I recently spent some vacation time in Maryland, helping my grandmother move to a smaller apartment. It turns out her credit card company was extending her credit (her only income is social security) while sending her promotional checks. You've seen these checks - they tell you that you have $500 to spend, but you really have to pay that back at a high interest rate.
My grandmother, at 83, was using the checks to pay her bills, so she racked up some debt. Did the credit card company call her about this? No, they just extended her credit, and sent more checks. That was followed by a barrage of calls to get her to pay the debt.
What was less common 30 years ago is the practice of debt buying. You may have had a relationship with the first lender, but the new "debt-buyer" does not care who you are or how you can pay. Once you are being sued for not paying debt that you were never notified about in the first place, you are already getting squeezed by collectors that might freeze your income.
The Neighborhood Economic Development Advocacy Project (NEDAP) worked with the AARP in order to get the Consumer Credit Fairness Act (S.4398, A.7558) passed. According to the NEDAP, seniors and other vulnerable populations will get some protection from predatory lenders. The bill also makes it easier for people to know how they can be part of a class action suit to protect themselves.
The new Credit Card Accountability, Responsibility and Disclosure Act, signed by the president, limits credit card companies from giving cards to people under 21 unless they can prove they have the means to pay the debt or a parent or guardian co-signs the agreement. The bill also says that the customer will have to be more than 60 days behind on a payment before seeing a rate increase.
This is a good bill, but seniors need protection as well. Of course, as adults, they are responsible for the debt they enter into. But seniors are vulnerable and, unlike young people, they do not have a lifetime to make up for a mistake.
Herb Stupp, former commissioner of the New York Department for the Aging, said that seniors should only borrow money in the following conditions: (1) they anticipate a windfall of money from some source; and (2) the borrowing is for a necessary purpose.
"If one is on a fixed income, why incur new debt, an added expense?" asks Stupp. "Before long, the older person's debt service will compete with food, housing, and other ordinary expenses."
Stupp stresses that older relatives should be discouraged from borrowing unless the two criteria mentioned are met.
What you want to know if you have an elderly parent or you are elderly yourself, is that if you live on social security alone, these credit card companies cannot dig into your social security.
Oddly enough, Jackie Gleason's ex-wife was living in my grandmother's senior residence. Mrs. Gleason lived in a cheaper apartment before moving out recently, and the building managers said that we could move my grandmother into Mrs. Gleason's place at a reduced rate.
Seniors react to technology differently than younger folks, and that is where they get tripped up. While moving my grandmother's furniture, I noticed her on the phone. Sure enough, even as we were moving her out of her home because of this debt crisis, credit card companies were calling her. I used my cell phone as an experiment. I let my phone ring.
"Aren't you going to answer it?" my grandmother asked. "No, I only answer when I know who it is," I said.
This is not how the older generation operates. When the phone rings, they answer it - and predatory lenders know it.
This culture of debt has nearly brought the country down. We're in debt on a national level and on an individual level. Credit card companies are legitimate businesses, but their practices are not always ethical and too often strategic in bilking customers.
We need to make sure that credit lobbyists do not dominate future credit card legislation. Some of the liberal college campuses that chased the ROTC off their campuses would serve their students better to let the ROTC remain, and instead, send these creditors - as Mrs. Gleason's husband would say - "to the moon!”