Tuesday, February 12, 2008

WSJ: High-Interest Lenders Tap Eldery, Disabled

The Wall Street Journal

February 12, 2008

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High-Interest Lenders
Tap Elderly, Disabled

February 12, 2008; Page A1

DOTHAN, Ala. -- One recent morning, dozens of elderly and disabled people, some propped on walkers and canes, gathered at Small Loans Inc. Many had borrowed money from Small Loans and turned over their Social Security benefits to pay back the high-interest lender. Now they were waiting for their "allowance" -- their monthly check, minus Small Loans' cut.

[Go to Graphic]1
See more maps showing how storefront lenders have targeted recipients of government benefits.

The crowd represents the newest twist for a fast-growing industry -- lenders that make high-interest loans, often called "payday" loans, that are secured by upcoming paychecks. Such lenders are increasingly targeting recipients of Social Security and other government benefits, including disability and veteran's benefits. "These people always get paid, rain or shine," says William Harrod, a former manager of payday loan stores in suburban Virginia and Washington, D.C. Government beneficiaries "will always have money, every 30 days."

The law bars the government from sending a recipient's benefits directly to lenders. But many of these lenders are forging relationships with banks and arranging for prospective borrowers to have their benefits checks deposited directly into bank accounts. The banks immediately transfer government funds to the lenders. The lender then subtracts debt repayments, plus fees and interest, before giving the recipients a dime.

As a result, these lenders, which pitch loans with effective annual interest as high as 400% or more, can gain almost total control over Social Security recipients' finances.

There are no publicly available statistics on the proportion of payday loans that are backed by Social Security and other government benefits. But dozens of legal-aid lawyers, senior service groups and credit counselors across the country say they are seeing more and more clients on Social Security struggling with multiple payday loans.

The Treasury Department, charged with ensuring that Social Security payments reach beneficiaries, says privacy rules forbid it from monitoring recipients' bank accounts without cause. Social Security Administration officials say the agency isn't responsible for benefits once paid out and that beneficiaries who run into problems should consult an attorney.

An analysis of data from the U.S. Department of Housing and Urban Development shows many payday lenders are clustered around government-subsidized housing for seniors and the disabled. The research was done by Steven Graves, a geographer at California State University at Northridge, at The Wall Street Journal's request. His previous work was cited by the Department of Defense in its effort to cap the amounts lenders can charge military personnel.

Audrey Miller, a disabled woman in Cleveland, Va., is one of a growing number of Social Security recipients who have become victims of predatory lenders. WSJ's Ellen Schultz explains why.

Lenders say they provide a useful service. "This industry provides convenient access to small amounts of money," said Tommy Moore, executive vice president of the Community Financial Services Association of America, which says it represents about 60% of payday loan stores. "It certainly wouldn't be right for the business to discriminate against them for whatever the source of their income is."

But some industry critics say fixed-income borrowers are not only more reliable, they are also more lucrative. Often elderly or disabled, they are typically dependent on smaller fixed incomes and are rarely able to pay off their loans quickly. "It's not like they can work more hours," says David Rothstein, an analyst at Policy Matters Ohio, an economic research group in Cleveland. "They're trapped."

Mr. Harrod was a manager of a Check 'n Go store across the street from Fort Lincoln Senior Citizen's Village, a subsidized-housing complex for the elderly and disabled in Washington, D.C. Mr. Harrod says he was encouraged by his supervisors to recruit the elderly, and did so by often eating his lunch on nearby benches to strike up conversations with the complex's residents. According to Mr. Graves's analysis, there are at least four payday lenders within a mile-and-a-half of Fort Lincoln.

Mr. Harrod quit his job in August over concerns that the company exploited its customers and targeted vulnerable groups and began working with groups seeking limits on payday lending.

Yancy Deering, a spokesman for Check 'n Go, a unit of closely held Ohio-based CNG Holdings Inc., which has more than 1,300 stores nationwide, confirms Mr. Harrod's tenure but says the company doesn't target the elderly. He adds the company doesn't track what proportion of customers depend on government benefits.

Social Security recipients weren't always a natural market for payday lenders, which typically require borrowers to have a bank account and a regular source of income. For years, a large percentage of government beneficiaries lacked traditional bank accounts, choosing to just cash their checks instead.

But by the late 1990s, the federal government began requiring that Social Security beneficiaries receive their benefits by electronic deposit to a bank account, unless they opt out. The number of recipients with direct deposit soared to more than 80% today, up from 56% in 1996. Citing taxpayer savings and greater security and convenience for recipients, the government is making a fresh push to get the remaining holdouts to participate.

[Cash Flow]

With direct deposit, Social Security recipients could now more easily pledge their future checks as collateral for small short-term loans. Oliver Hummel, a Billings, Mont., resident with schizophrenia, lived on the $1,013 a month in Social Security disability benefits he received by direct deposit to his bank account. Early last year, after his car broke down and his 13-year-old terrier racked up a big vet bill, Mr. Hummel borrowed $200 from a local lender.

Like many payday borrowers, Mr. Hummel realized he couldn't pay off the loan when it was due so he went to another "payday" lender. Lenders rarely ask about other loans and debt, and borrowers often take out multiple loans in an effort to avoid defaulting. By February, Mr. Hummel had eight loans from eight lenders, at effective annual interest rates that ranged from 180% to 406%.

The industry mushroomed in the 1990s and continues to prosper. Analysts estimate that payday loan volume has climbed to about $48 billion a year from about $13.8 billion in 1999. Most payday lenders are small and privately held. The biggest publicly traded company is Advance America Cash Advance Centers Inc., based in Spartanburg, S.C., with 2,900 stores in three dozen states and reported earnings of $42.9 million in the first nine months of 2007.

'Buckwheat' Bevels

In November 2002, when Melvin Bevels was short of money for groceries and rent, the elderly man visited a Small Loans store in Sylacauga, Ala., and borrowed money -- he thinks it was $200. Small Loans is part of a sprawling network of more than a hundred lenders in four states, including Georgia, Florida and Louisiana, owned by Money Tree Inc., a closely held Bainbridge, Ga., firm.

 Mr. Bevels's bank statement2 shows that every time the U.S. Treasury deposited his Social Security check, the bank transferred the benefits to the Money Tree, a high-interest storefront lender.

Mr. Bevels, who can't read, says a clerk helped him fill out papers that instructed Social Security to send Mr. Bevels's $565 monthly benefits to an account at an out-of-state bank, which transferred the money back to Small Loans or its parent, usually within a day. As is often the case, Mr. Bevels's bank earned no interest and didn't come with either ATM cards or checks.

Every month for nearly four years, Mr. Bevels, who is known around town as "Buckwheat" because of his thatch of yellow-white hair, rode his motorized mobility scooter to Small Loans to pick up his "allowance," which was sometimes as little as $180 a month, he says.

In a written statement, Money Tree's general counsel, Natasha Wood, declined to comment on Mr. Bevels's case but said: "Anyone who sets up a direct deposit arrangement with Small Loans Inc. does so completely voluntarily."

Mr. Bevels, who believes he's 80 but isn't sure, quickly lost control of his finances. When his utilities were shut off, a neighbor gave Mr. Bevels water in a plastic jug and ran an extension cord to Mr. Bevels's trailer a few hours a day to power his nebulizer, which delivers aerosol medication to people with chronic lung conditions. Mr. Bevels was facing eviction when his trailer burned down, leaving him homeless.

A county social worker arranged for Mr. Bevels to move to public housing and got his Social Security benefits redirected to a local bank. When Small Loans sued Mr. Bevels for repayment in small-claims court in Talladega County, Ala., a legal-aid attorney headed to court. The judge threw out the case when the lender failed to appear with documentation for the loan.

"It just isn't fair, what they do to old people," says Mr. Bevels, crying quietly. "It isn't right."

Ms. Wood, the lawyer for Small Loans, said in her statement: "Small Loans Inc. does not file suit against anyone because they move their direct deposit service elsewhere."

No regulatory agency tracks how much Social Security money is going to lenders as repayment for payday loans. A 2006 study by the Consumer Federation of America found that one-fifth of those without conventional bank accounts are receiving their government benefit checks through nonbanks, including payday lenders that also operate as check-cashing stores.

Social Security recipients are supposed to enjoy more protections than other borrowers: Federal law says that creditors can't seize Social Security benefits to repay debts. Small Loans and two banks with which it has partnered say their arrangements don't violate any laws. But critics say such arrangements effectively thwart the intention of the law. Social Security recipients can not only lose their benefits, but face lawsuits, harassment and even jail.

Jailed in Clayton

In December 2006, Jennifer Rumph, a disabled single mother of three, went to Miracle Finance Inc. to buy her children a computer for Christmas. She picked a laptop from the store's catalog and the Miracle Finance clerk said it would cost a little over $600, Ms. Rumph recalls. Some lenders have catalogs of merchandise and lend money to make the purchase. In the end, the loan came to $1,326, which included principal, interest and a fee for insurance that would pay off the loan to the lender if Ms. Rumph died, according to loan paperwork.

These three documents show how far Miracle Loans went to collect money from Social Security recipient Jennifer Rumph, who fell behind on her payments:
 The lender went to court and obtained a default judgment3 against Mrs. Rumph.
 Mrs. Rumph was ordered to appear in court4 to demonstrate what kinds of property she had that could be seize to pay the debt to Miracle Loans.
 When Mrs. Rumph failed to appear, an arrest warrant5 was issued, and she was jailed.

The company had Ms. Rumph, 43, sign documents directing her teenage son's Social Security disability check, which is $623 a month, to the company by way of an intermediary bank -- a condition for getting the loan, she says. The Social Security Administration says it doesn't have a problem with lenders capturing Social Security checks of disabled or orphaned children as long as the benefits money ultimately goes to the "current needs" of the child.

Like Mr. Bevels, Ms. Rumph didn't receive an ATM card or a checkbook. Each month she would go to Miracle Finance 30 miles away in Abbeville, Ala., to pick up what remained of her son Jeremiah's benefits after the company subtracted fees, interest and loan repayments, usually leaving her with less than $300 of her son's check.

Ms. Rumph, whose medical problems include severe asthma and two hip replacements, was unable to pay her bills on that amount. Much of the $623-a-month in disability benefits she receives for herself was going to a nearby Small Loans store to repay a different loan. She tried to return the computer, but a Miracle Finance employee said it wouldn't reduce her debt, and then the computer stopped working this summer, she recalls.

In the following months, Ms. Rumph says she asked Social Security several times to redirect her son's check to her mailbox, but to little avail.

Attorneys for Legal Services Alabama, whom Ms. Rumph ultimately contacted, say that each time she tried to cancel the arrangement, the company appears to have resubmitted her original direct-deposit paperwork, which Social Security honored despite her efforts to cancel it.

A Social Security spokeswoman says that when beneficiaries cancel direct-deposit arrangements with the agency, they should also contact the bank that had been receiving the check. Ms. Rumph says she never knew the identity of the bank receiving her son's Social Security benefits.

[Jennifer Rumph]

After Ms. Rumph fell behind on her payments, Miracle Finance sued her in small-claims court in Abbeville, Ala. Although federal law says creditors can't seize Social Security, disability and veteran's benefits to pay a debt, enforcement of the law is scant, and many Social Security recipients are unaware of their legal rights. Lenders and their debt collectors routinely sue Social Security recipients who fall behind in their payments, and threaten them with criminal prosecution, senior advocates say.

Debtors must go to court to prove their case. Ms. Rumph says she didn't know any of this and was afraid to go to court. Miracle Finance won a $1,500 default judgment in July, and four days later sought a court order requiring Ms. Rumph to appear in person to detail her income and assets.

After Ms. Rumph failed to appear at two hearings at Miracle Finance's request, a judge ordered a warrant for her arrest.

In November, Miracle Finance kept the full amount of Jeremiah Rumph's disability check. Ms. Rumph fell behind on her $300-a-month rent for her mobile home and faced eviction. After she was unable to pay utility bills, her electricity was turned off briefly the day before Thanksgiving.

On Sunday, Dec. 9, as she was getting ready for church, two sheriff's deputies came to Ms. Rumph's home, handcuffed her in front of her children and hauled her away. Ms. Rumph spent several hours in jail until an uncle paid the court $1,500. Miracle Finance didn't respond to numerous requests for comment.

A judge last week said Miracle Finance couldn't force Ms. Rumph to pay the debt because her Social Security income is protected under federal law. But she still owes more than $5,000 on loans from almost a dozen other lenders. "I want to pay them back," she says. "I can't."

Write to Ellen E. Schultz at ellen.schultz@wsj.com6 and Theo Francis at theo.francis@wsj.com7

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(6) mailto:ellen.schultz@wsj.com
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Monday, February 11, 2008

Trib: Foundations target South, West Sides

Feb 10, 2008 Chicago Tribune

Foundations target South, West Sides

By Charles Storch

Leading Chicago foundations are creating a multimillion-dollar fund to
protect South and West Side neighborhoods from being overlooked or
overwhelmed in the city's pursuit of an Olympic Games.

The fund could eventually support everything from housing to tourism to
job training, foundation officials said Friday. They also see the fund
as helping Chicago's chances with the International Olympic Committee to
land the 2016 Summer Games.

"Part of the judgment that is made when choosing a site is how deeply a
community has been engaged in the planning and what possibilities there
are for a lasting legacy," said Jonathan Fanton, president of the John
D. and Catherine T. MacArthur Foundation. "I think this fund is an
expression of Chicago's determination to make the Olympics a benefit for
all neighborhoods, all peoples and all sectors in the city."

"We want to reassure neighborhood leaders and groups with which we've
been working that they will have a voice," said Fanton.

MacArthur, the Chicago Community Trust and the McCormick Tribune
Foundation -- the city's three largest philanthropies, in terms of
assets -- each are putting $1 million into the 2016 Olympics Fund for
Chicago Neighborhoods. (McCormick Tribune Foundation is independent of
Tribune Co., the owner of the Chicago Tribune.) The much smaller Polk
Bros. Foundation is kicking in $500,000.

They are inviting corporations and other foundations to join the fund,
and they foresee the $3.5 million now in hand to double or triple.

The fund initially will focus on Washington Park, Englewood, Grand
Boulevard, Kenwood, Woodlawn and Douglas Park on the South Side; and
East Garfield Park, Near West Side, Pilsen, Little Village and North
Lawndale on the West Side.

Trust President Terry Mazany and Fanton said the first grants could be
awarded in coming months. They may be used to canvass residents and fund
research on jobs, business development and tourism opportunities.

Later grants may support community planning, affordable housing,
education and job training.

Mayor Richard Daley applauded the foundations and said this commitment
"underscores their generosity and continued investment in the future of
our city and our neighborhoods."

Patrick Ryan, chairman of the Chicago committee bidding for the
Olympics, said his group had sought support from the foundations, but
they felt a community initiative would be more appropriate. He said the
fund is "an incredible contribution" that will be of lasting benefit
even if the city loses the Games.

Mazany said it was important to begin the fund now rather than wait
until October 2009, when Chicago should learn whether it hosts the

"The planning and energy now [for the Games] will result in some real
and lasting changes, regardless of the decision by the International
Olympic Committee," he said.

Mazany said the foundations want to make sure that affordable housing is
a part of new development proposed for the Olympic bid.



Tuesday, February 5, 2008

Truth in numbers: The agony of air travel

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Truth in numbers: The agony of air travel
10 tips to avoid becoming a statistic
By Rob Lovitt
Travel writer
updated 12:42 p.m. CT, Tues., Feb. 5, 2008

It’s official. The year-end numbers just released by the U.S. Department of Transportation (DOT) confirm what most of us already knew: Flying was a nightmare last year. Any worse and it would’ve made it into the record books as the worst year ever.

Consider the numbers:

The airline industry’s on-time performance rate for arrivals dropped to 73.4 percent last year, down from 75.4 percent in 2006 and depressingly close to the all-time low of 72.6 percent scored in 2000.

The airlines mishandled more than 4.4 million pieces of luggage, up from 4 million and roughly equivalent to one bag going astray on every full 737-700 flight during the year.

Almost 64,000 passengers were involuntarily “bumped” last year, an increase of 8.3 percent (on a per-emplaned-passenger basis) and the second-worst showing since 1996.

You could complain — according to DOT, more than 13,000 people did last year, up 58 percent from 2006 — but, let’s face it, that won’t get your time, bags or boarding pass back.

Instead, you’d be better served trying to ensure that such mishaps don’t happen to you. And since 2008 is already looking sketchy, now is a good time to revisit the rules of defensive flying.

Dodging delays
Conventional wisdom says to fly early in the day because of the cascading effect one delayed flight can have on others. That’s still generally the case, but it’s also true that on-time performance — or the lack thereof — is a function of many factors:

Know your airports: Operated by the National Air Traffic Controllers Association, Avoiddelays.com provides specific tips on getting in and out of 29 major airports around the country. Avoid arriving into Logan after 5 p.m. Sunday–Thursday when incoming flights tend to back up, for example, and consider leaving Las Vegas on Tuesday or Saturday when check-in and security lines are at their shortest.

Know your flights: Fly non-stop — even if it means paying a premium. Every takeoff and landing is another opportunity for things to go wrong. If you must make a connection, don’t be suckered by unrealistically short layovers. You may be able to get across O’Hare or DFW in 30 minutes, but it won’t do you a bit of good if your inbound flight is an hour late taking off.

Know thy enemy: The DOT report also lists the industry’s worst offenders, i.e., those flights that are late 70 and 80 percent of the time. Do not book these flights — especially if you need to make a connection at the other end.

Bumps are for chumps
You paid for a seat; you shouldn’t be involuntarily bumped from it just because the airline overbooked your flight. (Voluntarily giving up your seat for cash or a ticket voucher is another matter — just remember that with today’s packed-to-the-max planes, there’s no telling when an available seat might appear.)

Pick a seat: Always make a seat assignment when you make a reservation. If an airline can’t find volunteers, travelers without seat assignments are the first to get bumped. Checking in early — e.g., online as soon it’s permitted — will also provide some protection.

Know your airline: The Denied Boarding section of the Air Travel Consumer Report ranks the nation’s major airlines for both voluntary and involuntary bumps. JetBlue, for example, almost never overbooks its flights, while regional flyers Comair and Atlantic Southeast are notorious for doing so.

Know your rights: DOT provides a full explanation of the rules governing bumps, including compensation, in its Consumer Guide to Air Travel. Similar information can also be found on your airline’s contract of carriage.

No more mishandled bags
This no time to get lazy about luggage. Lost, delayed, damaged or pilfered — the airlines reported that 7.03 bags went awry last year for every 1,000 passengers. To avoid becoming one of the statistics:

Fly non-stop (revisited): When connecting flights are delayed, guess what happens to the bags in their cargo holds? In fact, according to the International Air Transport Association (IATA), 61 percent of mishandled bags end up that way during connections.

Arrive early: Baggage check-in requirements vary by airline and airport — most are 30 to 45 minutes for domestic flights — but it’s a safe bet that if you have to dash for a plane, your luggage won’t make the trip.

Be tag aware: Remove all old baggage tags and confirm that the new one has the correct airport code for your destination. When you’re flying to JFK, you don’t want your bags ending up in GFK (Grand Forks, N.D.) or, worse, KGF (Karaganda, Kazakhstan). Ticketing errors, says IATA, account for nine percent of mishandled bags.

Go carry-on-only: The single smartest thing you can do to make sure your bags go where you go. After all, if you don’t give the airlines your luggage, they can’t lose it in the first place.

URL: http://www.msnbc.msn.com/id/23013172/

© 2008 MSNBC.com