Be­ware the pow­ers of at­tor­ney pit­falls

The Tribune (NZ) - - COMMUNITY COOKBOOK - ROB STOCK rob.stock@fair­fax­me­dia.co.nz

Hu­man­ity has gone through a lot of ages. We’ve had the stone age, iron age, the age of en­light­en­ment, atomic age, space age, and even a few (pos­si­bly imag­ined) golden ages.

How would we char­ac­terise our cur­rent age?

Maybe the in­ter­net age, or given the rapid grey­ing of the pop­u­la­tion, the age of age­ing.

Or per­haps to­mor­row’s his­to­ri­ans will call it the debt age.

It is not just the size of our debts that’s shock­ing, nor the fact that young ex­ec­u­tives and bankers tell me they can’t af­ford houses, nor the use­less stuff (TVs, mag wheels, hol­i­days, etc) we go into debt for.

It’s also the grue­some­ness of some of the lend­ing terms we are sign­ing up to.

I saw one the other day that left me speech­less, and a lit­tle de­pressed.

It gave the lender an ir­rev­o­ca­ble power of at­tor­ney over the borrowers’ prop­erty, which it could use to pro­tect its in­ter­ests and make sure it got its money back (plus in­ter­est and fees).

And, if there was a guar­an­tor of the debt (par­ents, brother, sis­ter, aunty, etc), the lender got power of at­tor­ney over their prop­erty as well.

It turns out the power of at­tor­ney clause is com­mon.

De­mand­ing one may be a very sen­si­ble move by the lender, but in my book only a trusted loved one gets power of at­tor­ney over your prop­erty, and then only if you’re in a coma.

The Cit­i­zens Ad­vice Bureau’s ad­vice is worth not­ing: "Think care­fully about who you want to choose as your at­tor­ney, as the role can be mis­un­der­stood or abused. The ideal at­tor­ney is some­one you re­ally trust, some­one who will keep your best in­ter­ests at heart and who can­not ben­e­fit fi­nan­cially from the de­ci­sions they may have to make."

OK, that’s your wife, hus­band, sis­ter, son, daugh­ter, maybe even trusted le­gal ad­viser, not the guys who lent you three grand.

Pow­ers of at­tor­ney are pow­er­ful things. Peo­ple com­monly use two types.

The first is en­dur­ing power of at­tor­ney for per­sonal care and wel­fare, which al­lows some­one else (a wife or hus­band, for ex­am­ple) to step in and make de­ci­sions over your med­i­cal care, should you no longer be able to.

The other is for prop­erty, which gives the at­tor­ney power over your prop­erty, again should you ever be in­ca­pable of man­ag­ing it your­self.

When­ever you take on debt, you give power to some­one else over you and, by de­fault, your loved ones. Banks can sell your home.

Car fi­nanciers can re­pos­sess the car.

But grant­ing a lender ir­rev­o­ca­ble pow­ers of at­tor­ney so they can con­trol your fi­nances crosses a line for me.

Lyn McMo­ran from the Fi­nan­cial Ser­vices Fed­er­a­tion rep­re­sent­ing of lenders (in­clud­ing at least two with power of at­tor­ney clauses) says lenders would use pow­ers of at­tor­ney them only as a last re­sort, and gen­er­ally don’t use them.

I can only think these clauses ex­ist be­cause of poverty, des­per­a­tion and des­per­ate ig­no­rance.

PHOTO: ALEXSKOPJE/123RF

Take ex­treme care with who you give power of at­tor­ney to, and un­der what cir­cum­stances.

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