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Wednesday, February 20, 2008

Payday Loans And The Elderly.

I found this article about payday loans and was shock to see how they have taken advantage of poor, elderly , and disabled people. One recent morning, dozens of elderly and disabled people, some propped on walkers and canes, gathered at Small Loans Inc. Many had borrowed money from Small Loans and turned over their Social Security benefits to pay back the high-interest lender. Now they were waiting for their "allowance" -- their monthly check, minus Small Loans' cut.

The crowd represents the newest twist for a fast-growing industry -- lenders that make high-interest loans, often called "payday" loans, that are secured by upcoming paychecks. Such lenders are increasingly targeting recipients of Social Security and other government benefits, including disability and veteran's benefits. These people always get paid, rain or shine. Government beneficiaries will always have money, every 30 days.

The law bars the government from sending a recipient's benefits directly to lenders. But many of these lenders are forging relationships with banks and arranging for prospective borrowers to have their benefits checks deposited directly into bank accounts. The banks immediately transfer government funds to the lenders. The lender then subtracts debt repayments, plus fees and interest, before giving the recipients a dime.

As a result, these lenders, which pitch loans with effective annual interest as high as 400% or more, can gain almost total control over Social Security recipients' finances.
Data from the U.S. Department of Housing and Urban Development shows many payday lenders are clustered around government-subsidized housing for seniors and the disabled.

Social Security recipients weren't always a natural market for payday lenders, which typically require borrowers to have a bank account and a regular source of income. For years, a large percentage of government beneficiaries lacked traditional bank accounts, choosing to just cash their checks instead.

But by the late 1990s, the federal government began requiring that Social Security beneficiaries receive their benefits by electronic depo sit to a bank account, unless they opt out. The number of recipients with direct deposit soared to more than 80% today, up from 56% in 1996. Citing taxpayer savings and greater security and convenience for recipients, the government is making a fresh push to get the remaining holdouts to participate.

With direct deposit, Social Security recipients could now more easily pledge their future checks as collateral for small short-term loans. What can be done about Payday Loans? Do the government need to put an end to this practice? What do you say?


  1. I recall my first experience with a Pay Day Loan and it was through college. Even though I was on scholarship, I still had to have money for your everyday bills so I found out I could get a student advance on my Work Study. At first it was a great idea especially when I needed a ticket to take a bus home or do a car share but then I started taking money out for pizzas and snack foods, road trips and sweat shits I began to drain my future assets. Then I found myself working just to pay the loans back, in essence I became a SLAVE TO MY SCHOOL.

    Years later I got caught up in Credit Card Advances on my paycheck which got a little messy, even though I could afford to make the payments, I started loosing track of my personal finances. Once I received a few overdrawn statements on my checking account, that all stopped ASAP. So I can only imagine people with little financial means getting caught up with the Pay Day Loaning racket.

    It takes real discipline to balance your check book and to plan for un-foreseen issues but I learned early enough to live AT MY MEANS. I learned that if I can not affort it, then I don't need it. I try to TEACH YOUTH the practice of Delayed Satisfaction .. something my parents instilled in me. Just because its new and everyone has it .. doesn't mean you need to have it or have it at that moment. That is our community's downfall and America capitalizes on that not only with Black people but anyone weak enough to give up their money for "STUFF". America banks on it so much that you are penalized for not having ENOUGH CREDIT and rewarded for having BAD CREDIT.

    I have mixed feelings about Pay Day Loans especially since they prey on the poor and yet if done right can help those in a pinch. I think the government should have some oversight involvement but like bad children, in the end, "Financial" Discipline begins at home.

  2. This is awful.

    When people have to resort to these predatory (predators) loans it is usually because they are 1. not living within their means or
    2. just not making enough income to meet their basic needs.This is no different than the liquor stores and pawn shops.

    I would have to guess in this situation it will be #2 for the elderly. Most people in this elderly generation were astute savers. This is a result of boderline criminal greed. I am starting to see people living longer and staying in the workforce longer.

    Shazza you are so right, when my credit is perfect, i have a hard time getting loans, but if i start paying things late, i get all kinds of offers in the mail, of course at crazy rates...hmmm.

    People are just going to have to educate, educate and educate. Families are going to have start taking care of their elderly member, and pray new leaders will see this as a serious problem.

  3. Poet thanks for your comment. Payday loans are good for anyone that can manager them. What got me angry is that the elderly should not be target in this way.

    energize thanks for your comment. I agree that education is needed.

  4. Payday loans not only hem up elderly people, but anyone that chooses to get them. If you don't need a payday loan, then do not get one because you become a part of the system that is hard to get from under.

    Marcus LANGFORD

  5. one of the biggest scams in the poor community that the government pretends to regulate. this is the equivalent of loan sharking.

  6. Marcus thanks for your comment. I agree if you don't need it please don't bother with them.

    Darkbrotha thanks for your comment. It is a shame and I would call it loan sharking.


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