Minnesota Attorney General Lori Swanson is suing two companies that required military veterans and senior citizens to sign over their monthly pension payments in exchange for small loans to cover household emergencies and basic living expenses. The lawsuit claims the companies commonly charged high interest rates that only made peoples' financial troubles worse.
According to a news release, Future Income Payments, LLC of Delaware and FIP, LLC of Nevada issued loans to veterans who received military pensions or disability benefits and senior citizens who have pensions from private sector jobs.
The lawsuit, filed Wednesday, alleges the companies violated Minnesota's lending laws because they did not have a license to issue the loans. Both companies are also accused of falsely characterizing the transactions as "purchase agreements" for pensions, not loans.
Most loans issued by the company were for less than $5,000 and the most common interest rate charged to borrowers was 200 percent. In some cases, borrowers had to repay more than 10 times what they borrowed.
In one of the examples cited in the lawsuit, a 73-year-old disabled Vietnam veteran borrowed $1,800 to pay for his sick wife's medical expenses and other bills. To repay his loan, he has to pay the company $300 from his monthly VA benefits for four years -- a 199.9 percent interest rate and more than eight times what he borrowed.
"These companies had veterans and seniors sign over significant portions of their monthly pensions and benefits for years to come in exchange for much smaller immediate cash payments to cover basic living costs, medical bills, and household emergencies," Swanson said in a statement. "A pension is supposed to provide financial security, and people should be very cautious about giving away their future pension benefits to get just pennies on the dollar in immediate cash. Borrowers' finances can become even tighter down the road if they relinquish their future monthly pension payments."
Colorado, California, Massachusetts, North Carolina, New York, Washington, Iowa and Pennsylvania have also filed lawsuits against one of both companies in recent years.More