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Banks have personnel loans to take Social Security

People on Social Security typically aren't amenable to giving away their benefits. That's why there is a plan on the table to eliminate paper Social Security checks entirely. 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. The stated goal is to conserve Social Security recipients money spent cashing the checks and distribute benefits in a more secure fashion. But according to many consumer groups, this will open the door for big banks like Wells Fargo and U.S. Bancorp to aggressively market choice cash advance-style loans to their Social Security customers.

Banks set their sights on fixed income customers

The National Consumer Law Center indicates the new breed of bank-issued cash advance loans products draw straight from consumer Social Security benefits as the necessary collateral. Such personnel loans original via customer phone call or online request. When the customer's following Social Security benefits payment hits their account via direct deposit, the bank gets its money before the consumer can spend it. 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.

Milking boomers for the bank's boon

As the latest Wall Street reform bill approaches law status, banks fear the effect the loss of automatic overdraft loans could have on their bottom line. Seems like like no small coincidence to the National Consumer Law Center that this aggressive push to get Social Security customers into payday loan-like products coincides with the coming of the financial reform law. Sources indicate that as much as $ 700 million in Social Security benefits are taken each year to pay overdraft fees, which draws focus to the magnitude of the issue for America's monolith banks.

Want an option to banks fingering your Social Security?

The Wall Street Journal suggests that consumers consider the prepaid debit card disbursement option. They're low cost and FDIC insured. Use them like ATM cards for purchasing and paying bills.

Sources Referenced

http://online.wsj.com/article/SB1000142405274870487500457537547409214176...

http://en.wikipedia.org/wiki/Social_Security_(United_States)