Federal, State Regulators Take “Pension Advance” Firms To Court

In the past, we’ve briefly covered “pension advance” firms – firms that make very high-interest loans against retirees’ pensions, similar to a payday loan model.

The business model itself is not illegal, except in Missouri.

But federal and state regulators this week announced they’ll be taking two such firms to federal court for deceptive business practices.

More from the NJ Herald:

Regulators say that the companies, Pension Funding LLC and Pension Income LLC, used deceptive marketing tactics to target the pensions of seniors and military personnel. The U.S. Consumer Financial Protection Bureau and New York state’s Department of Financial Services filed the lawsuit against the companies in federal court in Santa Ana, California.

They say the companies tricked consumers into borrowing against their pensions by portraying the deals as sales instead of loans, and failing to disclose high interest rates and fees.

The business of so-called pension advance loans, which grew during the recession, has been under scrutiny by regulators in recent years. Targeting seniors hit hard during the economic downturn, the schemes can drive retirees deeper into debt, regulators say.

“We are working to put a stop to the illegal practices these companies are using to sell their bogus product to military veterans and other pensioners,” CFPB Director Richard Cordray said in a statement.

[…]

The suit alleges that the companies violated the 2010 law overhauling financial regulation after the financial crisis by misrepresenting the products as sales rather than loans, and failing to disclose high rates and fees for the loans. In some cases, the promoters implied to consumers that they could face criminal prosecution if they stopped making payments, the suit said.

Read more about pension advances here.

Photo by http://401kcalculator.org via Flickr CC License