Son used mother's home as security for a loan

Mr. C brought a complaint to OBSI on behalf of his mother regarding a Power of Attorney (POA) document she signed appointing her three children to act as attorneys on her behalf. Each of her children could act alone. Mr. C's brother was responsible for administering the mother's finances and was aware of the POA, but the mother did not advise Mr. C or his sister that she had signed any POA document, or that she had authorized them to act as her attorneys.

The brother then convinced their mother to take out a Home Equity Line of Credit (HELOC) on her condo, against Mr. C's advice. The brother subsequently withdrew $100,000 from the mother's HELOC, advising her he was investing it for her and she would receive a 10% return. The investment performed poorly and the money was lost.

Mr. C did not discover that his mother had given him and his siblings her POA until he learned that the bank was returning cheques on his mother's account due to lack of funds. At this point his mother signed a new POA which appointed only Mr. C and his sister as her attorneys, removing Mr. C's brother from any future involvement in the mother's bank accounts.

With her savings gone, the mother was not able to make the required minimum payments on the HELOC, and her home was put up for sale. Mr. C argued that the bank should bear some responsibility for his mother's losses. Mr. C questioned how the bank could have allowed his brother to withdraw $100,000 from the HELOC shortly after it was established, without any questions or concerns being raised by the bank. He also believed that if the bank had made him and his sister aware of their POA rights – which it didn't – they could have prevented their brother from taking their mother's money. When the bank did not accept responsibility, Mr. C raised his complaint to OBSI.

Complaint not upheld

Mr. C confirmed to OBSI that his mother did not have any cognitive impairment, was alert, and understood the situation. During our conversation with him and his mother, we found her to be well informed and regretful that she “placed her blind trust in her son, who abused that trust."

As part of our review we surveyed other banks for their procedures for POAs. We found that the bank's procedures were consistent with industry standards, and that typically it is the responsibility of the person appointing the attorneys to advise them of the appointment, not that of the bank.

We reviewed the POA document which gave all siblings, acting “jointly or separately," the authorization to administer the mother's bank accounts, take out loans, and other transactions on her behalf. We also reviewed the HELOC Agreement signed by Mr. C's mother and confirmed that the document clearly describes the security as the mother's residence.

We understand that the mother was put in a precarious financial position. However, we concluded that the bank was not responsible for advising Mr. C or his sister that his mother had appointed them as her attorneys. By appointing all of her children as her attorneys, the mother gave each of them the authority to act on her behalf. The fact that she made only the one brother aware of the appointment did not negate this authority nor deny him access to her account and the HELOC. The withdrawal he made of $100,000 was apparently done with her knowledge and was based on her son's promise of a significant return.

We concluded that there was no evidence the bank acted inappropriately and as a result we did not recommend compensation.

(2010)