People on Social Security usually aren’t amenable to giving away their benefits. This is why there’s word in government that paper Social Security checks should be routed out. 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 so will ideally make benefit distribution more secure and conserve the taxpayers’ money. 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 3rd Bancorp are being targeted for high cost cash advance-style loans by the same banks.
Banks target seniors and disabled on fixed incomes
Collateral for the cash today loans comes straight from the recurring deposits of Social Security benefits, says the National Consumer Law Center. These personal loan 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 til payday 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
Losing automatic overdraft is something banks fear, as the Wall Street reform bill gets set to become law. The National Consumer Law Center believes this may be a big reason why these larger banks are aggressively pushing pay day products to Social Security recipients. Social Security benefits have helped banks rake in $ 700 million annually, so clearly they’re gripping over the potential loss.
Afraid of what banks will do with your Social Security direct deposit?
The Wall Street Journal addresses the other disbursement option: prepaid debit cards. Costs are low and the cards are FDIC insured. Use them like ATM cards for getting and paying bills.
Read more on this topic here
online.wsj.com/article/SB10001424052748704875004575375474092141764.html
en.wikipedia.org/wiki/Social_Security_%28United_States%29
