U.S. Air Force illustration/Staff Sgt. Alexandre Montes

Danger of Pension Advance Plans

by Barbara Nevins Taylor

Construction mechanic Darren Smith was working on a road crew in 1995 when a drunk driver hit him head-on and put him out of work for good. Today, a pension through the Operating Engineers union keeps him afloat. But a pension advance deal,  something he thought was a loan against his pension, threatens to undermine Darren’s financial security and take a big bite out of his income.

What happened to 51-year-old Darren is emblematic of a growing national problem that threatens pension and retirement security.

 Stuart Rossman, Director of Litigation for the National Consumer Law Center, says, “Virtually every situation where a person has a pension, a guaranteed income stream, there’s a vulnerability. It’s an area that’s ripe picking for those individuals who engage in scams to rip people off.”

Retired military members, those like Darren on disability, and older people with pensions find their way to Internet sites that seem to provide an easy answer to difficult situations.

AARP attorney Jay Sushelsky told ConsumerMojo, “This is predatory lending. These are lenders of last resort. The people who borrow money are very desperate for quick cash.  But chances are they are going to be in worse shape six months after the transaction than they were before.”

It’s unclear how many people have been sucked into these deals. But we do know that interest rates often run from 25 percent to over 100 percent.  All you have to do is Google “pension advance,” and pages fill with companies ready to sign you up. 

Details may vary, but Darren’s experience seems to mirror that of many others. He needed  money to help pay for a young cousin’s funeral and to consolidate some of his own debts. “In August, 2013, I was looking online for a loan for about $5,000 and this company kept popping up,” he explained.

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Barbara Nevins Taylor

As the winner of 22 Emmy Awards and a slew of journalism honors and awards, I created ConsumerMojo.com to give you the straight story about complicated stuff. Tell us what you want to know and we'll get you the answers.

7 thoughts on “Danger of Pension Advance Plans”

  1. Andrew Gamber is still operating a military pension scam in Arkansas. But now it’s not under Voyager Financial. The new name is B.A.I.C. Even though there is a cease and desist order against him in the state. He sources most of his desperate pensioners through a website called buyoutyourpension.com

    Now he also has a new company called PAC. They charge an additional fee for providing default insurance for the buyer of the pension. They had so many sellers defaulting that their business slowed down. Not to mention various law suits. He has one class action law suit against him and it being sued by the former Governor of Oregon – who was a purchaser of pensions until the income stopped. But they can’t call it insurance so they call it a backstop. It’s completely unregulated. They don’t have sufficient assets to cover any defaults that may occur. Brokers and buyers beware!

  2. These pension advances are not just a incredibly bad deal for the pensioner. Usually an investor puts up the loan money thinking they will receive a guaranteed annuity. Many of these deals fall through leaving the investor screwed. But the finders and brokers have already made their money. There are so many people involved that want their share of the take: finders, brokers, lawyers, life insurers, investors now even non payment insurers. Stay away.

    Here’s basically how a pension advance works, and who gets paid: First, the Pensioner seeks out help from an internet site, or a “finder” that is well connected with military clubs – they take their cut. Second and Thirdly, this same finder or an entirely new finder connects this potential advance with a broker providing advice to investors. Both this finder and the broker want their cut.

    Fourth, the broker finds an investor who wants an annuity usually in the 6-7% per annum range. Fifth, a life insurance policy has to be taken out against the Pensioner in case he dies while making payments.

    Sixth, a lawyer draws up an iron clad contract requesting his fees. Seventh, and this is a new. Because quite a few Pensioners catch on to the high fees after a while, they stop paying or enter into class action law suits. Investors have been scared off by this. Now a new product has appeared. It is usually an insurance against default offered by the very same finders of the original advance. Not only are these insurers non regulated, there is little known about them. Brokers and investors need to be very wary of this latest aspect of the scam.

    Finally, the Pensioner is usually drawn into this because of some sort if financial desperation. The finders claim that they will not only provide you with a loan, but negotiate additional debt consolidation on your behalf. Of course, this warrants being charged another fee. With all these hands looking for their slice, there is no doubt why the Pensioner usually pays grotesque interest rates on these so called loans/advances.

    This is a huge problem in Texas and Arkansas.

  3. Finally, the Pensioner is usually drawn into this because of some sort if financial desperation. The finders claim that they will not only provide you with a loan, but negotiate additional debt consolidation on your behalf. Of course, this warrants being charged another fee. With all these hands looking for their slice, there is no doubt why the Pensioner usually pays grotesque interest rates on these so called loans/advances.

  4. Sixth, a lawyer draws up an iron clad contract requesting his fees.

    Seventh, and this is a new. Because quite a few Pensioners catch on to the high fees after a while, they stop paying or enter into class action law suits. Investors have been scared off by this. Now a new product has appeared. It is usually an insurance against default offered by the very same finders of the original advance. Not only are these insurers non regulated, there is little known about them. Brokers and investors need to be very wary of this latest aspect of the scam.

  5. Fourth, the broker finds an investor who wants an annuity usually in the 6-7% per annum range.

    Fifth, a life insurance policy has to be taken out against the Pensioner in case he dies while making payments.

  6. Here’s basically how a pension advance works, and who gets paid:

    First, the Pensioner seeks out help from an internet site, or a “finder” that is well connected with military clubs – they take their cut.

    Second and Thirdly, this same finder or an entirely new finder connects this potential advance with a broker providing advice to investors. Both this finder and the broker want their cut.

  7. These pension advances are not just a incredibly bad deal for the pensioner. Usually an investor puts up the loan money thinking they will receive a guaranteed annuity. Many of these deals fall through leaving the investor screwed. But the finders and brokers have already made their money. There are so many people involved that want their share of the take: finders, brokers, lawyers, life insurers, investors now even non payment insurers. Stay away. This is a huge problem in Texas and Arkansas.

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