Are Pension Advances Dangerously Disguised Loans?

What's Hot


2 Types of Black Marks Might Vanish From Your Credit File SoonBorrow

6 Ways the Obamacare Overhaul Might Impact Your WalletInsurance

7 Dumb and Costly Moves Homebuyers MakeBorrow

This Free Software Brings Old Laptops Back to LifeMore

Obamacare Replacement Plan Gets ‘F’ Rating from Consumer ReportsFamily

Beware These 12 Common Money MistakesCredit & Debt

21 Restaurants Offering Free Food Right NowSaving Money

17 Ways to Have More Fun for Less MoneySave

House Hunters: Beware of These 6 Mortgage MistakesBorrow

30 Household Uses for Baby OilSave

25 Ways to Spend Less on FoodMore

Nearly Half of Heart-Related Deaths Linked to These 10 Foods and IngredientsFamily

5 Surprising Benefits of Exercising Outdoors in WinterFamily

10 Ways to Save When You’re Making Minimum WageSave

Boost Your Credit Score Fast With These 7 MovesCredit & Debt

7 Painless Ways to Pay Off Your Mortgage Years EarlierBorrow

The Most Sinful City in the U.S. Is … (Hint: It’s Not Vegas)Family

The True Cost of Bad CreditCredit & Debt

10 Companies With the Best 401(k) PlansGrow

This Scam Now Tops ID Theft as the No. 2 Consumer ComplaintFamily

6 Stores With Awesome Reward ProgramsFamily

6 Ways to Save More at Lowe’s and The Home DepotSave

6 Healthful Treats for Your DogFamily

New Study Ranks the Best States in the U.S.Family

Thousands of Millionaires Moving to 1 Country — and Leaving AnotherGrow

Strapped for College Costs? How to Get the Most From FAFSABorrow

6 Overlooked Ways to Save at Chick-fil-AFamily

Ask Stacy: What’s the Fastest Way to Pay Off My Mortgage?Borrow

Where to Sell Your Stuff for Top DollarAround The House

8 Ways to Get a Good Price on a Shiny New AutoCars

Ask Stacy: How Do I Start Over?Credit & Debt

Secret Cell Plans: Savings Verizon, AT&T, T-Mobile and Sprint Don’t Want You to Know AboutFamily

30 Awesome Things to Do in RetirementCollege

14 Super Smart Ways to Save on TravelSave

The Rich Prefer Modest Cars — Should You Join Them?Cars

You’ll Soon Pay More to Shop at CostcoSave

10 Ways to Save When Your Teen Starts DrivingFamily

A largely unregulated industry is pitching loans with interest rates as high as 106 percent to retired firefighters, police officers, and others receiving a pension.

More older Americans are being pitched loans that require borrowers to sign over part of their pension checks, The New York Times says. These loans can come with interest rates far exceeding those on credit cards.

Such loans are called pension advances, but are really more like payday loans for people who don’t have paydays anymore. The loans are putting instant cash in the hands of retirees, but also can put them deeper in debt.

That’s particularly troubling for people between the ages of 65 and 74, who the Federal Reserve says make up the group with the fastest growing level of debt.

Pension advance companies are targeting veterans and other retirees who receive pensions —  including teachers, firefighters and police officers — by promising cash right now in exchange for a portion of future pension checks. Prior to the recession, such companies focused their marketing mainly on veterans, suggesting the money could be used for luxuries like a dream vacation or a yacht, the Times says.

Interest rates on the loans examined by the Times varied from 27 percent to 106 percent when all fees and costs were factored in, and were not disclosed in ads or contracts.

In some cases, a life insurance policy with the lender as sole beneficiary is required to qualify for a pension advance.

Some companies insist that their products are advances and not loans in order to skirt state laws that cap interest rates. In the case of veterans, companies sidestep a law about how military pensions can be used by having customers set up separate bank accounts solely for the pension advance repayments.

These companies are subject to very little regulation but are beginning to draw the attention of Congress and the Consumer Financial Protection Bureau, the Times says.

Stacy Johnson

It's not the usual blah, blah, blah

I know... every site you visit wants you to subscribe to their newsletter. But our news and advice is actually worth reading! For 25 years, I've been making people richer without making their eyes glaze over. You'll be glad you did. I guarantee it!

💰🗣📰

Read Next: Ask Stacy: What’s the Best Way to Borrow?

Check Out Our Hottest Deals!

We're always adding new deals and coupons that'll save you big bucks. See the deals to the right and hundreds more in our Deals section.

Click here to explore 2,067 more deals!