Minnesota Attorney General Lori Swanson is suing two companies that tap into the pensions of military veterans and senior citizens for the repayment of high-interest loans.
In a lawsuit filed Wednesday in Hennepin County District Court, Swanson alleges that Future Income Payments LLC of Delaware and FIP LLC of Nevada made illegal online loans in Minnesota that commonly charged annual interest rates of 200 percent. The complaint contends violations of state licensing and usury laws.
During a news conference to announce the lawsuit, Swanson said the companies offer small loans to people in need if they sign over a portion of their future monthly pension payments.
“It usually puts people even further into debt,” Swanson said. “People went to this company because times were tough. They had the medical bills. They had an emergency. They had regular household bills they were having trouble paying, and then by taking out these loans and forfeiting their future payments they ended up exacerbating their financial condition.”
Swanson, who was joined by several loan victims, said the companies sought to evade state lending laws by describing the transactions as “purchase agreements,” not loans. She wants all the Minnesota loans voided and the payments refunded.
Billie Jo Slater of Mounds View borrowed $2,100 when her dog needed emergency surgery. The 72-year-old military widow later learned that she was obligated to pay $350 from her late husband’s benefits every month for five years. The total repayment was $21,000. Slater said her account was frequently overdrawn.
“I had to quit paying them,” Slater said. “I would advise everybody not to have electronic payments from your account.”
Stephen Schmelz, a 61-year-old disabled army veteran from Minneapolis, borrowed $2,700. He could have been on the hook for 10 times that amount but was able to reach an early repayment deal after just eight months. Still, Schmelz described the lenders as “snakes in the grass” for targeting veterans.
“They know we need the money desperately. They know we have a fixed income, and they know that that’s going to be a direct payment every month,” Schmelz said.
Attempts to contact Future Income payments LLC and FIP LLC were not successful.
Government regulators in several states have already taken action against the companies.
Minnesota Commerce Commissioner Mike Rothman, who also attended the news conference, said he’s conducting a separate investigation of the same companies. Rothman said his agency is demanding that they stop doing business in the state.
“These advance pension payments are a fraud and a scam, they’re illegal they’re predatory and are preying on Minnesota senior citizens and our veterans,” Rothman said.