Minnesota Sues Online Lenders For Targeting Vulnerable Pensioners
ST. PAUL (WCCO) -- Stephen Schmelz is a decorated Gulf War veteran who lives depends on his monthly pension payment. He is also disabled and battling back after undergoing multiple back surgeries.
Understandably, the medical bills and other expenses can pile up at times. So when Schmelz was in a bind and needed $2,700 in emergency cash, he turned to an online lender from out of Nevada: FIP, LLC. His repayment agreement required monthly payments out of his bank account in the amount of $450, for the next five years.
Looking back in disgust, Schmelz now refers to the company as "snakes in the grass." He'd soon learn he was charged 200 percent interest, and owed $27,000 for the full repayment, or 10 times his original principal.
He wasn't alone. It is estimated that at least 120 Minnesota seniors and veterans have signed on with FIP and another lender: Future Income Payments, LLC, out of Delaware.
"You're desperate, you trust them," Cecelia Gleb, a retiree who took out a $2,200 loan in December, said.
Gleb and Schmelz are two of the many seniors and veterans targeted by FIP and Future Income Payments, so-called pension advance companies who look for retirees who need a small loan.
"There's a lot of pensions to be had," Minnesota Attorney General, Lori Swanson, said.
On Wednesday, Swanson held a news conference to announce that the state has filed suit against the two companies in Hennepin County District Court. The state's lawsuit alleges that neither company is registered to do business in Minnesota, or licensed to make loans.
It is a charge that's been repeated by at least eight other states and the city of Los Angeles, which have taken legal action against the companies.
"The companies know what they're doing, they call them 'purchase agreements' with the customer. But they are thinly disguised loans, loaning people money in exchange for payments over time," Swanson said.
Back in February, Billie Jo Slater took out a $2,100 loan to pay for her dog's emergency cancer surgery.
FIP signed her up for a loan and began withdrawing money from her bank account even before her loan papers were returned in the mail.
When they arrived a week later, she was shocked to discover that what was explained to her as a 16-month repayment plan was changed to 60 months. Her loan would eventually cost her $21,000 when it was fully repaid.
"I wouldn't have taken the loan out," Slater said. "I would have found another way to have the surgery for my dog."
Anyone who believes they have been defrauded by the companies is urged to contact the Minnesota Attorney General's office at 651-296-3353 or by email. Complaint forms can be downloaded at the Attorney General's Office website.
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