Shady Investment Companies Still Targeting Retirees and Their Pensions

Need cash fast?  Just turn on daytime television and watch all the commercials that offer to “help” you with your pressing financial needs, should you already have an annuity. Or a car, if you need a small amount of cash. Or a …

While promises of quick cash easily obtained isn’t new, what is new is the upswing in the number of companies targeting military retirees and their pensions. These predatory lenders have managed to elude federal and state laws while bilking thousands of dollars from retirees and their families, many of these families in crisis mode.

Retired armed forces service members sign over their pensions for a prescribed period of time in exchange for a lump sum payment. In addition, retirees must also pay for a life insurance policy that covers the lump sum, should they die before finishing “payments.”

Federal law prohibits selling pensions; in addition, many state and federal statutes already have consumer protection loan laws in place. However, these companies have managed to elude the laws by purposefully structuring these transactions as “not loans” (repeated over and over again in these creative contracts). By doing so, these companies avoid usury and other laws with complex and twisted wording that make these financial agreements almost incomprehensible. Interest rates on these “not  loans” ranges as high as thirty to thirty-five percent, often averaging in the high twenties.

One of these companies is Structured Investments out of California. Structured Investments, also doing business as Retired Military Financial Services as well as U.S. Pension Funding,  is being sued by both its customers and its investors across the country; a quick google search yields pages of previous as well as pending litigation and multiple investigations. Co-founder Steven P. Covey, an army veteran himself, was convicted of fraud for his questionable business practices.

Court rulings against these companies have been mixed. Some class action lawsuits have resulted in small partial payments back to veterans, but nowhere close to the thousands upon thousands of dollars in fees and interest these veterans have already paid. In August 2012, a California ruling stated that these contracts are in violation in federal law.

But Caveat emptor, “let the buyer beware,” right?  Well, partially. All consumers must become financially literate, and reading over every contract you sign is a given. One step better:  having a lawyer read over every financial contract you sign.

On the other hand, people in these situations generally don’t have the money to hire a lawyer, and these predatory lenders know this. Dubious business practices with ever-evolving contracts helps keep these businesses one step ahead of the law and continue to take advantage of our veterans.

Veterans and civilians alike can find help with the Consumer Financial Protection Bureau (CFPB). The  CFPB provides financial information and guidance across the financial spectrum, a complaint board  for consumers, and legislative updates. The Office of Servicemember Affairs  within the CFPB assists active duty service members, reservists, veterans and retirees navigate through the additional complexities of military life (and laws) that affect finances.

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