The Consumer Financial Protection Bureau on Thursday filed a lawsuit against the pension advance company Future Income Payments for alleged deceptive marketing practices
In the suit, which also names the company's owner, Scott Kohn, and 15 related companies, the CFPB claims that Future Income Payments lured vulnerable consumers into taking out high-cost loans in exchange for their future pension payments.
The Irvine, Calif., company, known as FIP, has been sued or investigated by at least 25 states for advertising so-called “pension advances” that were often sold through financial advisers.
State and federal laws restrict the sale or transfer of pension benefits.
“Defendants’ product lures in vulnerable consumers, including senior citizens, disabled military veterans, and their spouses, who are in need of immediate cash,” the CFPB’s lawsuit stated.
The company and its owner could not be reached for comment.
In January 2017, FIP sued the CFPB in an attempt to keep its name and a pending investigation from becoming public. The company identified itself only as “John Doe Company,” and alleged that the CFPB was unconstitutional and had no authority to investigate its operations. The company said in that lawsuit that it would be "irreversibly damaged" if the CFPB publicly disclosed that it was being investigated for unfair, deceptive or abusive acts or practices, known as UDAAP violations. The CFPB ultimately prevailed in that case.
The CFPB’s lawsuit, filed in U.S. District Court for the Central District of California, alleges violations of the Consumer Financial Protection Act and the Truth in Lending Act.
The CFPB alleges that FIP sought to acquire income streams from consumers entitled to payments from pensions, annuities or other legal settlements. The company made high-cost installment loans at rates of up to 183% to pension beneficiaries in exchange for the rights to part or all of the consumers' future pension benefits, the CFPB said.
Under its contracts, consumers received lump sums, ranging from $100 to at least $60,000, but were required to repay much larger total amounts, including hefty fees, through monthly payments to FIP, typically over four to 10 years.
Some consumers were required to take out life insurance policies and name FIP or a third-party investor as the beneficiary to protect the company in the event the consumer died, the CFPB lawsuit stated.
FIP routinely represented that its product was not a loan, did not have an interest rate associated with it, and was comparable to or cheaper than credit card debt.
“In fact, FIP’s product is a loan, and what FIP claims is a 'discount' is a form of interest associated with its product,” the lawsuit stated.
The CFPB is seeking injunctive relief, other monetary and equitable relief, and civil money penalties.
