Lawyer warnings on equity-release loans to elderly 'ignored'
Lawyers issued strong warnings about controversial equity-release mortgages more than a decade ago.
The products are now seeing thousands of older people facing massive debts.
The lawyers had been particularly scathing about Bank of Ireland's Life Loan product.
At least 3,000 people owe a total of €300m on equity release loans, according to the Central Bank. No repayments are made on equity-release products taken out by older people, which means huge debts have now built up. The money is due when the owner dies, or the house is sold.
Financial adviser John Lowe explained that, as a rule of thumb, what is owed on a product like Life Loan doubles every 10 years.
This means that a €50,000 Life Loan taken out a decade ago has now spiralled to become a debt of €100,000.
Many families are now finding that the amount owed leaves them with nothing when the homes are sold, wiping out inheritances.
Mr Lowe said there was a chance many people did not have the product's terms and conditions properly explained to them when it was taken out.
The controversial Bank of Ireland Life Loan was singled out for criticism by the Law Society, which represents solicitors, in 2005.
The lawyers said many of the conditions attached to the Life Loan product were "objectionable and quite unnecessary".
The society claimed Bank of Ireland was imposing more stringent requirements than similar equity-release schemes in the UK.
So annoyed was the Law Society that it refused to allow its certificate of title forms to be used in connection with the Life Loan product.
Exception was taken by the society's conveyancing committee to the requirement that borrowers make a will and appoint executors. The lawyers are also annoyed at demands that borrowers name their executors.
Yesterday, director general of the Law Society Ken Murphy said: "This very bad outcome, for a great many consumers of equity-release products, is what the Law Society predicted a decade ago.
"In 2005 we expressed, both in the media and in practice notes to the solicitors' profession, the society's deep reservations about aspects of certain equity-release products then being offered on the market."
He said the society had recommended in 2007 that the equity-release products be more tightly regulated.
"Regrettably, no consumer-protection regulation was put in place."
The Irish Independent has received hundreds of calls and emails since the issue was publicised last week, including coverage on RTÉ's 'Liveline'.
Contacted again yesterday, Bank of Ireland said it sold life loan products between 2001 and 2010 in accordance with regulatory requirements.