‘Pension Funding’ or ‘Pension Advance’ Companies can be dangerous to deal with.
My client (we’ll call him “JF”) was a hard working U.S. Navy veteran. When his wife’s sickness put him into a spot of financial trouble a couple of years ago, he found an advertisement from a company called “Future Income Payments, LLC” who promised quick cash in return for a future stream of his VA pension.
He signed the deal and pursuant to their contract, gave them access to his bank account to draft the payments thereafter.
He came into my office to ask me to review this transaction, and we found that this wasn’t a normal loan. It was a unique financial product called a “pension advance” or “pension funding” contract.
It was labeled a “Purchase and Sale Agreement” and was littered with language that deliberately avoided the use of works like “loan” or “credit” or “debt.” The reason? Because they hoped to avoid the laws that real banks and lending institutions have to follow. No interest rate was listed anywhere on the contract, but if you did the math, it was clear that the effective rate of interest was over 156% APR!
Naturally, that sort of interest rate causes most people to gasp, and maybe they hope to avoid sticker shock by trying to act like this is not truly a loan, but something else.
We filed suit against them under the Truth in Lending Act and Electronic Fund Transfers Act, but we reached a settlement before the Court issued any ruling as to the legality of these financial products.
The Consumer Financial Protection Bureau has filed lawsuits against this sort of business in the past, but it appears that these pension advance companies are still doing business.
If you live in Alabama and have questions about a pension advance loan, call us today at 251.272.9148.