By Raine Bee
I was amazed the other day when I heard about yet another misleading practice designed to take advantage of senior citizens. We’ve heard about payday lending, where you typically go to a check casher or other alternative financial service provider for a short-term loan. The payday lender agrees to loan you the money and you agree to pay it back by your next paycheck, plus interest and fees. By the time your next paycheck rolls around, you’re unable to pay back the loan due to the exorbitant interest and fees added on. So, the cycle continues whereby you take yet another loan, so forth and so on.
Well, I’ve heard the term “payday lending on steroids” to describe this latest product. Instead of, essentially putting your paycheck up as collateral, senior citizens are being lured into putting their pensions up as collateral. This can put their retirement in jeopardy and cost them more in the long run. To put this in context, think of our beloved grandmothers and grandfathers. Most of the grandparents I know did not retire rich or even extremely well off. Instead, most live on a fixed income of an amount which, at best, allows them to live comfortably. They don’t have extra money for lavish lifestyles and they certainly don’t have extra money to pay rates and fees which could translate into an APR (the real cost of the loan) upwards of 50 percent or more. Imagine the next time you go for a loan and the bank tells you that the interest rate is 50 percent. You would probably run out of the bank before the lender even finished his sentence!
Unfortunately, this is happening to our senior citizens. Seniors citizens, and others receiving pension income, need to be aware. One website offering this product made the following claims: “…short term pension payday advance lenders can be the best thing, because you can get fast money and pay only when you receive your next salary.” However, what happens if your next pension payment is not enough to cover the loan, or if it takes your entire pension for that month due to the added on interest and fees? This would leave the person potentially unable to meet daily and/or emergency expenses that may arise.
These pension advance loans are not an illegal product, if structured and advertised correctly (i.e. no hidden fees, full disclosure, etc.), therefore we need to “sound the alarm” and let our community know that this product is out there. It’s often said that it takes a village to raise a child. Well, I believe the same holds true for our parents and grandparents as they approach those “golden years.” We have to look after them and make sure they are not preyed upon. We have to help them with the day to day and emergency expenses that come up because, oftentimes, they are too proud to ask for help. It is this pride that sometimes causes them to wind up in less than ideal financial situations.
 Hypothetical example