Vets Sell Pensions | VFF | Naples Florida

Vets Sell Pensions | CWP | Naples Florida

In recent years, many veterans have sold portions of or their entire military pensions just to pay their monthly bills. Desperate for a solution and without other income, these vets have often chosen to get cash advances through private companies that advertise these transactions as “sales,” when in fact, they are loans with very high interest rates.

 

Targeting Veterans through False Advertising

Many of these companies advertise in prominent military magazines and news sites, with images of veterans, slogans about America and tie themselves to the military and government organizations, although they do not have any direct connection.

Some have advertised on television, promoting themselves as having supported military vets and government workers. One of these companies, Future Income Payments ran a television ad that caught the eye of Keith Moore, a 40-year-old recently retired vet who had left the military after 21 years of service. Keith, like many others, suffers from PTSD and multiple injuries. He also has arthritis. He has a family to support and struggled to pay basic bills including his rent. His monthly pension stipend was not sufficient. Without a solution in sight and being two months behind his rent, Keith saw the ad by Future Income Payments offering to buy pensions for a lump sum that promised immediate help. Ten minutes later, he was on the phone and signing up. He signed up for the agreement immediately, not realizing how high of an interest rate he was paying on a loan for an indefinite period.

Loan Shark Rates

Despite advertising as a sale, these companies offer terms similar to a loan shark with interest rates ranging from 30 to 100 percent! They also offered less than what a retiree would receive by getting a lump sum from their pension provider. Pension advances are significantly more expensive than a credit card, personal loan or other forms of credit. In addition, borrowers have to pay taxes and fees.

Congressional Hearing and Lawsuits

Consumer groups have drawn attention to these fraudulent practices. In fact, the Senate convened a hearing on this in September. Earlier in August of this year, the state of New York and the Consumer Financial Protection Bureau filed a lawsuit against two companies for misrepresenting the products as a sale and not a loan, and also for not disclosing the proper terms for fees and interest rates that consumers would have to undertake.

Major Concern: Avoiding Lender Requirements and Circumventing the Law

By falsely advertising their products as pension sales instead of the loans that they are, these companies are not required to publicly disclose their interest rates. They circumvent the laws and strict regulation that lenders face.

Fighting Pension Sale Fraud

Recently, two senators, Gerald E. Connolly (D-Va.) and Matthew Cartwright (D-Pa.) reintroduced a bill that would cap interest rates on pension advances sold to military members and federal retirees.

One of the most disconcerting aspects of this is that these companies target income streams backed by the federal government for military retirees. These rates are abusive.

At the present moment, there are only two states, Missouri and Vermont, that have laws regulating pension advance companies.

Beware: A Long List of Fraudulent Companies

Future Income Payments is just one of many companies among many that offer such products. The Government Accountability Office listed 38 companies offering such pension advances, and almost 30 of them were affiliated with each other through some type of business relationship (parent company, sharing a broker or other).

Military vets must take careful note of such offers and protect their assets, no matter how small and avoid such fraudulent schemes. You can download the full report by the Government Accountability Office.

 

*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Elf Productions to provide information on a topic that may be of interest.