Guarantees of loans from financial institutions by a family member of the borrower can be problematic, especially if the guarantor is a vulnerable elderly person. The Commission recommends consumer protection measures to protect guarantors, including enhanced mandatory disclosure by financial institutions of the legal effects of guarantees.
Publications by Key Term: loan
Family Loans and Guarantees: Consultation Paper Jan 2006
This consultation paper investigates loans made by one family member to another, and guarantees of loans obtained from financial institutions by a family member of the borrower. Both are common, and are often ways in which a parent can help an adult child financially. Unfortunately, both can also lead to misunderstanding. Potential problems are greatest if the lender or guarantor is a vulnerable elderly person. In such cases, the financial transaction may amount to elder abuse.