We’ve reported about the dangers of taking an advance on your pension because you can end up losing a big chunk of your money. Now Washington State aims to stop pension advance companies from doing business with people who live in the state. It issued cease and desist orders to two big players in the national pension advance business.
The Washington Department of Financial Institutions (DFI) Consumer Services Division filed charges against Pensions, Annuities and Settlements, LLC, and Pension Funding, LLC. The companies are accused of operating without a lending license and making loans to Washington consumers as cash advances secured by future income from pensions.
Washington DFI alleges the companies made, “at least 95 loans to Washington consumers, charging fees that would equate to interest rates ranging from 22.7 percent to 129.9 percent.”
In Washington State, the maximum interest rates can legally range from 12 to 25 percent.
The state claims, “pensioners signed a contract to receive a lump sum of cash, totaling sometimes as much as $60,000, in exchange for monthly payments from their pensions to the lender for a fixed number of months, either by direct withdrawal from the pensioner’s bank account or from another bank account set up by the lender for the sole purpose of collecting the required payment.”
Consumers who signed up with these companies are in 23 different pension systems including the U.S. Department of Defense, U.S. Department of Veterans Affairs, and Washington Department of Retirement Systems.
The state says, ” Pension Funding, LLC claimed it did not make “loans,” but DFI confirmed one borrower and is confident more will be identified as the case proceeds”.
New York State and Massachusetts are also investigating pension advance schemes. State officials and those at the Consumer Financial Protection Bureau are interested in receiving complaints if you’ve been ripped off.