Research has revealed for the first time the extent of the dilemma facing carers and family members, as well as the huge potential for financial harm caused by their lack of rights provided by the current banking system.

Under proposals being launched today by the Money and Mental Health Policy Institute, a charity set up by Martin Lewis, carers would be granted the right to use other people’s cards to buy them essentials, including supermarket shopping, prescriptions and household bills.

At present the UK banking system does do not allow casual use of debit cards by carers unless they have full power of attorney, a special right which can be expensive to obtain and often requires the involvement of a solicitor.

This is despite millions of elderly and disabled people in the UK relying on carers to handle their basic financial affairs as they feel unable to do it themselves.

Polly McKenzie, director of the Money and Mental Health Policy Institute, described the current system as an “absolute disaster which puts people who simply want to help the people they love in legal and emotional jeopardy.”

She added that limited carers’ rights would minimize risk of fraud against the elderly as their spending would be easily capped, tracked, and separated from their own spending.

Her proposals were welcomed by experts, including Baroness Altmann, the former pensions minister and a campaigner for improving elderly care.

She told the Daily Telegraph: “This country has not yet woken up to the fact that more people will need care or be carers in the very near future but this has got to change.

“I am in support of anything that makes the system easier for carers, as the process for getting power of attorney is far too difficult and complicated right now. Carers are finding that even when they have power of attorney bank staff don’t know the rules, which is of course very frustrating.”

There are almost seven million unpaid carers in the UK and nearly a million (880,000) people care for someone with a mental health problem.

To meet this large and growing demand, this newspaper understands a number of banks including Barclays and Coventry building society have considered developing special “carers cards” to give carers limited access to someone’s accounts.

The proposals were also met with warnings that the British justice system also needs reforming as it is failing elderly victims of financial abuse.

According to charity Action on Elder Abuse hundreds of thousands of criminals are escaping punishment each year for preying on pensioners, with fewer than 1 per cent of cases ever reaching the courtroom. Only 0.7 per cent of all estimated crimes against people aged over 65 result in criminal charges, it said.

Chief executive, Gary FitzGerald, said: “It’s about striking a balance between letting carers help people run their lives and preventing fraud in cases where the carer puts their own interests above the person they are looking after.”

Under current rules giving a carer a PIN number or other confidential bank details breaks the terms and conditions of the account and means the account holder is potentially liable for any fraud carried out by a carer.

For example if someone gives their card to a carer to withdraw £50, also taking £50 for themselves, they would be liable for both transactions and would have little recourse as a victim of fraud or financial abuse.

In addition carers using cards could face accusations of fraud, particularly if the person they are caring for is too ill to properly understand what they are doing, or if family members dispute the way they are managing the person’s money outside of a formal legal arrangement.

The British Banking Association declined to comment.