Sunday, February 17, 2008

Loan Sharks

The Wall Street Journal: High-Interest Lenders
Tap Elderly, Disabled

DOTHAN, Ala. -- 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."

What's sad is these groups use "partner agreements" with banks to skirt the prohibition on creditors receiving direct deposits of Social Security checks. In an administration that was focused on making government work, there'd be a revision of the rules when this came to light and after 6-9 months (allowing for comment periods and so on) the problem would be solved. This administration chooses to actively avoid performing its regulatory duties, hence the subprime debacle and the ongoing Mexican trucks and Hours of Service fiascoes.

No comments: