WASHINGTON (AP) — Federal and New York regulators have sued two companies that make loans against retirees' pensions, saying they deceived consumers about the high rates of the loans.
Regulators say that the companies, Pension Funding LLC and Pension Income LLC, used deceptive marketing tactics to target the pensions of seniors and military personnel. The U.S. Consumer Financial Protection Bureau and New York state's Department of Financial Services filed the lawsuit against the companies in federal court in Santa Ana, California.
They say the companies tricked consumers into borrowing against their pensions by portraying the deals as sales instead of loans, and failing to disclose high interest rates and fees.
The business of so-called pension advance loans, which grew during the recession, has been under scrutiny by regulators in recent years. Targeting seniors hit hard during the economic downturn, the schemes can drive retirees deeper into debt, regulators say.
"We are working to put a stop to the illegal practices these companies are using to sell their bogus product to military veterans and other pensioners," CFPB Director Richard Cordray said in a statement.
Pension Funding is based in Huntington Beach, California. Pension Income was based in Huntington Beach but relocated to Lafayette, California, according to the suit.
Attempts to reach the companies and the three managers also named in the suit for comment were unsuccessful. A number listed for Pension Funding was disconnected, and a listing for Pension Income couldn't be found.
The suit alleges that the companies violated the 2010 law overhauling financial regulation after the financial crisis by misrepresenting the products as sales rather than loans, and failing to disclose high rates and fees for the loans. In some cases, the promoters implied to consumers that they could face criminal prosecution if they stopped making payments, the suit said.
The regulators are seeking unspecified fines and restitution against the companies.