Missouri regulators are looking into so-called pension advances that can hit retirees with interest rate charges of 27 percent or higher.
The product promises fast access to cash to help cover things such as medical bills, long-term care and bills for aging parents. But consumers can ultimately wind up paying thousands of dollars in interest and fees, said Missouri Treasurer Clint Zweifel.
“Unfortunately, there are businesses that prey on … retirees in difficult situations,” Zweifel said.
He said pension advances are unregulated and often do not fully disclose fees and interest charges.
In exchange for a lump sum payment, pensioners give up part of their pension payment. Monthly payments made by the borrowing pensioner “can be subject to effective interest rates of 27 percent to 106 percent,” Zweifel said.
Pension advances have become a bigger issue nationwide. In May, New York’s Department of Financial Services launched an investigation into pension advances involving 10 firms. A U.S. Senate subcommittee is also investigating this practice.
Zweifel said he plans to work with members of the Missouri General Assembly to propose legislation to prohibit companies from offering this product if, for repayment, it taps into public pensions in Missouri. That would include city, fire, police, state and teacher pensions, a statement from Zweifel said.
The federal government has already passed legislation prohibiting companies from promoting these products to military pensioners.
If you have been approached by businesses promoting pension advances, go to the state treasurer’s website attreasurer.mo.gov and click on the “Pension Advance Portal.”