Straight Talk from Al Jacobs
THE DECEPTION NEVER ENDS
The latest exposé to hit the circuit is the “pension advance” scheme, by which military veterans and retirees are induced, through high-pressure selling, to take cash advances secured by their retirement income. The pitch is enticing: “Eliminate debt! Launch a business! Take your dream vacation!”
These advances are inherently payday loans which carry hefty charges. A typical transaction might provide an up-front advance of $40,000, for which the borrower will pay back $1,015 monthly—often the entire pension check—for ten years. Such borrowing works out to a per annum interest rate of about 27%. The firms involved in these outrages maintain they’re not violating usury laws because they are not making “loans.” Rather, they claim these are “purchase/sale agreements,” or “income stream buyouts,” or some other euphemism. What they won’t call them is what they really are: “rip-offs.”
How is it that reasonably sensible persons can be ensnared by such trickery? Part of the answer may be simple human naïveté. However, note another commonality: the prevalence of offerings in which the elderly are targeted. Two other such devices, reverse mortgages and variable annuities, which are equally directed at seniors, both contain the same components: hidden fees, buried commissions, and devious sales techniques.
I have no profound moral to present. The only conclusion I will offer is the memorable line of financial columnist Al Lewis, creator of Al’s Emporium: “Wherever there’s money, there’s someone trying to steal it.”
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