How Do You Keep Grandpa and Grandma Out of the Payday Stores?

This is crazy!

According to a front page article ($) in today’s Wall Street Journal, payday loan companies are targeting the elderly and anyone else who receives a monthly Social Security check. It’s a racket. Here’s the typical scenario:

Grandpa visits a payday lender for a small loan. The payday lender is happy to oblige but requires Grandpa to set up a bank account with some bank and have his Social Security check deposited into the account. The bank will then send the money to the payday lender. The lender will then collect its fees and will give whatever is left over to Grandpa. In other words, by agreeing to these terms, Grandpa has given some payday lender complete control over his Social Security check.

The following story from the article illustrates just how easy it is to get into trouble:

In November 2002, when Melvin Bevels was short of money for groceries and rent, the elderly man visited a Small Loans store in Sylacauga, Ala., and borrowed money — he thinks it was $200. Small Loans is part of a sprawling network of more than a hundred lenders in four states, including Georgia, Florida and Louisiana, owned by Money Tree Inc., a closely held Bainbridge, Ga., firm.

Every month for nearly four years, Mr. Bevels, who is known around town as “Buckwheat” because of his thatch of yellow-white hair, rode his motorized mobility scooter to Small Loans to pick up his “allowance,” which was sometimes as little as $180 a month, he says.

In a written statement, Money Tree’s general counsel, Natasha Wood, declined to comment on Mr. Bevels’s case but said: “Anyone who sets up a direct deposit arrangement with Small Loans Inc. does so completely voluntarily.”

Mr. Bevels, who believes he’s 80 but isn’t sure, quickly lost control of his finances. When his utilities were shut off, a neighbor gave Mr. Bevels water in a plastic jug and ran an extension cord to Mr. Bevels’s trailer a few hours a day to power his nebulizer, which delivers aerosol medication to people with chronic lung conditions. Mr. Bevels was facing eviction when his trailer burned down, leaving him homeless.

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.

“It just isn’t fair, what they do to old people,” says Mr. Bevels, crying quietly. “It isn’t right.”

Ms. Wood, the lawyer for Small Loans, said in her statement: “Small Loans Inc. does not file suit against anyone because they move their direct deposit service elsewhere.”

No regulatory agency tracks how much Social Security money is going to lenders as repayment for payday loans. A 2006 study by the Consumer Federation of America found that one-fifth of those without conventional bank accounts are receiving their government benefit checks through nonbanks, including payday lenders that also operate as check-cashing stores.

Social Security recipients are supposed to enjoy more protections than other borrowers: Federal law says that creditors can’t seize Social Security benefits to repay debts. Small Loans and two banks with which it has partnered say their arrangements don’t violate any laws. But critics say such arrangements effectively thwart the intention of the law. Social Security recipients can not only lose their benefits, but face lawsuits, harassment and even jail.

What I don’t understand from the article is where all of Mr. Bevel’s money was going. Was he taking out more and more payday loans? My guess is that if he needed to borrow $200 in the first place, he probably didn’t have the money to pay it back and therefore got stuck in a cycle of borrowing, which is EXACTLY where the payday lender wanted him. The really sad thing is that unless the payday lender was lying to him (which wouldn’t surprise me), Mr. Bevels agreed to the terms of the loan.

BOTTOM LINE: Don’t sign your Social Security check over to ANYONE! Don’t give ANYONE direct access to your money. Most important of all: STAY AWAY FROM PAYDAY LENDERS!

8 thoughts on “How Do You Keep Grandpa and Grandma Out of the Payday Stores?”

  1. This is just one example, egregious as it is, of organizations preying on seniors. Some are intentional; some inadvertant. However, the result is frequently the same. Screwed seniors. Some other examples:
    1. Citizens Bank paid a $3 million penalty for targeting seniors for annuities.

    2. Try to choose and deal with insurers over Medicare Advantage plans – I’ve managed employee benefits programs for 30+ years and I have problems doing comparisons.

    3. AARP – They are one of the worst. They take in huge fees and then tell members how the United Healthcare and Hartford Insurance Group insurance plans are the absolute best.

    These are just a few quick examples. Worst is that there is little out there to protect older people who are trying to make it in an ever-changing world.

    I am a recent senior and can deal with these problems; many can’t

  2. There are usually limits to how much they will or can lend. For example, in my state, lenders cannot make a loan more than one-quarter of a person’s monthly net income. (My state also restricts loans to one at a time with a networked database so you cannot take loans at the same time from multiple lenders. Plus there is a seven-day waiting period between loans.)

    Sometimes there are legal loan limits (as in my state), or elde they are imposed voluntarily by the lender. The lender doesn’t want to lend too much at one time leading to a(n early) borrower default, but they do want to lend a modest amount of money sufficient to string out the borrower for a long time.

  3. This is just disgusting!! If a business has to take advantage of senior citizens to profit, that’s just bottom of the barrel scum. I hope every last one of them go bankrupt.

  4. Single, Ma – Would that it did happen. Unfortunately, they are the ones with $100 million bonuses and severance packages. Unfortunately, there is no one out there who is skilled and willing to help seniors get honest answers.

  5. I have read three articles now with the same story plastered over all three. Which tells me that there is one example of an elderly person who is not smart enough to handle his own finances. All three articles say that these payday lenders are taking advantage of the elderly. So this guy called Buckwheat is the representative of the elderly! I know a few elderly and I don’t think they would appreciate the insinuation that Buckwheat is their poster boy! This guy has probably been taken advantage of his entire life because he looks like a Buckwheat, and he can’t read. Maybe he should get a clue and maybe you journalists should find more than one example before you make a blanket statement. These payday loan stores provide a service that is obviously used because the stores keep popping up. Educate the people, and stop trying to blame other people for your bad choices.

  6. This is a great example! Every time I go into a payday loan store I find 5 to 10 elderly people who can’t read wandering around, bumping into walls, and getting trapped by the tellers and forced to get payday loans. I am sure that the elderly community is happy to have Buckwheat as their spokesperson! Finally someone who immolates the elderly community. I mean come on, can any of them read, or make educated decisions on their own, I think this article can answer that.

  7. These parasites have been around forever, targeting the poor, young military members, etc. Many states are passing laws running them out of the state. They fight tooth and nail, with political contributions, but if enough citizens demand it, no politician wants to be seen siding with these cretins.

    These loan companies are basically loan sharks. They may wear ties and clean shirts, but they are scum. If any of them go to church I wonder how they square their actions with that.

  8. Sorry to paint loan sharks in such a bad light by comparison… Loan sharks are at least honest about who they are.

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