You need a bank account. It's a contract. You're not allowed to sign a contract...

In My Humble Opinion
1

So a few months ago my brother was defrauded, and I only found out recently. He is mentally challenged, and while fairly high-functioning (he lives by himself, for instance), I’ve found that he is really bad with money, and also really bad at asking for help. I was surprised at his lack of financial skills, since despite his disability he is literally better at math than I am.

  1. You need a bank account in the modern first world. I live in Canada, so having a bank account is a bit easier than the United States. There’s no Chexsystems for instance (which reports on defrauding banks, overdrafts, not paying them off when you leave a bank) but the latter two would appear on a credit report, and it’s very difficult to convince a bank to give you an account without reviewing your credit.

I’m not sure if there are countries where having a bank account is even easier. (My experience learning about his problem suggests that in Canada you could seduce the bank manager’s spouse and film it live on the internet and still get an account.) I say this because your credit report could have all kinds of red flags but they’ll give you an account anyway, let you deposit a large cheque and then immediately withdraw most of it, etc.

  1. A bank account is a contract of some kind. You have to sign a document saying (among other things) that if you give someone your banking information and then they steal your money, you are responsible for it, not the bank.

  2. If you are mentally challenged, are you even allowed to sign contracts? And if not, does that mean that some mentally challenged people should not be allowed to have a bank account? (I’m not really asking for legal advice here. That’s what I’m doing in real life. It’s more of a what-if question. If one, then the other?)

So here’s what my brother did. He lives on social assistance, in a rent-subsidized apartment, so his income and expenses are both low. Unsurprisingly he lives from paycheque to paycheque, unfortunately he wastes a lot of money on eating out. Actually he takes most of his money out at counters and ATMs, so I don’t know for sure what he’s spending the money on.

He has frequent overdrafts. When you’re poor, these are hard to avoid, but I never taught him not to write cheques because I just didn’t know he had these problems. (I’m not his father, his mother should probably should have taught him these kinds of things, but never did. Actually I find that she’s not very responsible with money either, and many of the lessons I picked up from her were “do as I say, not as I do”, maybe it’s fortunate I didn’t notice what she did. I have to teach him this stuff now by default.) A bounced cheque costs just under $50, which is about 5% of his monthly income, and of course makes it even harder to get out of overdraft.

He switches banks often. His credit report hasn’t come in yet, but I think he’s been opening accounts with new banks when he has too much overdraft (and then not paying it). Mentally challenged or not, this is not okay, and he needs to pay this back. That’s one reason I talked him into getting a credit report. This is also why I’m surprised the bank he has a problem with gives him such good credit. If he’s been running away from other banks and leaving them with unpaid overdraft, why the hell would you give him any sort of credit?

He fell for a phishing scam, thereby giving someone his information. They used it to deposit a photo cheque from an “empty” account and then transferred as much as possible from his account. That was about $2000. This is ridiculous. My current bank only gives me half that, and I work full time. (When I joined my current bank, their credit system wasn’t working so they had to give me the worst possible deal, about $500, until several months later when I was able to ask for more. I’m just astonished they would grant $2000 of credit to someone with either no credit or bad credit who never makes that much money and never spends that much money either.) :mad:

I would count the cheque “hold” (is that the right term?) as credit, since the bank doesn’t know for sure whether the cheque is good or not until it’s cleared.

Because he gave his info away, he’s held responsible for the fraud (when that cheque inevitably bounced). I feel it’s unfair to expect him to be as good as most people at avoiding phishing, being scammed, etc.

I might lose “the case”. But the bank sold him life insurance (nobody is financially dependent on him) so I’m going to have the regulators rake them over the coals for that.

I find myself wanting him to switch banks (but after paying what he legitimately owes to any banks he may have run away from) and just avoiding the problem in the future, but this has gone on for years without me noticing, and I don’t think I can actually prevent my semi-independent brother from messing up in the future. If he’s not capable of signing contracts, then he can’t have a bank account, but if he doesn’t have a bank account, he loses almost all of his independence. This has me seriously worried, not just for him, but for any other mentally challenged person who owns (and needs) a bank account.

TLDR: Are bank accounts contracts? Can mentally challenged people sign a contract? If so, do they get any special rights or treatment compared to anyone else?

2

I’m NOT a lawyer, or a banker, but I would imagine that first you’d have to prove that he isn’t competant to be in charge of his own finances. Otherwise, I don’t believe that the bank would be at fault. If he isn’t competant to be in charge, you might be able to get power of attourney, maybe? Otherwise, I don’t know if there’s anything you can do.

Once again, I’m NOT a lawyer.

3

Another non lawyer, etc., here. You could check with your brother’s local lawyers, the sooner the better. For basics, there are sites like nolo, for example http://www.nolo.com/legal-encyclopedia/lack-capacity-to-contract-32647.html. Best of success.

4

I actually am seeking a power of attorney, but this thread was more about … can mentally challenged people have a bank account? Can you have the benefit of a bank account without any of the penalties?

(I was thinking of pitting the bank, but I’ve only done one pit thread, and it didn’t seem like it was angry enough to draw readers.)

5

In the US (and I know this from having worked in community living services for disabled people), simply having the diagnosis of a developmental disability, mental illness, or other impairment (like Alzheimer’s, or brain damage from an accident) does not automatically render a person incompetent. In fact, having a diagnosis of mental retardation or autism does not exempt a person from registering for selective service. Everyone becomes emancipated an 18; if it is clear that a person is not going to be competent to manage their own affairs, someone must seek guardianship over them. My SIL’s sister has Down syndrome, and though she is relatively high functioning, she cannot live on her own, manage finances, etc. Her parents got guardianship over her when she turned 18. My SIL’s father died a couple of years ago, and during his final illness, her mother could not handle both her husband and daughter, so she began living with my brother and SIL. They are right now in the process of transferring guardianship from her mother to my brother and SIL. As part of the process, they have to demonstrate once again that she still is in need of guardianship.

Now, this does not mean that you cannot demonstrate that someone was targeted because of a cognitive disability and taken advantage of, and that even someone who is competent enough not to need guardianship still cannot be victimized in a way that a fully competent person might not be. We had a situation like this once. But you do have to be able to demonstrate that the person doing the advantage taking knew they were targeting a person who was impaired, albeit slightly.

I don’t know how helpful that is.

I can also tell you that in the US, it is possible to take control of someone’s finances, but still allow them to live otherwise independently. You would pay their bills and give them an allowance, but they would still live in their own place and look after it, get themselves to whatever places they needed to be from day to day. I don’t know if Canada is like that or not.

6

While this isn’t quoting Canadian law, I suspect it’s rather similar. I was thinking a doctor’s letter might be sufficient, now I think that’s not enough.

The person who defrauded his account is a total stranger who couldn’t have known that he was mentally challenged, unfortunately. People who aren’t challenged do fall for these scams too. (The bank selling him life insurance he didn’t need is another story.)

According to my research, there’s something like that in Canada called a “continuing” power of attorney, and it’s financial in nature. I was afraid that this PoA would be “taking over his life”, but the idea of an allowance sounds like a very good compromise.

I already have the PoA documents. I don’t have a proper lawyer yet. Our sister is one, but since she’s a family member (and going through her own problems right now) I would need to seek another one.

I wonder if there’s something like “Nolo” in Canada. I’ll have to research that.

7

Suggestions:

  1. continue to pursue the legal case. Being fooled into giving up finances is sort of the definition of ‘fraud’.
    Could the criminal claim he was not guilty of fraud because the victim voluntarily gave him that info? Or “I’m not guilty of bank robbery because my note to the teller said ‘Please give me all the money in your drawer’, with no threat & no weapon displayed, and she just voluntarily handed me the cash”?

  2. Obtain a “Financial Power of Attorney”. (USA term. I presume Canada has something similar.) This lets you act for him in financial matters, but not in the rest of his life. There is also a Medical PoA, which lets a trustee act for a person in medical/health matters.

  3. To control overdraft fees, take the checkbook away from him. You keep that to pay his bills. Get him a bank debit card, and have him use that instead of writing checks. Make sure that the bank sets that so it will not allow any overdrafts. Also, have the bank set this so it can’t be used in ATM’s, or set a very low daily max withdrawal amount. (If the bank hesitates to do this, tell them your other option is to get a credit card (from another issuer) with a low limit, and have him use that instead of the banks’ debit card. Or you have the option of going to another bank. That usually makes them responsive.)

  4. The idea of a cash “allowance” each week is a good one. Talk to him when agreeing on the amount. It can be very small, if he begins using the debit card for everything. (Is Canada like the USA where everything from bus rides to soda vending machines to movie tickets accept credit/debit cards?)
    The first time he runs out of his allowance before the end of the week is a good opportunity for you to go over his spending with him, and try to impart a bit of financial skills to him.

P.S. This will be good practice for the day when your mother reaches an age where you need to do something similar for her.

8

The OP hasn’t said if his brother will agree to giving him power of attorney, or will try and fight it. I imagine that makes a pretty big difference to how to achieve this.
If he agrees then can’t he voluntarily sign over power of attorney?

9

Legal advice is best suited to IMHO.

Colibri
General Questions Moderator

10

If your brother lives in Ontario, and you or some other trusted person are not willing to run his finances for him via a continuing power of attorney for property or via a guardianship, then you and he should contact the Office of the Public Guardian and Trustee to see if they will run his finances for him.

11

The Public Trustee that Muffin described is the option used if he disagrees. I don’t actually know how to bring the topic up with him.

12

“Mentally challenged” is a legal status, which requires documentation of supporting facts that can be judicially challenged. Being denied the right to sign a contract is also a legal status with the same burden of proof. To say that a person cannot sign a binding contract because he is mentally challenged cannot be based simply on somebody saying “He appears mentally challenged to me”.

13

In the UK, banks are obliged to offer a no-frills ‘basic’ bank account to people who have low incomes and a poor credit history. With these accounts, one can pay in (maybe from wages) and accept transfers (maybe from social security), withdraw cash and pay bills. overdrafts are not allowed and any payment that took an account holder overdrawn would be returned.

Many people that have these accounts, only do so because the government will not pay cash or issue cheques. They will often queue up at an ATM at Friday midnight to draw it all out.

14

I have a friend who is developmentally disabled. He was constantly overdrawing his bank account using the ATM card. I went to the bank with him and asked that they set up his account so he can’t take out money he does not have.

They said they could not [would not] do that!

So forget about the bank doing anything to help these people. Might want to appoint someone to take care of some of this stuff for him - get a power of attorney or whatever - give him so much a week cash.

15

Is this in the US? Because a few years ago they passed a law requiring banks to offer these accounts, by default.

Part of the problem was he didn’t tell me anything. As a result of the fraud, he opened a new account at another bank without advice (before I found out about the problem). I found out because a collections agency called me. He had been sent to collections after less than 30 days… leaving his old account in only a small overdraft (less than $20), which I paid off. Apparently they wanted to send him to collections and then continue as if nothing had happened. They also didn’t close the defrauded account right away. When I say that bank did not want to let go of an account, I’m not kidding. American banks are apparently much better about closing accounts when warranted.

It might be possible to transition his new account to a “basic” account. I hope.

16

If the life insurance policy has a cash surrender value, see if the life insurance can be changed to a much smaller policy that is funded entirely by that cash surrender value, and have him *irrevocably designate you as the beneficiary of the policy under an insurance trust to which he is the beneficiary but for which you are the trustee holding absolute discretion whether or not to pay out the eventual proceeds to him. That might (note “might” – there is no guarantee that this will work – read up on “Henson Trust”) be enough to let him stop making payments (other than rolling over interest earned by the policy), protect the funds in the policy from creditors, and allow the policy/asset to remain without getting him cut off from the Ontario government’s Ontario Disability Support Program’s payments that he presently may be receiving or may in the future receive. If the life insurance cannot be self-funded as above, consider having him make you the irrevocable *beneficiary and instead of him making the payments, you make the payments directly into it (but beware that if the absolute discretionary trust fails due to a change in the law, exposing the funds to his creditors, you would be out your contributions).

If there is no cash surrender value, either have him make you the sole beneficiary and you take over the payments, or have him stop paying, cancel the policy, and swallow the loss if the insurer will not make nice.

Whichever way you set it up, be sure to put alternates in place in case you go first, and be sure to set up an absolute discretionary trust for him in your will so that if you go first he won’t be able to blow whatever you leave him.

17

Thank you for telling me. Good to know that! (It was about 5 years ago I tried setting up that account and in the U.S.)

18

I’m amazed he finds it so easy to open bank accounts. The son of a friend of mine moved from Montreal to Toronto with his newly minted law degree and simply could not open an account at a Toronto branch of the Bank of Montreal that he an account at in Montreal. First he was asked to provide a birth certificate. When this was in French, the bank said that that was unacceptable. Sure, he could have raised all sorts of stinks over that, but it was easier to go to a credit union down the street. Still it makes you wonder.

I think the issue will turn on how disabled he actually is.

19

Explain it as a favor you are willing to do for him.

“Hey, because you’re my brother, and you’re having trouble with this bank stuff, and financial stuff is easy for me, I’m offering to do this banking work for you. I’ll take care of the checkbook and writing checks to pay your bills when they come in. And we’ll get the bank to give you a debit card, so that you can pay for things like coffee or lunch just by swiping the card, instead of having to write out a check. I’ll take care of all that stuff for you. But you gotta promise to tell Mom what a good brother I’m being!”

Discuss it with him not as you ‘taking control’ of his finances, but as you doing him a favor. Emphasize the benefits for him, and you might be able to persuade him to do this.

Note though, if he voluntarily signs a Financial Power if Attorney for this, he can also withdraw this at any time. So you have to keep him satisfied that you are doing your best for him.

20

I have some practical experience with this having legal control of my mother’s finances and health decisions.

  1. Even with if you have a financial power of attorney, the ‘mentally challenged’ person still can sign a contract. This is why I have not just power of attorney, but total control (by transferring the accounts to my name for investments, and with special notes and a password on her account at the bank telling employees that my mother is not able to make financial decisions and if she comes to the bank desk asking for money, that she’s been scammed. There’s no guaranteeing this will work, but it’s something)

  2. Depending on your local laws, the only way to take away legal ability to sign a contract is to obtain guardianship for the individual. This is a serious legal step. and can affect the person more than just keeping them from signing stupid contracts. In some states it involve lawyers and a judge. In California, the individual can sign it away (which is stupid on the part of the law).

  3. I think you may want call on a local agency that helps with the mentally challenged and ask for help.

  4. The police may be able to help with the phishing. It is a crime.