Seeking refunds

Pennsylvania’s Department of Banking and Securities ordered FIP and Mr. Kohn to stop providing pension advances in May.

Banking department officials say FIP is an unlicensed lender, arguing that since pensioners must still pay income taxes on the portion of their monthly check they turn over to the company, the transaction is a loan, not an asset purchase as FIP contends.

They are seeking refunds for borrowers who were charged more than 6 percent and a $10,000 fine for each loan made to state residents.

Among the borrowers were a Perryopolis, Fayette, County, resident who had to repay $27,900 after borrowing $3,500 and a Mount Joy, Lancaster County, woman required to repay $116,400 after borrowing $12,000.

FIP can contest the order, which is not final until it is approved by the state Banking and Securities Commission. People who think they have fallen victim to a financial scheme should call the departmentat 1-800-PA-BANKS.

Pennsylvania’s action follows similar efforts by regulators in other states.

In Washington, at least 83 residents of that state — including one person who took out two loans totaling $49,000 and was obligated to pay back $146,796 — did business with FIP, according to the state’s Department of Financial Institutions.

Future Income Payments found 64 customers in Iowa, who paid an average interest rate of 131 percent, according to Mr. Miller, the state’s attorney general.

‘Desperate measures’

Minnesota Attorney General Lori Swanson filed a lawsuit against FIP and related entities last month, accusing them of making loans to more than 120 state residents. The most common interest rate was 200 percent. One veteran who borrowed $1,500 was required to pay $18,000 over five years, an interest rate of 240 percent, according to the lawsuit.

“When you’re desperate, you’ll take desperate measures. What was I going to do? Rob a bank?” asked Delma Francis, a 63-year-old Brooklyn Park, Minn., substitute teacherwho borrowed $4,000.

Ms. Francis was unable to find full-time work after taking a severance package from the Minneaoplis Star Tribune in 2007. She was waiting for Social Security to rule on her disability claim based on severe psoriatic arthritis, but needed cash to pay bills before theagency made a decision on herrequest.

“I couldn’t get a loan the traditional way because I didn’t have a job,” she said. “I thought, ‘I’m borrowing from myself,so why not?’ ”

According to Ms. Swanson’s lawsuit, FIP required Ms. Francis to turn over $410 of her $510 monthly pension from the newspaper for six years. That put a $24,600 price tagon her $4,000 loan.

“I had paid off the $4,000 in lessthan a year,” she said, noting that she was required to keep paying for another five years.

She stopped making payments after hearing from Ms. Swanson’s office. Unlike FIP customers who have their monthly payments deducted automatically from their bank accounts, Ms. Francis paidby check.

“They did not have access to my bank account, so that’s one smart thing I did,” she said.

Ms. Francis said she called FIP and told them “you’re not getting another penny out of me and they haven’t called backsince.”

She was initially reluctant to talk about what happened, feeling sheepish for agreeing to the company’s terms. But Ms. Francis’ concern that others might be taken advantage of led her to discuss what happened.

“It’s not about me. It’s about this company and how they take people,” Ms. Francis said. “It’s important to stop these people.”