terms and conditions of your account or card and you will generally be liable for fraudulent transactions. You won’t be liable for fraudulent transactions if you have taken reasonable care of your card and PIN.
Financial abuse of the elderly
Financial abuse can take the form of:
- misusing or stealing from the bank accounts of those in their care
- pressuring a person to sign a legal document, such as a guarantee or mortgage
- using a power of attorney in a way that is not in the interests of the person who granted it.
Pressure from family member or caregiver
Elderly people may face pressure from family members for financial support. For example, an adult child may pressure a parent to guarantee a loan or become a co-borrower on a loan using the parent’s house as security.
If someone is pressuring you to sign a bank document, or is accessing your accounts without your permission, contact your local bank branch. Staff will give you advice on how best to protect yourself and your banking affairs. In so doing, bank staff will also be alert to any unusual activity in your accounts.
Suspicions of financial abuse
If you suspect an elderly friend or relative is the subject of financial abuse, you may like to raise the subject diplomatically with that person. Some tentative questions can either allay or confirm your suspicions. You may wish to raise your concerns with a trusted family member. The Office for Seniors runs a free helpline (0800 32 668 65) that gives callers information about elder abuse and also connects them to support services.
Other types of financial abuse
Like all customers, older people can also be approached by individuals running financial scams. Fraudsters can make contact in person, by phone, email, or through the internet.
The following organisations also deal with matters affecting the elderly:
- SuperSeniors (Office for Senior Citizens)
- Age Concern
- Commission for Financial Capability (The Retirement Commissioner).