WASHINGTON — Two California companies allegedly sold pension advance loans that they claimed were not credit products but in fact charged usurious interest rates, according to a lawsuit brought Thursday by the Consumer Financial Protection Bureau and New York regulators.

Pension Funding and Pension Income characterized their product as a lump-sum buyout, directing consumers to redirect pension payments to the companies in exchange for easy cash, authorities say. The Huntington Beach, Calif.-based firms claimed in advertising that the products were not loans, but they failed to disclose that customers — who included retirees and military personnel — would in fact pay high fees and interest rates, the lawsuit said.

"These companies duped consumers into taking out pension advance loans by deceiving them about the terms of the deal," CFPB Director Richard Cordray said in a press release.

The lawsuit, filed in the U.S. District Court for the Central District of California, also names three managers of the companies as defendants: Steven Covey, Edwin Lichtig and Rex Hofelter. The CFPB and the New York State Department of Financial Services are seeking to stop the practices. The suit also seeks redress for consumers and other monetary relief, although it does not cite specific amounts.

The defendants told consumers that their product had lower rates and fees than a home equity line or a credit card, the two regulatory agencies claim. But, according to the lawsuit, the pension advance products had an effective annual interest rate above 28%. The lawsuit said New York customers paid nominal interest rates in excess of the state's civil usury cap of 16% and a criminal usury cap of 25%.

The lawsuit alleges the companies violated federal prohibitions against "unfair," "deceptive" and "abusive acts or practices" as defined in the Dodd-Frank Act. The suit also alleges three state violations: breaking New York's usury law, acting as a money transmitter without a license and disobeying a prohibition against deception.

"The defendants used blatantly deceptive practices to harvest the hard-earned pensions of seniors and military personnel," acting New York Superintendent of Financial Services Anthony J. Albanese said in the press release. "This scheme involved false advertising, illegal loans at high interest rates, and other abusive tactics that our department simply will not tolerate."

Attempts to reach the defendants were unsuccessful. A phone number listed online for Pension Funding was not in service, and an email to an address posted on the website for the Better Business Bureau was returned as undeliverable.

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