Secretary of the Commonwealth William F. Galvin announced May 13, 2013, that the Massachusetts Securities Division has opened an investigation into companies that seek to purchase settlement income streams including pensions of military retirees.
The first group of inquiry letters went out to the following nine firms: BuySell Annuity, Inc., Rancho Santa Margarita, California; VFG, LLC/Voyager Financial Group, LLC, Little Rock, Arkansas; First
American Finance Corp., Portland, Indiana; Pension Annuity Cashout/Cox Financial Network,
LLC, Brigantine, New Jersey; Pension Income LLC, Huntington Beach, California; Pension
Loan Companies Pension Loan Advances, San Tan Valley, Arizona; Z Commercial Capital
LLC., Bronx, New York; Termbrokers LLC/Investing Forward, Freeport, Florida, and SHP
Financial LLC of Plymouth, Massachusetts, according to a press release issued by the Commonwealth of Massachusetts.
On May 7, 2013 the New York Department of Financial Services sent subpoenas to the following companies (some of the targets the same as Massachusetts)
1. LumpSum Pension Advance 2. Pension Funding LLC 3. Pensions Annuities & Settlements LLC
4. Pension Income LLC 5. Cash Flow Investment Partners 6. DFR Pension Funding
7. Veterans Benefit Leverage 8. Voyager Financial Group LLC (Pension4Case/Cash Out My Pension/Buy Your Pension) 9. First American Finance Corporation 10. Investing Forward (Termbrokers LLC)
According to a statement issued by Governor Cuomo's press office “These companies are literally harvesting the-hard earned pensions of seniors, military veterans and other hard working New Yorkers,” said Governor Cuomo. “Using deceptive practices to cheat people out of their pensions by enrolling them in backdoor high-interest loans will not be tolerated in our state. Anyone seeking to prey on New Yorkers should know that we will use every tool at our disposal to aggressively pursue and put stop this fraud.”
Benjamin M. Lawsky, Superintendent of Financial Services, said, “These pension advances appear to be nothing more than payday loans in sheep’s clothing. Pension harvesting schemes that hit financially strapped retirees with sky-high interest rates and hidden fees are simply unacceptable. It's especially disturbing that military veterans – who earned their pensions defending our country – are apparently being targeted through these abusive products.”
In a pension advance scheme, a retiree signs away a portion of their regular weekly or monthly pension payment to a company in exchange for an upfront, lump-sum payment. The effective annual interest rates for these pension advances can sometimes exceed 100 percent – eating away a substantial portion of the value of a retiree’s pension. Additionally, in a particularly troubling development, the companies offering these products appear to be targeting the pensions of our nation's military veterans.
DFS’ wide-ranging investigation into pension advances is targeted at determining whether these companies have engaged in fraud or misconduct; violated state usury laws; engaged in false, misleading, or deceptive advertising about rates and fees; and violated laws prohibiting the harvesting of military pensions.
Under New York Financial Services Law, DFS has the power to conduct investigations into and provide oversight for new financial products that are not currently subject to regulation. Previously, these 'gap products' – such as pension advances – could have gotten stuck in regulatory blind spots while consumers were harmed. (emphasis added)
A number of the targets of the inquiry also purchase structured settlement payment streams from injury victims. It possible that this is the reason that a posting in Investment News mischartacterized the Massachusetts press release as an investigation into structured settlements in its opening topic sentence. Here is a copy of the actual press release Download STRUCTURED SETTLEMENT INQUIRY 13 May 13
It is important to note that in order to sell structured settlement payment rights a judge's approval must be obtained. One cannot simply go to an ATM and withdraw the money. The process of selling a structured settlement is subject to applicable state structured settlement protection acts as well as Federal Law.
A number of secondary market players mislabel and market structured settlement payment rights as "annuities" to consumers, possibly including retirees. The purveyors of these unregulated financial products may not be insurance licensed and the purchasers of such products may not receive the same protection afforded consumers of insurance.