Payday Lending For Seniors

I was recently doing some research regarding the payday loan industry and senior citizens. With the cost of living skyrocketing and fixed incomes, well staying fixed, I thought it would make for some interesting reading if I were to post the results I found.


While I came across an old article ran in the Wall Street Journal regarding seniors and the payday loan industry, it seems as though the authors did not do all of their homework. The authors, ELLEN E. SCHULTZ and THEO FRANCIS charged that payday lenders are in the market of taking advantage of seniors on fixed incomes, lets examine:


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.

There are no publicly available statistics on the proportion of payday loans that are backed by Social Security and other government benefits. But dozens of legal-aid lawyers, senior service groups and credit counselors across the country say they are seeing more and more clients on Social Security struggling with multiple payday loans.





Of note are the some of the major rebuttals that I have read regarding the shortcomings of this article. In particular, from a representative from the CSFA responded:


We want to set the record straight.


The February 12th front-page Wall Street Journal story by Ellen E. Schultz and Theo Francis, “Social Insecurity: High-Interest Lenders Tap Elderly & Disabled” confuses payday lenders with other types of small loan services: primarily installment and catalog lenders.
The article describes loan practices that are NOT conducted by payday lenders.
Errors in the WSJ article

• Example 1:The article says payday lenders are “…forging relationships with banks and arranging for prospective borrowers to have their benefits checks deposited directly into bank accounts.” This is patently false. State laws only authorize payday lenders to hold a personal check, deposited on the borrower’s payday.


• Example 2:The story says: “One-fifth of those without conventional bank accounts are receiving government benefit checks through nonbanks, including payday lenders.” This, too, is blatantly false. Payday lenders do not receive checks on behalf of recipients (state law prohibits this practice) and 100 percent of payday lending customers have a checking account at a bank or credit union. Read More Here.

Seniors are always at risks because historically they have been easy targets. Seniors be sure to speak to your local financial representative before considering signing any loan. If you need money then payday loans are one alternative. Weigh the options of the option that will best suit your short term and long term needs.