Payday lenders targeting US seniors
Predatory lenders are zeroing in on the elderly and disabled in the US, targeting their government-backed social security payments, according to a report in The Wall Street Journal.
“These people always get paid,” said the former manager of a payday lender operating in Washington DC, and its Virginia suburbs, the newspaper reported.
Unlike the original target of payday lending services – low-paid workers, who may work only sporadically – the elderly and disabled can count on their social security check every 30 days, the former lender said.
Although federal law prohibits lenders from attaching social security payments in most circumstances, lenders are working directly with banks, arranging for borrowers to have their government checks deposited directly into their bank accounts.
When the funds are deposited, the banks immediately transfer funds to the lender, who subtracts the debt repayment, as well as fees and interest that can reach 400% or more per year. If anything is left, it goes to the recipient.
Consumer activists, senior service organisations and legal aid lawyers say they are seeing a fast-growing number of elderly and disabled people struggling to live on what’s left after their monthly loan payments are taken out of their bank accounts.
The social security administration says that it isn’t responsible for what happens once the benefits are paid out and says privacy rules prohibit it from monitoring recipients’ bank accounts.
The Journal contracted with a California State University-Northridge geography professor who analysed data from the US Department of Housing and urban Development (HUD), finding that payday lenders are increasingly clustering around government-subsidised housing for seniors and the disabled.
Payday lenders claim that they provide a useful service to consumers who otherwise would have to turn to loan sharks when they run short of cash.
