The FCA's recent proposed changes to powers of attorney have dangers for vulnerable people, says Dawn Joughin of Excello Law.
With the relentless transfer of everyone’s business and personal lives to online only, the pace of digital change can leave some people left behind or vulnerable. Recent proposals from the Financial Conduct Authority (FCA), published in September, are a good example of this phenomenon. They relate to Lasting Powers of Attorney (LPAs) with the suggestion that there is an ‘end-to-end digital system’ which would enable these important documents to be completed and registered exclusively online.
Demand for computerisation has been increasing rapidly in recent years: more than 2.6 million individuals now have their LPAs registered with the Office of the Public Guardian (OPG), an executive agency of the Ministry of Justice. But this process still requires a ‘wet signature’—the physical signing of the document—necessary when registering an LPA with the OPG. What the FCA proposal suggests is that the entire process be digitised.
LPAs enable someone to appoint one or more trusted individuals who assume total control of their assets and financial affairs as well as decisions about their future healthcare. They are invariably used by people who have been diagnosed with dementia, or similar conditions, which will eventually result in them losing the mental capacity to make decisions about their future. Inevitably, most of those who choose to use them are elderly.
Although the power and influence of the Internet’s silver surfers may be celebrated and encouraged by the media, older people are still less likely to use digital or online technology on an everyday basis. The real problem however, is not in the level of their technological competence, but instead in the much increased risk of fraud that an exclusively digital LPA system creates.
According to research from Action on Elder Abuse (AEA), a helpline charity, over 160,000 people over 65 are victims of financial abuse each year. By making the LPA process completely digital, that figure would only increase. AEA has said: 'We believe the OPG’s online tool does not sufficiently address, warn against, and prevent the misuse of Powers of Attorney, thereby leaving older and vulnerable people open to accidental or intentional abuse.' The FCA argue that an exclusively digital LPA would make it easier for everyone to use: "We would like to see the OPG and other authorities develop more customer-friendly approaches to setting up, registering, storing and understanding Lasting Power of Attorney”, states the FCA proposal.
Greater risk of fraud
However, abandoning any requirement for a wet signature potentially puts thousands of people at much greater risk of fraud and financial abuse. The law requires that an LPA is understood and consented to by the donor. But in the absence of any witness to the physical signature, precious little deterrent exists for a family member or friend to register a document fraudulently on someone else’s behalf, without their knowledge or consent.
Lack of checks
Solicitors for the Elderly (SFE) recently published a report which outlined concerns that the current online LPS system leaves older and vulnerable people open to abuse. The report concludes that online LPAs show “a lack of consideration or checks to safeguard for vulnerable donors” and “the individual making the application can more easily become a victim of fraud or coercion.”
The FCA paper does anticipate problems in the following conclusion: “While the paper element of LPAs may be preferable to the current generations of older consumers and arguably reduces risk of fraud, in the longer term, creating a secure, centralised online database of registered LPAs could reduce administrative pressures on firms and carers by removing the need for physical paperwork, and reduce the length of time it takes to set up LPAs. This needs to be carefully balanced with consideration of potential risks of digital exclusion and cybercrime. Consumers who are less comfortable with digital interfaces need to be able to engage fully, regardless of their technological abilities.”
Yet despite identifying problems, the proposal concludes that LPAs should become fully digital. Given that LPAs may become exclusively registered online in future, the potential for high levels of abuse also exists. LPAs are a powerful aide to the elderly, and unless the interests and safety of those that need it most can be protected, this proposal of digisation should be resisted.
Dawn Joughin is a lawyer at Excello Law