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.
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.