Payday Lender Scam Cons Elderly, Disabled
Across the country, in small towns like Dothan, Alabama, to large cities like Washington, DC, elderly and disabled people, some with walkers and canes, line up at storefront lenders to receive their monthly “allowance.” A recent article in the Wall Street Journal highlights an alarming trend, which seems more like a government-sanctioned scam to exploit the elderly.
The poop: Payday lenders – located in strip malls, pawnshops, subsidized senior housing, and along highways, loan small amounts of money to the elderly and disabled who promise to pay the lenders back the next deposit of their social security benefits. But they are charged interest rates in excess of 400%, making it difficult or impossible to ever catch up.
How did this happen? Seems the payday lenders are using a government-sanctioned rule that sends a recipient’s benefits directly to banks, done primarily as a security measure, so benefits would not be stolen in the mail, or as cash. That wouldn’t be so bad, except the storefront lenders hook up with banks and arrange for prospective borrowers to send the recipient’s benefits directly to the lenders instead of the banks. When the elderly take out small short-term loans, they pledge their future checks as collateral. The lender then takes out the debt payment, plus fees and interest. These predatory loan sharks then trap the elderly into paying back the loans.
Lenders proliferate because the money is guaranteed, every month, assuring them a profit. They say they provide a viable service and don’t target the elderly. But the lenders were “encouraged” to recruit the elderly, by talking up their services while eating lunch with residents at nearby low-income housing complexes.
The Social Security Administration (SSA) says it can’t monitor recipient’s accounts without cause, and washes it hands of any responsibility, once the monies are paid out. Often, if the elderly can’t pay the money back, lenders take them to small-claims courts, because federal law says that creditors can’t seize Social Security benefits to repay debts.
What can you do? Forward this article on and help educate consumers. Read the full article online.
Related Links on AGIS:
Learn more about how to protect the elderly on AGIS’ Frauds & Scams page.
Discuss issues and suggestions with fellow caregivers regarding financial issues in AGIS’ Money Concern Forum.
Filed under: AGIS, Community, Elder Issues, Eldercare, Estate Planning, Housing, Social Security
I’m a spokesperson for the association of payday lender, CFSA.
The Wall Street Journal article was wrong. The companies that directly deposition or use social security checkes as collateral are NOT payday lenders. In fact, payday lenders are prohibited by state law from these practices.
These elderly people have been on this earth long enough to know exactly what they are doing. They just want their money now, just like the rest of us. There are companies that have been doing this for years that are not payday lenders. These people are not getting scammed, and I am tired of hearing that. I use payday loans to get by from time to time and I am not going into the store thinking, “boy, I am really getting the better of these people,” I know that I am paying a $15 fee for every $100 that I am borrowing and i am more than happy to pay it, I need the money and I cannot get a credit card, so that is my only option. Stop hiding behind the people whom you think are being taken advantage of, they are the ones taking advantage, and what they are taking advantage of is a wonderful service that payday loan stores are offering. You are the one that is scamming people, you are scamming people into thinking falsehoods about this industry. The truth is that some people get all bent out of shape because they don’t want to pay back the money that they borrowed, they want a free meal ticket, and those don’t exist, so don’t ruin it for the rest of us responsible adults who know how to take care of our business.
This is such a crock. These people have gotten themselves into the situation they are in, they have other choices, but choose not to use them. Banks will cash checks from the government, and just about anyone can get a savings account with no debit card to deposit their checks in. Stop blaming the payday lenders for providing a service, if these people are too stupid to know that you cash checks at banks, then they don’t deserve all the free money they are getting from the government anyway!