My sister, who works as a supervisor in a public library, recently told me that several older adults came into her branch having major questions about payday loans. One woman said that she applied for a payday loan and was denied. She later went on to say the company is deducting money from her checking account despite not receiving a loan.
Recent studies have shown that one out of four payday borrowers are Social Security recipients. Don Baylor Jr., senior policy analyst at the Center for Public Policy Priorities, which advocates for the interests of low and moderate-income Texans said that many seniors are using payday loans as a means to bail out family members. This is because payday lenders know that Social Security recipients have a guaranteed monthly income. Also, payday lenders recognize that older homeowners tend to have higher home equity. Targeting the elderly allows the lenders to easily drain the equity from a borrower’s home by including excessive fees and lending under unfair terms. They will encourage the borrower to refinance their loans which benefits the lender, not the borrower.
Alabama seniors have been hit hard by payday lenders. One senior, Mr. Bevels, who is illiterate, had the clerk from Small Loans, owned by Money Tree, Inc. help him complete the application for a payday loan. His check was being deposited into a out-of-state bank. He was given a $200.00 loan. Small Loans then started taking his benefits check and paid him a small allowance out of it, deducting the money to repay the loan. The company took thousands of dollars from him over the years. Nearly four years, Mr. Bevels rode his motorized mobility scooter to Small Loans to pick up his allowance, which was sometimes as little as $180 a month. He eventually became homeless after his trailer burnt down.
This story has a happy ending. A county social worker arranged for Mr. Bevels to move to public housing and got his Social Security benefits redirected to a local bank. When Small Loans sued Mr. Bevels for repayment in small-claims court in Talladega County, Ala., a legal-aid attorney headed to court. The judge threw out the case when the lender failed to appear with documentation for the loan.
There are many tales of seniors and disabled Social Security recipients going to Small Loans to pick up their allowances from their checks. Many researchers found that because many recipients did not initially have traditional bank accounts, this form of direct deposit appeared to be a viable option.
Small Loans is not the only company preying on the elderly and disabled. Check ‘n Go, held by Ohio-based CNG Holdings Inc., which has more than 1,300 stores nationwide, had the manager of one on its Washington, DC location recruiting elderly customers. This particular location was across the street from a retirement complex. The manager often ate his lunch on nearby benches to strike up conversations with the complex’s residents. He later quit because he did not want to exploit the elderly.
Payday lending is an increasing growing business and as a result, many consumers, young and old, are sinking into deeper debt. Banking regulators must find a way to regulate these lenders and protect the consumers, especially the elderly and disabled.
As always, I encourage you to report any concerns regarding elder abuse to the proper authorities. I have attached the National Center on Elder Abuse’s website below. Please feel free to leave your comments or questions.