Use of Payday Advance Loans by the Elderly is Surging
A recent California report shows an increase in the number of cash-strapped senior citizens who are seeking high-interest payday advance loans, which also may go by the name “cash advance” or “deferred deposit transaction”. Regardless of the name, these types of loans are short-term financial products, ones that involve an individual borrowing money from a lender at a high annual percentage rate. The California Department of Business Oversight, or DBO, found that the use of advance payday loans by the elderly is surging.
The Elderly are Turning to Payday Advance Loans
Nancy McPherson, the state director for AARP California in Pasadena, said, “Many people in California are struggling because of the high cost of housing.” She went on to say, “We understand that people need access to capital – that’s a given. But, it shouldn’t be done this way.” The Pasadena Star News reports that along with high housing costs, people are also having trouble covering the price of gasoline, taxes and other expenses in the state.
According to the California DBO report, the state’s elderly has become the largest group of people who are borrowing fast payday loans. California residents who are 62 years old or older accounted for 23.4 percent of the total. Along with this, people in the age group took out around 2.7 million fast payday loans, which is almost a three-fold increase from the year before.
In 2016, the average payday loan amount was $251 compared to $237 a year earlier. The average transaction length stayed the same at 17 days. California law states that the most a consumer can borrow through a payday loan is $300, so the residents are getting closer to this amount.
Fast Payday Loans Serve a Financial Need
Today, as in many other parts of the country, millions of Californians live paycheck to paycheck, making fast payday loans a necessity. An Advance America, Cash Advance Centers Inc. spokesman, Jamie Fulmer, said, “Last year, nearly 2 million utilized regulated payday advances to navigate financial challenges. Consumers choose our service because it’s simple, transparent and accessible.” People also know that fast payday loans are often cheaper than overdraft fees or programs that protect them from accruing these fees.
Other statistics in the DBO report show that fewer short term loans were given out to borrowers in 2016. In 2015, $4.1 billion was lent to consumers under payday advance loan terms while 2016 saw $3.1 billion. Along with this, total transactions dropped 6.2 percent to 11.5 million, making it a nine-year low. In 2015, total transactions came to 12.3 million. Despite the lower numbers, seniors in California continue to seek the services of payday advance lenders when financial problems come up, but payday advance loans are not long-term financial solutions. Instead, they often cause borrowers to remain in debt longer.
A Demographic Vulnerable to Financial Problems and Tempting to the Lenders of Payday Advance Loans
The California Reinvestment Coalition is a group that takes action by fighting for fair lending practices as well as for accountability when it comes to the financial sector. Liana Molina, the group’s director, said, “The DBO report is quite alarming because a number of seniors are on fixed incomes and many of them are low income. These payday advance loans are easy to get into but very difficult to get out of.” The report noted that 52 percent of the payday loan customers from last year earned $30,000 or less annually. A low annual income makes it tough for borrowers to get out of the cycle of debt.
American Banker reports that in the state of California, 7.5 million workers in the private sector do not have a retirement savings plan available through their employer. In addition, estimates show that more than 50 percent of the state’s households will reach their golden years without enough money to maintain their current standard of living.
Not only are seniors vulnerable to financial problems, but they are also a tempting demographic to online payday advance loan lenders. Social Security payments now arrive into recipients’ bank accounts through electronic deposit. This means that lenders know when the funds will be available. When a borrower takes out a payday loan, he or she is usually required to give the lender access to his or her bank account.
Joe Sanchez, an AARP associate state director for advocacy, said, “They get their Social Security in the bank, the payday lender, as soon as it gets in there, they scrape it up.” He went on to say, “People were short to begin with, so what other option do they have but to go back and get another online payday advance loan or continue that cycle of debt by paying just the interest and fees and never addressing the principal.” Because these are often customers with credit difficulties, they have few options when it comes to borrowing money.
An Attempt to Strengthen Retirement Security
California state officials are making an attempt to strengthen retirement security for workers. The state has a program called the Secure Choice. It requires employers who have at least five employees to offer the program to their workforce. Employees are enrolled in the program automatically. But, they do have the choice to opt out. Payroll deductions for Secure Choice start off at 3 percent and go as high as 8 percent. However, Republicans in Congress and President Trump are attacking it. In May, Trump signed a congressional resolution designed to overturn a 2016 regulation that permitted Secure Choice to operate without having to comply with the Employee Retirement Income Security Act of 1974.
Supporters of Secure Choice have blamed problems with the retirement program on the GOP inclination to abide by the desires of Wall Street megafirms. Major Wall Street players tend to consider programs like Secure Choice competition in the retirement savings management division. Senior citizens in California deserve to live their retirement years comfortably without having to turn to online payday advance loan lenders when financial problems strike.
Relying on Online Payday Advance Loan Lenders During the Golden Years
With California seniors relying on fast payday loan lenders during their golden years, it’s clear that there’s not enough retirement security for the elderly, making it time for the nation to consider how it’s going to help its people save for the years when they are no longer able to work. Savings plans for the private sector are being considered, but the country needs to step it up and develop policies that will help today’s seniors. To read more about how the elderly are turning to online payday advance loan lenders to handle financial emergencies, visit the Personal Money Store.