Attorney General Lori Swanson sues "Pension Advance" companies requiring veterans and seniors to sign over monthly pensions
Attorney General Lori Swanson filed a lawsuit Wednesday, August 16 against Future Income Payments, LLC of Delaware and FIP, LLC of Nevada.
According to the news release, the lawsuit alleges that the companies violated State lending laws by issuing loans to Minnesota borrowers without being licensed as a lender. The lawsuit also asserts that the companies sought to evade state lending laws by falsely characterizing the transactions as “purchase agreements” of a pension, not a loan.
Future Income Payments and FIP required military veterans and senior citizens to sign over significant portions of their monthly pension payments for up to 10 years in exchange for loans of relatively small amounts of money to cover household emergencies and basic living expenses. The loans commonly charged annual percentage rates (APRs) of 200 percent. Because borrowers surrendered a significant portion of their future monthly pensions to the companies, the loans often exacerbated people’s financial difficulties.
The companies issued the loans to veterans who receive military pensions or disability benefits, plus senior citizens who have pensions from private sector jobs, the release said.
Examples cited in the lawsuit include:
-A 73-year-old disabled Vietnam veteran whose wife has stage 4 lung cancer borrowed $1,800 to take care of medical and other bills and was required to repay $14,400, eight times what he borrowed. He must pay the company $300 from his monthly VA benefits for four years, for a 199.9% APR.
-A 72-year-old military widow borrowed $2,100 for emergency surgery for her dog and was required to repay $21,000, ten times what she borrowed. She must pay the company $350 monthly deductions from her late husband’s monthly VA benefits for five years, for 200% APR.
-A 63-year-old with psoriatic arthritis borrowed $4,000 to pay off other bills and was required to repay $24,600, six times what she borrowed. She must pay $410 monthly deductions from her pension for five years, for a 122.6% APR.
In the last two years, Colorado, California, Massachusetts, North Carolina, New York, Washington, Iowa and Pennsylvania, plus the Los Angeles City Attorney have taken action against one or both companies for issuing unlawful loans, the release said.
The company often solicited borrowers through its own websites of “lead generators” who marketed “pension loans” or “loans that fit your need” according the news release. The release also stated that the companies’ training materials encouraged sales agents to instill a “sense of urgency” and “fear of loss” that a loan may no longer be available if the borrower does not sign up immediately.
Most loans issued by the company to Minnesota residents were for less than $5,000 and the most common interest rate charged to borrowers was 200%, according to the release.
The lawsuit was filed in Hennepin County District Court.
The news release said the Attorney General’s Office issued an alert to warn borrowers about so-called “pension advance scams.” People may report complaints to the Minnesota Attorney General’s Office by calling (651) 296-3353 or (800) 657-3787, or by emailing Attorney.General@ag.state.mn.us. People may also download a Complaint Form from the Attorney General’s Office website and mail the completed form to the Attorney General’s Office at: 445 Minnesota Street, Suite 1400, Saint Paul, MN 55101-2131.