Transcript: Over Fifty, Overdrawn

BRANCACCIO: Given the somber, let's-pull-together-to-fix-it tone of his inaugural address, it's clear that Barack Obama has been talking to real Americans in real distress. Such as: many older Americans, for whom the golden years aren't turning out that way.

And why is that? We are here to tell you it's not just the deep recession to blame.

Senior Correspondent Maria Hinojosa and producer Fae Moore have been investigating the causes and effects of older America's crisis over credit.

HINOJOSA: Meet Jeanine Cook and Mary Ebosh...two sisters living in Myrtle Beach, South Carolina. They came here from Ohio to enjoy their golden years. Little did they know they would enter their retirement in the midst of a terrible recession.

COOK: Well, now we've got money. I mean, we're not poverty-stricken. But that's all we have for the rest of our life. That's it. There isn't putting more money in to watch it grow 'cause right now we're afraid to put it anywhere because of the loss.

HINOJOSA: In the past six months Jeanine has seen her retirement fund sliced in half.

COOK: I've got some good coupons here...

What we have lost in the stock market is devastating to us because that's our retirement. That's our money! You know, you—you—put it away for the rainy day. It's pouring. It's pouring. It's pouring out.

HINOJOSA: Today the sisters are enjoying a much needed distraction—

A weekly painting group at the Grand Strand senior center.

EBOSH: This is Fiona Fay Frog...she's a girl after my own heart, footloose and fancy free, loves the men

HINOJOSA: But there's not a lot to be cheerful about. Not only have their finances been devastated. Their kids have been hit hard too. One of her sons is afraid of losing his job, another already has.

EBOSH: He's got two little children. Scary.

HINOJOSA: You're crying about your kids and they're supposed to be your future.

EBOSH: Very bleak.

HINOJOSA: Things are even bleaker for Jeanine. She's unable to sell her house back in Ohio because her kids are just scraping by and had to move back into her home.

COOK: I'm afraid my children will never see owning their own home. They live in our home. Do we wanna—in Ohio. Do we wanna sell our home? We can't sell our home. I have my daughter and son living there. I have a granddaughter there. There's no way

HINOJOSA: Because the cooks can't sell their house, Mary and Jeanine have moved in together. Now the sisters, along with their husbands, are living as roommates.

What's going on with these sisters is being echoed across the country. There are almost 40 million seniors in the United States. And many of them are in trouble.

OBAMA: Our challenges may be new...

HINOJOSA: And at his inauguration this week, President Obama acknowledged the problems faced by the baby boomer generation as it heads into retirement.

OBAMA: The question we ask today is not whether our government is too big or too small, but whether it works—whether it helps families find jobs at a decent wage, care they can afford, a retirement that is dignified.

HINOJOSA: While the economic bad news has been terrible for seniors,

perhaps the bigger story lies in the predatory practices, both legal and illegal, that are sending seniors deeper into debt.

Now traveled to South Carolina, a retirement hotspot, to see for ourselves.

LT. GOV. ANDRE BAUER: We've had 25 listening sessions throughout South Carolina to hear the concerns of—of the seniors.

HINOJOSA: Republican Lieutenant governor Andre Bauer runs South Carolina's office on aging.

When you look at the big picture, how do you think these retirees, these elderly folks living in your state, are gonna be impacted by this financial downturn?

LT. GOV. ANDRE BAUER: Well, I don't think it matters whether they're wealthy or poor, they're all affected by it. More and more of them are concerned about the rising cost of healthcare coverage. The rising cost of drugs, prescription drugs. And—and the fact that the cost of living, in general, continues to go up and they're concerned how they're gonna make the numbers work.

HINOJOSA: Making the numbers work is even harder, says the lieutenant governor, when seniors become victims to fraud.

LT. GOV. ANDRE BAUER: Fraud is growing rapidly, targeting what I like to call the greatest generation, and—and the Andy Griffith generation, folks that were more trusting, are more gentle. Weren't as quick to shut that door or hang that phone up, that would listen to somebody's sales pitch.

HINOJOSA: To combat crimes against the elderly, Bauer has established a Senior Fraud Task Force.

COMMERCIAL: "Here in South Carolina, the LIEUTENANT Governor's office on aging believes in protecting its senior citizens. ....SC seniors"

HINOJOSA: So what is that—what does that fraud look like for seniors in—in South Carolina? What—what's a typical scheme?

LT. GOV. ANDRE BAUER: The latest scheme is they call and they say they're a jury duty coordinator. And they say, "I'm with the local—office. And you didn't show up for jury duty." And the person immediately is concerned. And they say, "Really?" And they say, "Yes, and there's been a warrant served for your arrest."

LT. GOV. ANDRE BAUER: And so this person is distraught. They don't know what to do. Well, immediately, the person on the other line acts like they're gonna become their friend. They say, "Well, let me get your full name? Now what's your address? What did you tell me your social security was?" Their identity has just been stolen.

HINOJOSA: Advocates for the elderly say this kind of scam is appalling but rare compared to a far bigger problem: certain kinds of loans that are perfectly legal.

BERKOWITZ: Well, clearly, you don't want to see people subject to fraud. But a lot of the loans that were made are not fraudulent. They followed the laws.

HINOJOSA: Sue Berkowitz is a lawyer with the Appleseed Justice Center, a non-profit organization that helps low income people.

Some of the hardest hit are seniors, many of whom are on a fixed income.

BERKOWITZ: Gas prices are up. Utility costs are up. Food is out the roof. And that small pension, and that small social security check, that retirement doesn't go as far as it used to go. And people are using extraordinary means to try to make ends meet.

HINOJOSA: The average social security payout around the nation is only fourteen thousand dollars per year. Things are so bad here, some seniors are taking out high rate, short term loans with their checks.

They're called payday loans.

BERKOWITZ: There's Check World over there, there's two or three over there—-

HINOJOSA: Here in Columbia South Carolina, they're everywhere.

BERKOWITZ: ...and then if we come over here you can see there's Title Max and Check Max and Check—Express Check Advance there.

HINOJOSA: Anyone who draws a regular check can take out a two week payday loan of up to $300 for a $45 dollar fee.

Loans are pitched for emergency use only .....but there's a good chance that those who don't have the money today won't have it when the loan needs to be paid back. So, a cycle of debt begins

MOBLEY: I'm going to open the door...

HINOJOSA: That's what happened to Emma Bouknight. She was using her entire monthly $600 Social Security income to pay off six payday lenders.

This went on for two years before her daughter Clementine discovered what was going on and call Sue Berkowitz.

MOBLEY: She began to talk about I hate when the first of the month comes. One day she said it again. I said mama why are you saying it? She said I hate giving all my money to these people

HINOJOSA: Mrs. Bouknight had originally taken out a payday loan to pay off an urgent bill. When the due date came she was still short of cash.

BERKOWITZ: Every month for two years, they took another 45 dollars, each one of these six, that was a lot of money they took out of your pocketbook and I know you couldn't afford it.

HINOJOSA: Payday lenders advertise aggressively and set up shop close together.

When Mrs. Bouknight needed another loan, she could just walk next door.

BERKOWITZ: If I'm not able to pay my $345 loan back to you, I'm gonna borrow another $300 from another pay day lender. And you know what they're gonna ask? "So you need money?" Well, what am I gonna say? "Sure, I need money." So I'm gonna borrow another $345.

HINOJOSA: Mrs. Bouknight kept paying because she was afraid she could go to jail.

BERKOWITZ: If you close your checking account...

HINOJOSA: Berkowitz took action. She convinced her to close her bank account and confronted the lenders, who eventually backed down.

BERKOWITZ: We do have a law that says no lender should make a loan to anyone in South Carolina without looking at their income and debt ratio, their ability to pay.

HINOJOSA: The practice is so controversial, fifteen states don't even allow payday lending, but the business is thriving in South Carolina. The country's largest payday lender, Advance America, is based here.

Lyndsey Medsker is a spokeswoman for the community Financial Services Association, the lobbying arm for the payday lending industry.

For someone who takes out an emergency loan with—with, you know, a high fee, and they're living off of a small, fixed income, how is it possible that they're ever gonna be able to catch up. If they're on this fixed income, they're desperate for money, they go take out this loan.

MEDSKER: Well, I think you have to look at—at what—what the other options are to this person. If they—if they really need—to pay a bill today or, you know, their electric bill is in—is on the verge of getting shut off, what is available to them? And if it's not paying the bill and it's the middle of winter and that means your bill's going to get shut off, then it makes sense for them to take out a payday loan.

HINOJOSA: But remember, most of these loans aren't one time emergencies.

Consumer advocates say 90 percent of payday loan customers are repeat borrowers.

Do you worry that, particularly with seniors, this is something that they could get in the habit of using that could be problematic?

MEDSKGER: I think seniors—I mean, like with anything, I—I mean—any product could be problematic. I think—with the case of payday lending, people need to understand exactly what the product is and use it for that.

HINOJOSA: According to the Center for Responsible Lending, payday lenders nationwide made close to twenty-eight billion dollars in revenues last year.

In South Carolina, advocates have sought help from the state legislature to end this practice. Last year one bill limiting the rates on payday loans got eighty-four supporters, both Republican and Democrat. But it never made it to a vote in the house. This year several more bills are seeking to ban the practice outright.

But the state's governor and lieutenant governor say payday loans are not a problem the state should be focusing on.

HINOJOSA: When we spoke to—to—aging activists, they told us that the pay day lending was one of the biggest issues.

LT. GOV. ANDRE BAUER: We just hadn't seen it. I mean, I'd love to, you know, our phones ring every day. And if the folks watching this show have been put in a situation they think that they've been taken advantage of, we want to hear about it.

HINOJOSA: In recent years the Lieutenant Governor has received nearly $30,000 in contributions from payday and title loan companies

So when your critics say the reason why, as a lieutenant governor, haven't taken on the pay day loans is because you, yourself, have taken contributions from pay day institutions?

LT. GOV. ANDRE BAUER: Oh, when you're in politics for 12 years, you get critics every day. It doesn't matter if I wore a blue tie they'd say I needed to wear a red tie. But, again, I have—

HINOJOSA: Right, but you did—you—you did take $3,500 from Aycox who is—runs a pay day title loan company. You took another 3,500 from them in 2006. You took another 2,500 from Title Max. So you have a list of contributions from pay day loans.

LT. GOV. ANDRE BAUER: I don't believe in government solving everything. So it's not about who gave me money. 'Cause a couple thousand dollars would not affect me. If we were talking about saving senior's lives, I can tell you, a couple thousand bucks wouldn't do it. But part of being a government leader is—is—is sniffing out if there's really a problem and sniffing out a dividing line between free market and actually unscrupulous tactics.

HINOJOSA: As we looked into what's going on in South Carolina, we discovered payday loans were only a part of the problem.

Throughout South Carolina seniors are trapped in the same kinds of debt we have been seeing across the nation.

According to a study by a public policy research organization, the past 20 years have seen a 200% increase in credit card debt alone for older Americans nationwide.

DONALD DUNLAP: You retire on fixed income from the government. The government gives you about a two percent raise a year. When food costs goes up six and a half or seven percent a year. There's no way that you can, that you can exist like that, unless you've got credit cards or something.

HINOJOSA: The single largest expense for most seniors is healthcare ...for Joyce and Donald Dunlap, that's exactly where their problems—lots of problems—began. First, Joyce left her job to take care of her sick mother.

JOYCE DUNLAP: And then I, she died in July and I got breast cancer in November, so. And then he got uh, what, three months or four months after that, no it was, it was after I had chemo in the same year that he had to go have um, brain surgery done.

HINOJOSA: Recently, they were dealt another blow. Under their Medicare Part D policy the cost of prescriptions is going up. With Donald on twelve medications for various illnesses, they will pay over almost three thousand dollars this year.

JOYCE DUNLAP: He has high blood pressure. He has high cholesterol. He has diabetes. And he just—

DONALD DUNLAP: I'm a living time bomb.

HINOJOSA: Both unable to work, the Dunlaps turned to credit cards to make ends meet. Then, to pay off credit cards, they decided to refinance their mortgage with Ameriquest. They took advantage of a low interest rate offer, only to see their payments go up. What started out as a mortgage of $650 a month is now costing them double.

JOYCE DUNLAP: We thought we were, uh, buying something we could pay for. But having to, uh, quit my job and, it's just overwhelming now. We just can't dig our way out and looking at these interest rates, we never will.

HINOJOSA: Meanwhile, their credit card bills keep creeping up.

JOYCE DUNLAP: Yeah, then you get, um, you get late fees of $39 or upwards of $18. And then you're off the scale

HINOJOSA: In the past year, Joyce noticed that due dates and credit limits were suddenly changing.

JOYCE DUNLAP: I think it's complicated. And I think that's the way they want it. They want it complicated so you can't pay your bills on time. That's the reason they change the dates. That's the reason they put 'em on weekends. And a lot of times, I think that they think that people our age just aren't—are do—do not have the mental capacity to—to try to keep up with it. And some of 'em my age don't.

HINOJOSA: Now at the ages of 74 and 70, the Dunlaps have gone back to work. She and Donald work at the shipyards. She does days, he does nights.

The Dunlaps are doing everything they can to avoid becoming part of an alarming statistic—people fifty and older hold fully one quarter of delinquent mortgages in the country. And among older black Americans, the situation is even worse.

ARNOLD: We've seen that for African-Americans, they're disproportionately represented by those who have delinquent mortgages are in fore—foreclosure, probably more than double the rate of others.

HINOJOSA: Teresa Arnold works for the South Carolina chapter of the AARP

She says that many black seniors in the state have been put into subprime loans.

ARNOLD: We were listening to African-Americans talking about being steered into sub-prime loans when they should have qualified for a prime rate. And that is a truly—a problem.

HINOJOSA: This may have been exactly what happened to Lavonia Atkinson who's 83. She lives with her ailing daughter Roslyn in Columbia, South Carolina. She spent her career teaching school and coaching basketball.

Lavonia and her husband made careful plans for retirement when they bought the house 26 years ago for $78,000.

LAVONIA ATKINSON: And my husband was able to get it and fixed up. And—it was reduced at price. And that's why we got it.

HINOJOSA: Over the years Lavonia saw the value quadruple.

ROSALYN ATKINSON: But it was valued at $350,000 when it was first—when it first come up it was valued at $350,000.

LAVONIA ATKINSON: It was valued at $350.

HINOJOSA: When the housing boom was at its peak, Lavonia and Roslyn decided to refinance their home to pay for other expenses.

But, they say, a mortgage broker put them on a path to financial ruin when he sold them an interest only mortgage. The broker was happy to make that loan to Roslyn, even though she only had a part time job, and a debilitating illness: multiple sclerosis.

ROSALYN ATKINSON: I have a hard time keeping a job, especially a full-time job working outside the home.

HINOJOSA: Rosalyn says the value of the house has gone down, but the payments have gone up.

ROSALYN ATKINSON: It was a thousand nine hundred....by now it's 2300

HINOJOSA: Now they are overwhelmed.

LAVONIA ATKINSON: We just live and pay debt, and we never got behind. We kept up with everything. And—now, everything is all out of whack.

HINOJOSA: Roslyn and her mother are threatened with foreclosure. But they told us that the mortgage company isn't willing to negotiate.

ROSALYN ATKINSON: All they want is payment and when they...if you get even a month behind they're talking about foreclosure. I'm trying to get out from under 'me if I can.

BERKOWITZ: You know there was a time when, if you were gonna go get a loan, it was your local banker and you trusted them. They were gonna do what was in your best interest.

HINOJOSA: Sue Berkowitz is angry that government deregulation and the highly sophisticated predatory lending that followed has left so many seniors blaming themselves for their problems.

BERKOWITZ: You know, what's interesting to me is so many times, the first thing, especially with older people, what they'll say to me is, "I'm really sorry. I—I'm—I never thought I'd be in this position. It never dawned on me this would happen." And apologizing to me that they got ripped off.

HINOJOSA: When people say, "Look, there is a certain level of personal responsibility." What's your response to them? When people say, "Look, you know you made this decision."

BERKOWITZ: What about the responsibility of government? And what about the responsibility of lenders to determine whether that person had the ability to pay that loan back. You know, we're seeing ourselves in a huge financial crisis right now with mortgage loans. Because we let a whole industry make loans to people who didn't have the ability to pay it back. Some sophisticated but many unsophisticated borrowers. Why is it okay for them to act irresponsibly as lenders?

ARNOLD: I think it is going to take federal intervention. You know, as you get older, you just don't have a whole lot of options. And I think that our country will be a lot worse off if we don't try and stabilize seniors.

HINOJOSA: For many seniors the only wealth they had left was in the value of their homes. Now, many of them have no option left but bankruptcy

ARNOLD: One in four bankruptcies are held by a person who's 55 and older. Back in 1991, that number was one in 12.

HINOJOSA: One of the problems is, the bankruptcy laws don't allow people to restructure debt on their home

ARNOLD: And in fact, AARP has written a letter to Congress, saying "When you provide this bailout package, you need to consider our members, people 50 and older, who need to be able to restructure their mortgages, who need help during the bankruptcy process. You can restructure debt on your yacht, but not on your home."

HINOJOSA: When he was on the campaign trail President Obama promised to help seniors hold on to their homes.

PRESIDENT OBAMA: ...if we're serious about protecting retirement security, we need to protect the homes that are the cornerstone of a secure retirement...

HINOJOSA: Now Obama has made his plans clear. He wants to reverse decades of deregulation in the banking industry and push through laws that will allow judges to order loan re-modifications.

There are other ways out of the red too. The AARP recommends that seniors see government approved credit counselors, to help manage debts.

Additionally, Teresa Arnold hopes that more adult children will have an honest talk with their parents about what's happening with their finances.

ARNOLD: You know, the seniors that you're looking at, the older folks, they really are from the silent generation. They sucked it up. So, even though they're being hurt by their silence, they're not necessarily gonna speak out about it either. They're gonna figure out how to survive.

HINOJOSA: For some, surviving means giving up their dreams in order to pay off their debts.

JOYCE DUNLAP: It would be so nice to be retired and be able to do the things that we want to do now and travel and, and...

DONALD DUNLAP: We have talked about it, just letting this house go, forget it, and just get us a trailer and move on. Go out on the road.

JOYCE DUNLAP: But the uh, work ethic, ethic that we were raised with, there's no way we could just walk out. We just have to keep trying.

EBOSH: This is such a bad time and we, we can't cave, you know. We have to go forth and put our earrings on and do what we have to do to get through it.

BRANCACCIO: Alright so the advice is to talk to our aging friends and relatives about delicate financial matters. But how do you do that without starting trouble? We have some tips on our website.

PBS.org is the place to start.

And that's it for NOW. From New York, I'm David Brancaccio. We'll see you next week.

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Over Fifty, Overdrawn

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