(WKBW release) New York Governor Andrew M. Cuomo on Tuesday announced that he has directed the Department of Financial Services to launch an investigation into 'pension advances' – which are financial products that allow companies to harvest a retiree's pension payments in exchange for a lump-sum payment that amounts to just pennies on the dollar.
According to a news release issued Tuesday:
At the Governor’s direction, DFS today sent subpoenas to ten companies engaging in pension advances.
“These companies are literally harvesting the-hard earned pensions of seniors, military veterans and other hard working New Yorkers,” said Governor Cuomo. “Using deceptive practices to cheat people out of their pensions by enrolling them in backdoor high-interest loans will not be tolerated in our state. Anyone seeking to prey on New Yorkers should know that we will use every tool at our disposal to aggressively pursue and put stop this fraud.”
Benjamin M. Lawsky, Superintendent of Financial Services, said, “These pension advances appear to be nothing more than payday loans in sheep’s clothing. Pension harvesting schemes that hit financially strapped retirees with sky-high interest rates and hidden fees are simply unacceptable. It's especially disturbing that military veterans – who earned their pensions defending our country – are apparently being targeted through these abusive products.”
In a pension advance scheme, a retiree signs away a portion of their regular weekly or monthly pension payment to a company in exchange for an upfront, lump-sum payment. The effective annual interest rates for these pension advances can sometimes exceed 100 percent – eating away a substantial portion of the value of a retiree’s pension. Additionally, in a particularly troubling development, the companies offering these products appear to be targeting the pensions of our nation's military veterans.
DFS today sent subpoenas to the following companies:
1. LumpSum Pension Advance
2. Pension Funding LLC
3. Pensions Annuities & Settlements LLC
4. Pension Income LLC
5. Cash Flow Investment Partners
6. DFR Pension Funding
7. Veterans Benefit Leverage
8. Voyager Financial Group LLC (Pension4Case/Cash Out My Pension/Buy Your Pension)
9. First American Finance Corporation
10. Investing Forward (Termbrokers LLC)
DFS’ wide-ranging investigation into pension advances is targeted at determining whether these companies have engaged in fraud or misconduct; violated state usury laws; engaged in false, misleading, or deceptive advertising about rates and fees; and violated laws prohibiting the harvesting of military pensions.
Under New York Financial Services Law, DFS has the power to conduct investigations into and provide oversight for new financial products that are not currently subject to regulation. Previously, these 'gap products' – such as pension advances – could have gotten stuck in regulatory blind spots while consumers were harmed.
DFS also urged anyone who suspects that they have been the victim of a pension advance scheme to contact DFS’ Consumer Help Line at 1-800-342-3736 for assistance.