High-interest pension loans target seniors and retirees: Internet Scambusters #563
Seniors and retirees are being offered advances on their pensions — in effect, advance pension loans — paying at annual interest rates of up to 100% or more, and the Consumer Financial Protection Bureau is not happy.
The bureau has joined others warning against this type of loan, saying that some lender practices may be deceptive or downright “cheats” to get access to retirees’ pension accounts.
We have the details in this week’s Snippets issue, along with reports about a new eBay scam and a dubious claim about how to get yourself on TV.
Now, here we go…
Alerts Sounded on Pension Loans, eBay Scams and TV Casting
Only a few weeks after our warning about a medical alert scam targeting seniors, we’ve encountered another warning for retirees — pension loans, a costly variation of the predatory payday loan scam.
Payday loans, as most people know, are short-term loans intended to tide over borrowers until their next paycheck.
Interest charges are usually high but the scam element comes into play when lenders employ dubious techniques to push their loans, conceal the terms or charge outrageous interest rates (which are outlawed in some states).
See this earlier issue on predatory lending, How to Avoid Predatory Lending Scams.
The new variation has been tagged “pension advance loans” in an alert from the Consumer Financial Protection Bureau (CFPB). It targets retired military and emergency services personnel.
Lenders offer a lump sum in advance of a pension payout, charging interest rates that, according to the New York Times, sometimes exceed the annual equivalent of 100%, threatening the security of many older borrowers’ retirement funds.
Often, the full terms of the loans are not disclosed, so borrowers may not even know what they’re getting into and how much they might have to repay.
Earlier this year, New York’s Department of Financial Services launched an investigation into pension advance firms and subpoenaed several of them.
New York Governor Andrew Cuomo was quoted by the Times as saying: “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.”
But it’s not just New York that’s concerned. The CFPB has issued an alert across the entire nation.
The bureau explains: “In the case of veterans, federal law contains a general prohibition on assigning military pensions to a third party. Reports indicate that many firms may try to get around this by calling the lump sum payment a loan or an advance and by urging veterans to deposit their monthly retiree payments in a newly created bank account controlled by the firms, which is then debited to pay back the lenders. Whatever the name, these transactions generally are not a good deal for veterans or other retirees.”
Action: If you’re offered a pension advance loan, this is what the bureau says you should do:
- Refuse any arrangement that gives access to a lender to the account where you get your pension.
- Get advice from a trusted financial professional if you need money urgently.
- Check out this CFPB page for more options on short-term borrowing.
Second Chance Scam
Another scam target back in the news is the online auctioneer eBay. As fast as they try to eliminate one crooked trick, another one seems to pop up.
In one of the latest scams, losing bidders receive an email that pretends to come from eBay, saying the winning bid has fallen through and offering them a “second chance” to buy the item.
eBay does indeed have a genuine Second Chance Option for the next highest bidder if the winner doesn’t come through with the payment.
Somehow, scammers seem to be getting hold of the identities of these runners-up and offering them a non-existent chance to buy by sending payment directly to them, usually to an overseas bank.
Action: In an online statement eBay says: “These scams occur through personal email, off the eBay site.
“Always start and end your transaction on eBay. Consumers should keep in mind that legitimate Second Chance Offers are facilitated through eBay and will appear in the ‘Messages’ section of ‘My eBay.’
“If you’re suspicious about an email that claims to be from eBay, sign in to ‘My eBay’ and click the ‘Messages’ tab. If you don’t see the same message there, the email is fake.”
Pay to Be An Expert?
For our final Snippet this week, we’re highlighting a dubious claim that you can pay to become a TV pundit on a subject where you have expertise, appearing on major news channels and celebrity-hosted shows.
A number of complaints have been filed from across the US citing a telephone solicitation offering to get the call recipients on TV shows — for a fee of between $500 and $5,000.
The calls seem to come from a PR company, which allegedly says it can get its “clients” onto national TV casting calls.
In some instances, the caller offers training for the shows and carefully avoids promising success.
We’ve not been able to establish if such “training” ever takes place but a number of people claim they paid up and heard nothing more from the company.
However, the TV shows, celebrities and companies mentioned in the solicitations deny that they use outside agencies to find experts or conduct casting calls.
Action: If you’re interested in appearing as a TV “expert,” you should know that, first, your chances of success are pretty remote unless you’re nationally-renowned in your field.
If you are renowned, you might want to check the websites for the individual shows or TV companies and contact them directly to offer your services. But don’t hold your breath!
As they say on TV, that’s a wrap for our Snippets issue this week — but stay tuned folks for those senior pension loans tricks, eBay second chances and your long-awaited appearance on Oprah!
That’s it for today — we hope you enjoy your week!