Pension-Advance Companies? Beware, Says Article

Pension-Advance Companies? Beware, Says Article

“[P]otential threats to older Americans’ financial security can come in the form of financial products that are risky, expensive, and inappropriate for thei needs.  For example, there are companies that target retirees who may need access to cash by offering them lump sum ‘advances’ on their pension payments.  These so-called advances are reported to carry interest rates from 27 to 106 percent, threatening many older borrowers’ safe retirement.

Pension advance firms have been targeting military veterans, and reportedly have recently begun targeting teachers, firefighters and police officers.  In the case of veterans, federal law contains a general prohibition on assigning military pensions to a third party.  Reports indicate that many firms may try to get around this by calling the lump sum payment a loan or an advance and by urging veterans to deposit their monthly retiree payments in a newly created bank account controlled by the firms  . . . .  Whatever the name, these transactions generally are not a good deal for veterans or other retirees.

That’s from a piece on the consumerfinance.gov website.  The story, headlined “Spotlight on scams that target older adults”, is available in full here.

Some of the prior Secondary Insurance Market Blog posts on government investigations into pension advance company business practices are available here, here, here and here.

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