What does ‘capacity’ mean?

You ‘have capacity’ to take out a loan if you can:

• Understand and remember information about the loan,
• Weigh up that information when deciding whether you want the loan, and
• Let someone know what your decision is.

 If you can't do one of these things, you ‘lack capacity’ at the time.

What if I took out a loan when I lacked capacity?

It can be hard to prove that you lacked capacity, especially if it was a long time ago. It can also be hard to show that a bank or money lender should have known.

However, the lender should have known you lacked capacity if:

• You told them you had an illness,
• They could see that you were finding it hard to follow the conversation and understand what they said,
• They know you have an appointee for benefit purposes,
• Your attorney under an Enduring Power of Attorney told the lender you lack capacity,
• The lender knows that you are subject to an Office of Care and Protection order,
• You told the lender that you wanted to spend the money on something unusual, or
• You talked about unusual or unrelated things when they were explaining the loan agreement.

In Northern Ireland common law governs mental capacity. It follows English law definition of capacity. Mental Capacity Act 2016 is a new capacity legislation which will be implemented in the next few years.