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Loans Borrowed Against Pensions Squeeze Retirees

…are these loans just another form of elderly financial abuse?

To a retiree in a financial bind, the offers can seem like the answer to their problems: get cold hard cash today, for tomorrow’s pension checks.


These “pension advances” are wreaking havoc on a growing number of America’s older population. They are threatening their retirement savings and plunging them further into debt. The advances, according to federal and state authorities, are carefully disguised loans that require borrowers to sign over all or part of their monthly pension checks, not advances at all. They often carry interest rates that are many times higher than those on credit cards.

A review of more than two dozen contracts for pension-based loans found that, after factoring in various fees, the effective interest rates ranged from 27 to 106 percent – information not disclosed in the ads or in the contracts themselves. Furthermore, to qualify for one of the loans, borrowers are sometimes required to take out a life insurance policy that names the lender as the sole beneficiary. NewYorkTimes

These “pension advances” look like a good idea, they of course promise fast cash, cash that is yours anyway, so you might as well get it now, when you need it.  …These products seem especially enticing because their long-term costs are essentially hidden from the borrowers.

Both the Consumer Financial Protection Bureau (CFPB) and the Senate’s Committee on Health, Education, Labor and Pensions are examining these loans and are spotting fresh examples of elderly financial abuse.

Financial abuse of the elderly is a serious problem, even though we rarely hear about it. A study done by MetLife Mature Market Institute in 2009 estimated the financial loss from abuses to be at least $2.6 billion a year. But that’s just an educated guess.

In a follow-up study to the 2009 study, MetLife found that Instances of fraud perpetrated by strangers comprised 51% of articles related to elder financial abuse, followed by family, friends, and neighbors (34%), the business sector (12%), and Medicare and Medicaid fraud (4%).  What gets me is the percentage of “family” that is responsible for financial abuse.

In a speech at the World Elder Abuse Awareness Day Event in Washington, D.C., Richard Cordray, the Director of the Consumer Financial Protection Bureau, stated that “in 2010, older Americans lost at least $2.9 billion to the silent crime of financial exploitation, and it is estimated that for each case that is actually addressed by an agency or a program for victims, 42 others go unrecognized.”

He went on to mention victims in our military, “We are also concerned about military pension buyout schemes. Military retirees are offered lump-sum cash payments in return for surrendering their rights to their pension payouts. These schemes are usually very bad deals for the retirees.”

“It’s terrible to think that there are people out there willing to take advantage of our elderly and military…”

It’s terrible to think that there are people out there willing to take advantage of our elderly and military, but there are. If you are elderly and find yourself having financial troubles, seek the advice of a debt management professional before you decide to take out a loan against your pension.

The professionals at DebtHelper.com can explain the benefits of a debt management program and provide you with a fresh start.

One of the biggest long-term benefits of the debt management plan is the reduction in interest. Reduced interest allows you to pay off your principal balances faster while saving you possibly thousands of dollars in finance charges.

In order to determine if you are eligible for a debt management program, you can fill out an online budget application form now and then you can contact one of their Certified Personal Finance Counselors© at (800) 920-2262.

DebtHelper.com can currently accept clients from the states listed here. DebtHelper.com is licensed, insured and complies with all state licensing requirements to ensure mandated regulations are followed. They are diligently working on becoming licensed in every state and are opening new states monthly.

Please call (800) 920-2262 if you have any questions. DebtHelper.com’s consultations are free, call them any time.

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