Personal Finance

Military vets, investors warned about “pension advance loans”

Military veterans and investors are being warned by state officials about “pension advance loans” that could be financially risky to both parties.

According to the state Department of Business Oversight, some 38 companies nationwide – including 18 licensed in California – are known to arrange these types of investments, which rely on illegally buying and selling the rights to a veterans’ pension or disability payment.

“There are unscrupulous operators out there misleading investors and preying on vulnerable veterans who need cash,” said DBO Commissioner Jan Lynn Owen in a statement this week. “We want veterans to know they cannot sign away their right to their pension or disability benefits.”

The DBO said the scheme typically works like this: Veterans are targeted by salespeople offering an immediate lump sum in exchange for temporary rights to their pension or disability payments. Such cash payouts to the veteran are significantly lower than the value of their future payments. Companies then sell investors securities tied to the revenue stream from the pension or disability benefits.

In reality, the DBO said, federal pension and disability payments are not assignable to anyone else. So the investment itself is essentially illegal.

Last week, the DBO issued a “desist and refrain” order against Voyager Financial Group LLC, based in Little Rock, Arkansas, which was ordered to stop selling these types of securities in California.

Consumers who believe they may have been frauded can file a complaint on the DBO’s website, dbo.ca.gov, or call the consumer line at (866) 275-2677.

Call The Bee’s Claudia Buck, (916) 321-1968.

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