An executive from the Center for Responsible Lending told the Senate Special Committee on Aging that older Americans represent a quickly growing base of borrowers for payday lenders.
Rebecca Bornè, senior policy counsel for the CRL – a subsidiary of the 50,000-member, $580 million Self-Help Credit Union in Durham, N.C. – told legislators that a number of things make seniors attractive to payday lenders, including the fact that the seniors almost always have regular Social Security income and because older Americans were hit particularly hard by the loss of wealth during the Great Recession and housing downturn.
“Faced with insufficient incomes, many older Americans take on debt to cover medical and living expenses,” Bornè wrote in prepared testimony for Wednesday's hearing, adding: “Over the last 20 years, the percentage of households with credit card debt has decreased for every age category except those aged 55 and over, with those aged 75 and older experiencing the largest increase.
“Amidst the deleveraging of the last five years, credit card debt for households aged 50+ decreased somewhat (to a still-large average of $8,300 for indebted families), but by much less than it did for younger households,” Bornè said in her testimony.
Bornè reported that in both Florida and California, approximately one in five payday borrowers is age 55 or older. And in Florida, the proportion of payday borrowers age 65 and over increased by 73% from 2005 to 2011, while this age group among the general Florida population increased by only 4%.
Further, the CRL executive charged that payday lenders dealing with Social Security recipients have managed to dodge protections that Congress and federal regulators have put into place to shield those payments from being seized to pay debt.
“Payday lenders grossly undermine this critical protection by requiring Social Security recipients to provide direct access to their bank accounts – either through a post-dated check or electronic access – and immediately taking the income for repayment,” she wrote.
Bornè added that her center’s research found that payday lenders take an average of 33% of a borrower’s next Social Security check to repay a loan.
The government has tried to stem this trend by making sure that Social Security money placed onto payment cards cannot be taken for payday loans, but traditional checking accounts remain vulnerable, Bornè added.