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Potential dangers of Pension Advance mentioned in NYT

An April 28th article from the New York Times warns about the potential danger of loans borrowed against pension – known as Pension Advances. These loans, disguised as cash advances, pose a threat to the economic security of retirees by requiring them to sign over all or part of their monthly pension check as collateral to the loan. With effective APR of loans ranging from 27 percent to 106 percent, pension advances can have a devastating effect on retirees and low-income seniors much like a payday loan.

Read more about the potential hazards of Pension Advances here.

Credit Union Journal highlights the work of the Federation’s Better Directions program in a series of articles on elder financial abuse

Going Paperless in 2013:
Benefit Payments and the Impact on Seniors

By Margot Saunders,

Counsel, National Consumer Law Center, Washington, D.C.

After years of gently nudging recipients towards direct deposit, on March 31, 2013, the federal government will require electronic direct deposit of all payments (except IRS refunds) and including social security. By that date if a recipient has not provided the relevant federal agency with an account number at a financial institution, benefits will be automatically placed on Treasury’s Direct Express card or on request, a private-label prepaid card that meets certain criteria. Financial institutions and organizations that deal with seniors can help smooth this transition.

Who is affected?

Everyone who receives regular federal payments is covered by the electronic payment rule.

Can anyone avoid the mandate?

Recipients who are receiving their benefits via paper checks on March 1, 2013 and are 92 years of age or older will be permitted to continue receiving their benefits by check. Recipients with a mental impairment or who live in a remote geographic area which lacks the infrastructure to support the electronic financial transaction may request a waiver in writing.

What will happen in March 2013?

Benefit recipients will be asked to provide the number of their bank account, information for private label prepaid card, or they will automatically start receiving benefits on the Treasury sponsored Direct Express Card.

The Direct Express Card is a prepaid card issued by Comerica Bank under a contract with the Treasury Department. The card can be used like any other debit card: to make purchases anywhere MasterCard is accepted and to withdraw cash at ATMs and at most banks and credit unions. The card will be mailed along with activation instructions.

Seniors who are converted to the Direct Express Card but wish to switch to direct deposit to another account –bank or credit union account or a different prepaid card account – may always do so. Other prepaid cards are eligible for direct deposit of federal payments only if they carry deposit insurance, comply with the legal protections governing debit cards, and do not have an attached line of credit or loan agreement that is automatically repaid from the deposit.

How Organizations Can Help

Publicize the transition and encourage direct deposit.Many seniors who still receive paper checks may distrust electronic deposits, be reluctant to provide their account numbers, or may not understand the materials. However, direct deposit into a bank or credit union account is always the safest and least expensive way to receive federal payments.

Who can help allay concerns before the March 2013 deadline? Member services staff and tellers who see seniors come in to deposit their paper checks at a financial institution; Senior centers’ staff; Credit counselors.

Offer accounts to unbanked seniors. Seniors who do not have bank or credit union accounts should be encouraged to sign up for one. Second chance accounts can be especially helpful for seniors who have had trouble with accounts in the past. For those concerned with garnishment, new rules protect federal benefits from debt collectors.

Explain the Direct Express Card.The Direct Express Card is a good option for those who do not qualify for a credit union or bank account. The card has few fees and these can be avoided with careful use. Customer service is free and paper statements are available for only $0.75/month. Alerts by telephone, text message, and email can provide notice when a deposit has been made or the balance is low.

Evaluate other prepaid card options. There are two drawbacks to the Direct Express Card; it cannot accept deposits from other sources, such as a private pension, and it does not offer an online bill payment feature. In contrast, other prepaid cards may have more functionality and can be used for direct deposit, but it is crucial to review the fee schedule. Stay away from cards connected with credit features or overdraft “protection” (i.e., fees), or those offered by payday lenders and check cashers.

To Learn More

U.S. Treasury

Sign up for Direct Deposit & get information on the Direct Express Card at www.godirect.or g and learn more about the Direct Express Card at www.usdirectexpress.com

National Consumer Law Center

Download free Fact Sheets at http://www.nclc.org/issues/protection-of-exempt-public-benefits.html

Better Directions Webinars

Your invitation to learn how credit unions can effectively serve seniors

If you missed them, here are links to important recent Better Directions Webinars

Assessing the Economic Well-being of American Families and Elders

Watch here >

Responsible Approaches to Reverse Mortgages

Watch here >

And watch for the announcements of these upcoming webinars:

Fighting Elder Financial Abuse: What Credit Unions Should Recognize and How to Respond

CDCU executives told us that their members 65 and older are being targeting by financial scams. CDCU senior members told us that they had been the victims of exploitation. In this Webinar national experts will discuss the risks of elder financial abuse, explain how to recognize the signs and look at effective responses and intervention strategies.

Watch here >

Seniors Going Green: An Introduction to Equity Express

Equity Express® is a unique approach to financial literacy; a curriculum that helps seniors make smart consumer choices, lower their household expenses, improve their health and have a smaller environmental footprint.