Cartwright Introduces Legislation to Protect Federal and Military Retirees from Exploitation
Washington – Today, Congressman Matt Cartwright introduced the Annuity Safety and Security Under Reasonable Enforcement (ASSURE) Act along with Rep. Gerry Connolly (VA-11). The legislation, introduced with the support of 38 colleagues, aims to protect federal and military retirees by expanding ‘Truth in Lending Act’ disclosure provisions to any situation where a federal or military pension is used as consideration for an “advance.” The bill also caps the interest rate on such an “advance” at prime plus six percent. Currently, there is no private right of action in many of the applicable federal statutes that prohibit pension assignments. This bill allows for such an action.
These simple measures will protect federal retirees from exploitation, allow individuals to assert their rights in court, and ensure that retirees maintain their financial independence.
“While current federal law already prohibits federal and military retirees from assigning their pensions to a third party, many companies have resorted to skirting state and federal laws by requiring the retiree to deposit his or her pension in a separate bank account controlled by the firm,” said Cartwright. “Moreover, firms refer to the product they sell as a “pension advance” rather than a loan. In reality, these “advances” require borrowers to sign over all or part of their monthly pension checks and carry interest rates that are often many times higher than those on credit cards.”
A review by The New York Times of more than two dozen contracts for pension-based loans found that after factoring in various fees, the effective interest rates ranged from 27 percent to 106 percent — information not disclosed in the ads or in the contracts themselves. Furthermore, to qualify for one of the loans, borrowers are sometimes required to take out a life insurance policy that names the lender as the sole beneficiary.
In May 2013 the Senate Health, Education, Labor and Pensions (HELP) Committee launched an investigation into this practice. Moreover, several state regulators initiated investigations into these practices, most notably in New York and Massachusetts. Unfortunately, the pension lending companies continue to target retirees who often have little or no recourse.
“Federal workers, military career servicemen and women, and postal workers spend a lifetime earning a federal annuity, an annuity to which they’ve contributed each paycheck. Federal annuities were designed to provide retirees with a stream of guaranteed income that gives them a sense of financial security in their golden years. Unfortunately, pension advance companies often prey upon federal retirees and veterans,” said Cartwright.
“The ASSURE Act provides protection to American retirees from predatory lenders who go to great lengths to target and mislead retirees in their most vulnerable moments,” said Jeanette Dwyer, President of the National Rural Letter Carriers’ Association, endorsing the ASSURE Act. “Through selling ‘pension advances’, they coerce federal and military retirees to sign away the rights to the retirement benefits that they worked their whole lives to accrue, only to leave them no recourse after the fact. The ASSURE Act caps interest rates on these types of loans and creates a private right of action to protect those exploited by predatory lenders.”
Supporting Organizations: National Active and Retired Federal Employees Association (NARFE), American Federation of Government Employees (AFGE), American Foreign Service Association (AFSA), National Association of Postal Supervisors (NAPS), American Postal Workers Union (APWU), National Association of Federal Veterinarians (NAFV), Military Order of the Purple Heart, Professional Aviation Safety Specialists (PASS), Senior Executives Association (SEA), National Federation of Federal Employees (NFFE), National Rural Letter Carriers’ Association (NRLCA), The Retired Enlisted Association (TREA), Federal Managers Association