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Written on 16th July 2024 by Lauren Hall

A deputy for property and financial affairs is appointed when a person (“P”) lacks the capacity to make financial decisions for themselves. In the vast majority of cases, this means that P lacks the capacity to enter into loan or credit agreements.

But how can a deputy proactively prevent P from taking out any kinds of loans or credit agreements whenever they want to?

Preventing unauthorized loans and credit agreements

In this digital world, it is easy to apply for credit or loans with just a few clicks. It is readily available and often websites encourage usage with enticing “buy now, pay later” slogans. For those with brain injuries who are spontaneous, live in the moment and struggle with future planning, this seems to be a great idea.

Following a deputyship order being made, it is good practice to discuss this order with P and, as part of this discussion, to explain that this means they cannot take out loans or credit agreements without the express approval of the deputy.

The main step to take following this is to write to the top credit agencies in order to notify them that P is under the jurisdiction of the Court of Protection and does not have capacity to enter into loan or credit agreements. This means that lenders should see this entry when performing a credit check and should, in theory, refuse any applications.

The pitfalls and challenges facing a deputy

Case Study: A Client's Loan Issue

Unfortunately, this is not a failsafe option as demonstrated recently by a client (“A”). Despite notes being added to Equifax, Experian and TransUnion, A managed to take out a loan with a whopping 60.8% interest rate. We are in the process of challenging this loan to establish whether a credit check was undertaken and whether the statement was included or whether it was ignored or missed by the lender. We will then need to protect P by ensuring the loan is voided.

On this occasion, all reasonable steps were taken by the deputy but P still managed to take out a loan. Luckily, a good relationship with P meant that we were able to step in quickly. However, this clearly shows a lack of understanding about the Court of Protection with lenders and credit agencies and highlights a need for them to consider how to protect P.

This is not the only challenge that faces deputies though. Use of services such as Clearpay and Klarna are becoming ever more popular. These are services that lend customers a fixed amount of credit to make purchases instantly and then the customer pays them back every two weeks over four instalments.

Registering with the top credit agencies does not solve this issue because these services do not run credit checks. Therefore, there is no way for deputies to proactively prevent P from using these services. Another client (“B”) used Clearpay to pay for his clothes shopping and then defaulted on repayments for months, incurring daily interest, before admitting to the deputy what he had done. Upon discussion with Clearpay, they confirmed that they did not have any steps or protocols in place to protect those lacking capacity.

Summary

Until credit agencies and lenders develop protocols to protect P and take steps to understand the Court of Protection, there are few proactive steps that a deputy can take but these are imperative in order to protect P as best as possible.

  1. Have an honest and open discussion with P about loans;
  2. Write to the top credit agencies to add a warning to lenders when they run a credit check.

Once you become aware that P has taken out a loan or credit, take steps immediately to notify the lender that P lacks capacity and is under the jurisdiction of the Court of Protection.

 

If you need any advice in relation to deputyships, please contact our Court of Protection team at courtofprotection@boyesturner.com.