McDee Award Goes to ‘Temporary, Honorary’ Senior

By Riley McDavid   Riley McDavid

Those of you with good memories will remember that the McDee Award, which is given out irregularly, goes only to seniors who have made some notable contribution to the lives of others.   But this week the award goes to Jessica Silver-Greenberg, a financial reporter for the New York Times, who is at least three-plus decades shy of being a senior. So for the purposes of this blog, I hereby designate her a temporary, honorary, short-term, transitory senior.

Ms. Silver-Greenberg, a 2004 graduate of Princeton University and a Pulitzer Prize finalist for national reporting in 2112, is currently doing extensive coverage of the ongoing shareholder saga at JPMorgan Chase.  In the past she has covered all kinds of debt stories, including lending practices, debt collection, student loans, credit cards, and mortgages.  Some of her reporting is about consumers getting the short end of the stick when it comes to finances. Her McDee Award is for being so far out in front of the rest of American journalism on a particular kind of scam targeted at seniors — the pension loan scheme.  

Here’s how it works.  Say you’re a senior with a pretty good monthly pension payout, but not a whole lot in the bank.  All of a sudden you need a whopping big amount of money for a major medical expense or some other reason.  Or maybe you don’t really need it, but you want it.  Let’s say you want to buy an RV or even a yacht. Well there are companies that will advance you money against your pension.

“What’s the problem?” you ask.

Jessica Silver-Greenberg is tough on financial predators, but says, “I am very close to my 88-year-old grandmother, Ruth Silver. She is my inspiration for many things.”

In an April 27 story, Ms. Silver-Greenberg explained the problem, “The Times’s review of more than two dozen loan contracts,” she wrote, “found that the loans, once fees were factored in, could come with effective interest rates from 27 to 106 percent — critical information that was not disclosed either in the ads or the contracts.”

She wrote about Ronald Govan, a retired marine from Snellville, Georgia.   Mr. Govan had a military disability pension of $1,033 a month. A company offered him an advance of $10,000 in return for five years of monthly payments of $353 from his pension. According to both the New York Times and my Quicken loan calculator, that works out to an effective interest rate of 36% — a really bad deal at a time when you can get a mortgage for about three percent and when your CDs earn just a smidgen above one percent.  And by the way, lending against military pensions like Mr. Govan’s is illegal, but the companies doing so claim they are making “advances,” not loans.

I don’t want to give Ms. Silver-Greenberg too much credit, but if the timing I see is correct, a number of people in government took quick notice of these practices after the Times began publishing her stories.  (Apparently the old post hoc, ergo propter hoc idea isn’t always a fallacy.)

On May 7, about ten days after Ms. Silver-Greenberg’s seminal story, New York Governor Andrew Cuomo announced an investigation into pension loan companies.

“These companies are literally harvesting the hard earned pensions of seniors, military veterans and other hard working New Yorkers,” said Governor Cuomo in a statement on his web site. “Using deceptive practices to cheat people out of their pensions by enrolling them in backdoor high-interest loans will not be tolerated in our state.”

Benjamin Lawsky, the state’s Superintendent of Financial Services, echoed his sentiments. “These pension advances appear to be nothing more than payday loans in sheep’s clothing,” he said.

Massachusetts wasn’t far behind. On May 13, Secretary of the Commonwealth William Galvin announced his state was taking action. “It’s a novel industry and it seems to be flourishing,” Mr. Galvin told the online site Investment News. “I understand the pressure someone may have to sell [their pension],” he added, “and we’re not saying it’s never appropriate [but] obviously you’re going to get less than the value of future payments.”

Attorneys general in several states aren’t buying the argument that the payouts are advances and not loans, and are going after the companies.  New York has issued subpoenas for ten of them, the ads for several of which popped up on my screen when I Googled “pension advances.”  Three are located in California, including two here in Orange County.  Others are in Indiana, Florida, Delaware, Michigan and Arkansas.

Consumer watchdogs generally urge that people steer clear of these loans. “Just don’t do it,” one said bluntly. But if you have a real emergency need for cash, see a legitimate financial counselor for advice before you commit.  If in the end you decide to get one of these “advances,” do the following.

• Don’t take the sales pitches as gospel.  What counts is what’s on paper, not what a salesperson told you. If you don’t understand the paperwork, take it to someone who does — a lawyer, an accountant, a financial advisor at your senior center.

• Make sure the interest and all other fees are spelled out specifically.

• If a loan officer presents you with paperwork, but tells you that you have to sign on the spot and can’t take it with you to look over, get up and leave — immediately.

On behalf of the thousands of seniors in Age Well Meals on Wheels and other  programs, and on behalf of any senior anywhere who benefited from the Times’s stories, thank you Jessica Silver-Greenberg.

Coming up on the Age Well Calendar:

Monday, June 3: Clyde Wright Invitational Golf Tournament. Benefiting Meals on Wheels and other Senior Services. 11 a.m. shotgun start at the Aliso Viejo Country Club. Golf plus continental breakfast, box lunch, buffet dinner, and prizes for contests.  For more info, call (949) 855-8033.

Saturday, June 29: Casino Night from 6 p.m. to 10 p.m. at Clubhouse 5 in Laguna Woods Village. For $25, you get admission, $100 in play money, a bountiful snack table, and the opportunity to win some great raffle prizes. This is the biggest fundraiser of the year for the Florence Sylvester Center, thanks to the generosity of many individuals and businesses and the outstanding support of Saddleback Kiwanis. Tickets available at the door and at the Florence Sylvester Senior Center.

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