Social Security recipients, beware banks pushing personal loans
Social Security recipients – particularly those who depend entirely on it – don’t need anyone skimming off the top. That’s why there is a plan on the table to eliminate paper Social Security checks entirely. The Wall Street Journal reports that the Treasury Department plans to stop issuing paper Social Security checks by 2013 and distribute monies via direct deposit or prepaid debit cards. The intention is to save taxpayer dollars and make benefits more secure. However, numerous consumer groups are now concerned that those Social Security recipients whose funds are directly deposited into accounts at major banks like U.S. Bancorp, Wells Fargo and Fifth Third Bancorp are being targeted for high cost cash advance-style loans by the same banks.
Bank loans that target low-income seniors, disabled
According to the National Consumer Law Center, these new cash advance-like products are drawn from customers’ Social Security benefits as collateral. These personal loans can be requested from the bank via telephone or online. When the next benefits check comes via direct deposit, the bank takes its cut for the cash advance service. If the loan isn’t paid in full within 35 days, the bank automatically withdraws the amount owed, frequently producing overdraft and a morass of fees.
Making up for lost revenue by siphoning from baby boomers
As the latest Wall Street reform bill approaches law status, banks fear the effect the loss of automatic overdraft loans will have on their bottom line. The National Consumer Law Center believes this may be a big reason why these larger banks are aggressively pushing payday loan products to Social Security recipients. Sources indicate that as much as $700 million in Social Security benefits are taken each year to pay overdraft fees, which draws focus to the magnitude of the issue for America’s monolith banks.
Afraid of what banks will do with your Social Security direct deposit?
The Wall Street Journal recommends the prepaid debit card option for benefit disbursement. Costs are low and the cards are FDIC insured. The card can be used like a standard ATM card for purchases and bill payments.
Wall Street Journal
Social Security and dance lessons – enjoy the rant: