People on Social Security generally aren’t amenable to giving away their benefits. That’s why there is a plan on the table to eliminate paper Social Security checks entirely. The Treasury has plans to phase the checks out by 2013 and send funds via direct deposit and prepaid debit cards, writes The Wall Street Journal. Doing this will ideally make benefit distribution more secure and conserve the taxpayers’ money. But as outlined by many consumer groups, this will open the door for big banks like Wells Fargo and U.S. Bancorp to aggressively market choice cash advance-style loans to their Social Security customers.
Banks target seniors and disabled on fixed incomes
According to the National Consumer Law Center, these new cash advance-like products are drawn from customers’ Social Security benefits as collateral. Such personel loans original via customer phone call or online request. When the next benefits check comes via direct deposit, the bank takes its cut for the cash until payday service. Where it gets really scary is when a payday loans from the bank is not paid in 35 days: the bank takes out anything owed, whether it causes overdraft and an explosion of fees or not.
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 can have on their bottom line. The National Consumer Law Center finds no surprise in the fact that banks are pushing hardest on their payday loan products now, considering the financial reform restrictions to come. Social Security benefits have helped banks rake in $ 700 million annually, so clearly they’re gripping over the potential loss.
Want to avoid banks hitting up your Social Security before you do?
The Wall Street Journal recommends the prepaid debit card option for benefit disbursement. They’re low cost and FDIC insured. Use them like ATM cards for purchasing and paying bills.
Additional information at these websites
online.wsj.com/article/SB10001424052748704875004575375474092141764.html
en.wikipedia.org/wiki/Social_Security_%28United_States%29
