California Representative Criticizes Payday Loan Regulation Rollback That Could Impact Seniors
Inside Subprime: Feb 11, 2019
By Ben Moore
The Consumer Financial Protection Bureau announced this past Wednesday that the bureau will be overhauling a payday loan regulation, a move that could greatly affect senior citizens. The announcement comes after years of lobbying by lenders aiming to block the rule from being enforced, claiming the rule would make it too difficult to maintain business if enforced. Advocates of the Obama-era rule have made remarks insinuating they will seek legal action in order to block the Trump administration’s changes, and democratic policymakers have been critical of the revision as well. Representative Maxine Waters sees the proposal as sending “a message to predatory payday lenders that they may continue to harm vulnerable communities without penalty” and urged Kraninger to rescind the proposal. Meanwhile, consumer advocates have called for tougher requirements in order to “rein in” payday lenders’ business practices.
The change is expected to hit senior citizens especially hard as the number of Americans over the age of 62 using payday loans tripled from 2015 to 2016, according to a report from the California department of Business Oversight. The report also found that almost one in every four payday loans is being lent to senior citizens, with APRs reaching up to 372 percent. Many senior citizens use payday loans for medical bills as well as rent payments. But their lack of regular, steady income that other borrowers get from employment makes it difficult for seniors to repay a payday loan in time, and in accordance with the rules of the loan. Many senior citizens find themselves dealing with overdraft fees, high interest, and even bankruptcy because of this.
Payday lenders have come under fire as purposefully targeting senior citizens, especially in part to the income they receive from Social Security checks. Diane Standaert, the executive vice president and director of state policy at the Center for Responsible Lending, believes “payday lenders’… cluster around government-subsidized housing for seniors and the disabled” because of the monetary benefits they receive from the government. Senior citizens also are at a disadvantage due to their lack of access to financial advice professionals who could help them avoid payday loans and direct them to more healthy forms of budgeting and borrowing. Brent Weiss, the co-founder and head of planning at Facet Wealth in Baltimore, believes this lack of access makes them even more “susceptible and vulnerable” as payday lenders will “prey on [seniors]’ lack of [financial] literacy”.
It is estimated that about 40 percent of middle-class Americans will live in poverty by the time they are 65 years old, according to a Schwartz center for Economic Policy Analysis at the New School report. A quarter of households age 65 and up already rely on Social Security for 90 percent of their retirement income, with an average Social Security check coming in at around $1,400 a month. Senior citizens do have alternatives to payday loans. Low-income seniors can look into state assistance programs, which can help with daily living costs, as well as nonprofit organizations that work with seniors living in financial hardship.
For more information on payday loans, scams, and cash advances and check out our city and state financial guides including California, Anaheim, Bakersfield, Chico, Fresno, Los Angeles, Modesto, Oakland, Redding, Riverside, Sacramento, San Diego, San Francisco, San Jose, Santa Barbara and Stockton.