Online ads offering advance payment on future pension income may have seemed like a financial lifeline for some senior retirees and military veterans.
But a lawsuit filed Thursday by federal and state regulators charges that the offers by California-based Pension Funding LLC and Pension Income LLC in reality came with high interest rates — a detail not disclosed to customers.
The federal court action filed by the U.S. Consumer Financial Protection Bureau and the New York State Department of Financial Services accused the firms and present or former executives Steven Covey, Edwin Lichtig and Rex Hofelter of deceiving consumers by characterizing the transactions as advances, not loans.
"These companies duped consumers into taking out pension loans by deceiving them about the terms of the deal," CFPB Director Richard Cordray said. "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."
A joint telephone number for the firms had been disconnected, and corporate representatives could not immediately be reached for comment.
The companies paid to steer Internet search traffic to their websites by targeting consumers who conducted Google browser searches for such phrases as "pension loan" or "sell my pension," the lawsuit charged.
The company websites described "tailored financing programs" in which the firms purported to make lump-sum payments for eight years of future cash flow from consumers' pension payments, the lawsuit alleged.
"This pension payment is not a pension loan; it is a pension lump sum," the websites stated, according to the lawsuit. The sites also allegedly promised "[n]owhere else can you leverage your military, civil service or corporate pension to secure near-immediate cash."
Regulators said the scheme operated from 2011 until roughly December, 2014. The companies and their officials told applicants the purported advances were better than a home equity line of credit or a credit card, based on lower rates and fees, the lawsuit charged.
However, the transactions represented loans that on average had an effective annual interest rate of $28.56%, the lawsuit charged. The companies made their entire profit and deducted all fees at the inception of each deal, the lawsuit charged.
Culled from US Today
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