From the WaPo:
Keith Moore, a 40-year-old military veteran recovering from post-traumatic stress disorder in Oklahoma, remembers the day last year when he sold off a chunk of his pension.
He had left the military after 21 years of service, because his disabilities — PTSD, arthritis and other injuries — made it difficult to work. But the transition to civilian life came with a different struggle: the need to provide for his family and pay the same bills with only half the paycheck.
The article says that Moore was two months behind on rent and 10 days from his next paycheck. He saw a TV ad for Future Income Payments, an Irvine, CA company that buys pensions in exchange for a lump sum of cash. The company said it had worked with military personnel and government workers. Moore called them. More from WaPo: (brackets and emphasis by the Wrongologist)
The next day, a company representative…explained that he [Moore] would receive a $5,000 cash advance for selling part of his pension. In exchange, Moore would have to pay the company $510 a month for five years, a total of $30,600.
If it were a typical loan, that would amount to $25,600 in interest — a rate of 512%.
Can you say deceptive and predatory?
We are ending year seven of our recovery from the Great Recession, but the recovery has largely benefited those at the top of the income ladder, while bottom-feeders like these pension advance companies work to profit from poverty, charging more than 500% annual interest.
This is particularly egregious when companies target income streams that are riskless since they are backed by the federal government.
But these are not treated as loans by the pension advance companies. They are treated as an installment “sale”. The pensioner sells the income stream to the pension advance firm, rather than making a loan against the future payments, which would be subject to usury laws.
Some will say that Mr. Moore entered into a dumb deal, that he is a victim of his own personal choices.
Others could say that view makes you an apologist for loan sharking. Following the argument to its logical conclusion, any fraud or con game should be legal under the premise, “the victim should have known better“.
Some in the government are looking into the grift: In a 2014 report, the GAO identified 38 companies that offered pension advances. At least 30 of them were affiliated with one another in some way. The Senate Special Committee on Aging held a hearing on the issue last month, and reported that only two states, Missouri and Vermont; have laws regulating pension advance companies. If 30 operators are really one company, why can’t states or the Feds regulate this?
So, it’s past time for state and federal regulators to wake up and look carefully at pension advance firms. To help them rub the sleep from their eyes, here is Minus the Bear, an American indie rock band from Seattle, with their tune “Knights”:
Sample Lyrics:
I owe you, don’t I?
A little light today but tomorrow
Oh, tomorrow
This usury’s so typical
A piece of you for a piece of me
It’s hard-coded
A piece of you for a piece of me
Is it really a sin if we both come out even?
Those who read the Wrongologist in email can view the video here.
