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I'm behind a deadline at the moment, but I couldn't let this twist in our fine credit market go unnoticed:
One recent morning, dozens of elderly and disabled people, some propped on walkers and canes, gathered at Small Loans Inc. Many had borrowed money from Small Loans and turned over their Social Security benefits to pay back the high-interest lender. Now they were waiting for their "allowance" -- their monthly check, minus Small Loans' cut.The crowd represents the newest twist for a fast-growing industry -- lenders that make high-interest loans, often called "payday" loans, that are secured by upcoming paychecks. Such lenders are increasingly targeting recipients of Social Security and other government benefits, including disability and veteran's benefits. "These people always get paid, rain or shine," says William Harrod, a former manager of payday loan stores in suburban Virginia and Washington, D.C. Government beneficiaries "will always have money, every 30 days."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.Something has gone deeply wrong in our economy. And it's all the worse when you think of the legislative context. The most recent piece of major legislation targeting the credit industry was the Bankruptcy Bill, which made it far harder for overburdened individuals to declare bankruptcy. There's no recent bill targeting those who mislead individuals into loans they can't understand and credit cards whose terms they haven't been told; no new legislating using the power of the state to regulate those preying on the elderly and the disabled.
