Life loan proves a millstone for 97-year-old pensioner

I would like to draw your attention to a very serious issue involving a Bank of Ireland life loan to an elderly lady. I am hoping that by having this case highlighted it will help speed up our efforts to have the issue resolved, and also serve as a cautionary tale to anyone else considering taking on a life loan.

Back in 2003, when she was 72, a single woman with no children received correspondence from Bank of Ireland offering her a life loan. Having taken legal advice (she never discussed this advice with anyone), she took out a life loan of €130,000.

She actually only needed €30,000 at the time, so she put €100,000 back on deposit with Bank of Ireland, where it has remained ever since. (It is not clear why she took out €130,000 when she only needed €30,000.)

As of June this year, the total amount required to close the account was a staggering €455,081. The woman is now 97.

Her nieces and nephews have been trying unsuccessfully to get mediation on this loan with Bank of Ireland since 2022. A complaint was made in August last year to the Financial Services and Pensions Ombudsman (FSPO), but in a response in May this year, the ombudsman said it could be another 12-14 months before we hear from them on this complaint.

The general public needs to be more aware of the risks involved in life loans. While Bank of Ireland no longer offer such a product, there are ads for similar products from Spry Finance frequently aired on radio.

The behaviour of Bank of Ireland at all stages of this loan needs to be questioned and answers given.

The fact that the FSPO can tell a 97-year-old that it will be 12 to 14 months before a member of the investigative team will be appointed to this case is shocking.

JC

Any regular reader will know that while I accept life loans and similar equity release products can be useful for certain borrowers, my view is that they are very much credit of last resource – something you turn to only if you cannot raise money you need any other way.

They were, as you say, popular in the early years of this century and heavily marketed by the lenders offering them, including Bank of Ireland. They offered people who might be wealthy on paper due to the value of their home but cash poor – especially women with little or no pension cover – access to money that would not need to be repaid in their lifetime.

[ Lifeline or life sentence? How equity-release lifetime loans workOpens in new window ]

Interest built up over time and the loan was redeemed when you died or otherwise moved out of or sold the property. That interest could, and in some cases did, swallow up all the equity in a home. However, where the debt was greater than the eventual sale price, the bank committed not to chase the estate for any payment over and above the sale price.

The collapse of property prices saw them swiftly withdrawn from the market, alongside tracker loans, as banks faced the prospect of losing money on both products.

Your friend’s story is almost a textbook case study of what can go wrong.

Life loans were available only to those over the age of 65. People could borrow up to 20 per cent of the value of their homes if they were in their 60s to as much as 30 per cent for those in their 80s. For someone like your friend, borrowing at 72, the limit was 25 per cent.

The first alarm is that, as you tell it, she never proactively sought this loan; instead, she was simply targeted with marketing material by the bank.

[ What are your options if you want to release wealth tied up in your home?Opens in new window ]

This was certainly not unusual back in the wild west of the early noughties in the credit markets. People regularly got letters at that time telling them they had been pre-approved for loans they had never sought and found their credit card borrowing limits had been increased without any contact from or with them.

Was any of this ethical, including love-bombing a pensioner with offers of “easy-to-access” money? In my view, certainly not.

Does it amount to mis-selling? I’m certainly not going to second-guess the ombudsman when it comes to that. The FSPO is an office with far more resources and expertise than me, as well as long experience with such cases and clear lines of communication with the very top echelons of lenders such as Bank of Ireland.

But there are features of your friend’s story that are deeply concerning. While the woman was obliged under the terms of the loan to consult a solicitor – who had to sign forms to confirm their engagement – the bank also had a duty of care to ensure that it was selling appropriate products to people.

The fact that €100,000 of this €130,000 borrowed never moved from the deposit account into which it was lodged at Bank of Ireland should have raised alarms bells with the bank.

Bank of Ireland notes that, as in this case, it could be decades before repayment fell due. Interest on your friend’s loan has been building up for 25 years.

[ Equity release borrowing by older homeowners jumps 30% to €75mOpens in new window ]

“To ensure customers would understand the product, the information provided clearly explained the terms of the loan,” a spokesman for Bank of Ireland says. And, having read the product brochure, those terms should be very clear to anyone who took the time to read it in full. It is not hidden is seven-point type.

“Most importantly,” the bank continues, “before any life loan was agreed it was a requirement for each customer to obtain independent legal advice – and to show that they had taken that legal advice – to ensure that customers fully understood the terms and conditions.”

Whatever about Bank of Ireland mis-selling this loan, there are questions about the advice any legal practitioner gave this woman back in 2003. She clearly did not “need” this money – or most of it anyway – as €100,000 has sat untouched on deposit ever since, effectively losing value. It is just such a bad call on so many levels.

So what “advice” the solicitor provided, I have no idea. I can see them saying they advised only on the legal and contractual issues rather than the wisdom of taking the loan but that seems a very narrow and unhelpful interpretation of their role.

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The bank certainly appears to be sticking to its view that the loan has worked exactly as it should and as it was advised to the client. Whether that passes muster with the ombudsman remains to be seen, especially given she borrowed money under this expensive product that she clearly did not need. How was that assessed?

As for the ombudsman, I have sympathy. Asking a 97-year-old to hold on for up to 14 months to hear if they have a case certainly seems insensitive but the resources of the ombudsman are limited and all the cases that get to the investigation stage have people who are feeling hard done by, so how can they prioritise other than first come, first served.

It is simply unfortunate that it took so long for the details of this loan to emerge so that her extended family could help her.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or by email to dominic.coyle@irishtimes.com with a contact phone number. This column is a reader service and is not intended to replace professional advice.