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 The lawsuit against Pension Funding LLC and Pension Income LLC was
brought by the U.S. Consumer Financial Protection Bureau and the New
York State Department of Financial Services.
It accused the California-base companies and their principals of
duping older Americans, mainly through online pitches, from 2011
through last December into redirecting pension checks over eight
years in exchange for upfront cash.
Regulators said the companies claimed their advances lacked the
borrowing costs associated with credit cards or home equity lines of
credit, and advertised that "OUR PROGRAM IS NOT A LOAN."
In fact, the regulators said the advances were loans with effective
interest rates averaging 28.56 percent, including fees for the
companies, sales agents, life insurance policies and a reserve to
protect against borrowers who default on payments.
"The defendants used blatantly deceptive practices to harvest the
hard-earned pensions of seniors and military personnel," Anthony
Albanese, acting New York superintendent of financial services, said
in a statement.
Debt levels have risen at a faster rate for older Americans than for
the overall population.
In households led by people 65 and older, the mean debt load rose to
nearly $82,000 in 2011 from about $29,000 in 2000, Census Bureau
data show.
Thursday's lawsuit seeks to recoup illegal profits and impose civil
fines. It was filed in the federal court in Santa Ana, California.
Pension Funding is based in Huntington Beach, California, near Los
Angeles, while Pension Income is based in Lafayette, California,
near San Francisco. Websites associated with both companies were
inactive on Thursday.
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Neither company could immediately be reached for comment.
In March, the California Commissioner of Business Oversight filed a
"desist and refrain" order against them from operating as unlicensed
finance lenders or brokers in that state.
Pension Funding and Pension Income were among at least 10 companies
that received subpoenas from New York in 2013 over pension finance
loans.
Albanese's predecessor, Benjamin Lawsky, at the time said the loans
"appear to be nothing more than payday loans in sheep's clothing."
Matt Anderson, a spokesman for Albanese, said the New York probe is
continuing.
The case is Consumer Financial Protection Bureau et al v Pension
Funding LLC et al, U.S. District Court, Central District of
California, No. 15-01329.
(Reporting by Jonathan Stempel in New York; Editing by Dan Grebler)
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