A new lawsuit says Minnesota veterans and seniors are getting scammed by a pair of companies that are taking big chunks of their pensions in exchange for relatively small loans.
The suit announced Thursday by state Attorney General Lori Swanson says the companies usually charge about 200 percent interest on loans of a few thousand dollars to cover household emergencies.
The companies being sued are related. They're called Future Income Payments and FIP. Their website says they help people by providing "pension advances."
Swanson says those are actually loans. And since the companies are not licensed to lend money in Minnesota, she says what they're doing is illegal. It's also making the financial problems of some older Minnesotans worse instead of better.
Here's one of the examples Swanson says she used in the lawsuit: A Vietnam vet who's 73 needed help with medical bills when his wife was being treated for lung cancer. He got an $1,800 loan – but only by agreeing to turn over $300 a month from his VA pension for the next four years. That means he'll wind up paying $14,400, which is eight times more than he borrowed.
Swanson says the companies are trying to get around their lack of a lender's license by saying the deals are "purchase agreements" of a pension.
No comment from the companies
A spokesman for Future Income Payments, reached by The Associated Press, declined to comment.
The companies already have a bunch of other lawsuits against them. According to Swanson eight other states and the city of Los Angeles have taken action against one or both companies.
She says the pension advance scams are taking advantage of an economic trend. In recent years people in the 65 to 74 age group have had the fastest-rising debt load, the New York Times and Fortune have reported.