Pension advances, or short term loans that allow borrowers to receive cash against their pensions, are on the rise among retirees and are putting older Americans at risk, reports the New York Times.
Those who deal in pension advances are coming under scrutiny of Congress as well as the Consumer Financial Protection Bureau as a result, the NY Times writes, as they can have “devastating financial consequences… they carry interest rates that are often many times higher than those on credit cards.”
According to research conducted by the publication, interest rates on pension advances range from 27% to 106%, information that often is not disclosed in ads for the loans.
“While it is difficult to say precisely how many financially struggling people have taken out pension loans, legal aid offices in Arizona, California, Florida and New York say they have recently encountered a surge in complaints from retirees who have run into trouble with the loans,” the Times writes.
Some pitches target military pensioners directly, which requires going around a federal law prohibiting military retirees from signing over pensions to third parties. Yet those providing the advances encourage retirees to establish separate accounts to circumvent the law, a process which has landed some in court, according to the Times.
Written by Elizabeth Ecker