Friday, February 28, 2014

Consumer Financial Protection Bureau Pay Day Loan "Solution" about to Endanger Millions of Seniors and those with No Savings.

The following is an email that was sent to the 600 plus signers of the Debt Neutrality Petition. When you sign the Debt Neutrality Petition, you also get 1 or 2 free email updates every month regarding important consumer debt issues that seem to not reach the main media radar.

Debt Neutrality Petition has uncovered banking news that may adversely affect millions of seniors and those on a strict budget after Mid May of 2014. Apparently ALL BANKS are DISCONTINUING their direct deposit advance program by mid May of 2014!

For those of you who have never used direct deposit advance, you have been blessed! However, if you have found yourself financially short before the end of the month and just need a one time advance to prevent a chain reaction of penalties and fees for being late on various bills, then direct deposit advance could be a sparingly used, but much needed lifeline.

One big problem with direct deposit advance has been the 1.50 fee per 20 dollars borrowed for what might just be one week, or less! That works out to 693% interest! Rather than drop that ridiculous $1.50 per 20 dollars charge to a still very high but much more reasonable 1 dollar for ever 25 dollars borrowed, the CFPB has apparently scared off the banking industry from offering the direct deposit advance program all together.

I previously wrote that the CFPB is more about enforcing the alignment of balding tires on a car versus making the situation more palpable for people to get new tires. In the issue of direct deposit advance, the CFPB has actually blown out the balding tires and made the situation far far worse, especially for seniors!

99% of all Home Owning Seniors living on social security income DO NOT qualify for ANY TYPE OF LOAN other than a Reverse Mortgage (you heard it here first). Most of the time a Reverse Mortgage is a mega rip off in which the mortgage insurance monthly premiums may be HIGHER than the monthly amount the senior wants to take out of their own paid off home!

So if a senior citizen WHO OWNS THEIR HOME has a sudden, one time need for a relatively small amount of cash; they could have a perfect payment history, a 725 credit score, have social security income, and still be denied ANY AMOUNT OF MONEY from any type of loan presently being offered by our wonderful banks. This is beyond criminal.

I am probably the first person and maybe the only person warning you about the dramatic shift into an extinction of loan opportunities for retired homeowners, and how the CFPB has managed to jeopardize the very people they are supposed to be helping by killing off direct deposit advance.

I have literally bent over backwards to greet the CFPB when they came to Los Angeles for a meeting in May of 2013. I reached out to them with well researched documents, and I also commented at that meeting and have posted comments on their facebook page, but the CFPB doesn't appear to feel my research needs to be addressed or taken seriously.

Even if you have never used direct deposit advance, please read this short story on how easily you could suddenly need direct deposit advance, if only for one month.

Someone's bank account was compromised by fraudulent third party billing by a person they had never meet. The bill of around 60 dollars was simply deducted from the victim's account. The victim fortunately discovered the fraud almost as soon as it happened and immediately reported it to their major bank (Wells Fargo).

It took Wells Fargo 10 business days to actually review the claim! (actually 15 when weekends and a Monday Holiday were added in.) For those 15 days this person's account remained in the negative because of the fraud.

The victim had two very small credit card bills to pay but suddenly the money allocated for those two bills had been electronically stolen by someone they never met. (The person's name and the name of the company accepting the payment did appear on their online banking statement).

Now imagine if direct deposit advance were not available. Those two bills would have gone unpaid, risking the victim to a rate hike in interest from their special rate of 4.9% to as high as 29%!

A couple of months from now, just one fraudulent third party access to an account with no direct deposit advance option could cause one to lose whatever solid interest rates they have managed to get from their credit card companies.

Someone is able to get a bill fraudulently paid via an unsuspecting bank customer's account and by the time the victim discovers the fraud, reports it and the slow moving banks fix the situation, the victim misses two payments because there is no direct deposit advance anymore.

The banks needed 2 business weeks, plus four weekend days, basically that's 15 days to resolve any fraudulent activity on the victim's account. If the fraudulent activity puts the victim in the red, and if their credit card overdraft kicked in putting them over their limit, they could literally have their finances come to a screeching halt for weeks.

Even though the victim immediately reported the fraud on their account, the banks WILL NOT suspend the fraudulent activity until AFTER their investigation is complete.

If you instead use cash advance from another credit card to pay those bills, you will then need to make more than the minimum payment to make sure that the ultra high cash advance interest rate charge doesn't nestle into the credit card accruing high interest rate charges month after month. Ironically, making a credit card cash advance can be potentially just as bad as the usurious rates being charged on direct deposit advances.

In my opinion services like LifeLock charge too much per month, something like 25 dollars per month or 275 dollars per year. In my opinion, it should be five bucks a month for a service like Life Lock, not 25 dollars. Then it becomes a no brainer to do it.

The CFPB screwed up big time by scaring the banks away from direct deposit advance.

Please try and make some type of financial arrangements in the event you are a victim of withdrawal fraud on your bank account so you don't become financially frozen while the bank takes up to 15 days to fix the fraud.

Sincerely, Alessandro Machi

Below are some blog links if you want to read about financial terrorism articles I have written in the past. , , . , ,