In one case, a borrower took out a loan against his pension for $10,000 for 60 months. His monthly payment was $353. The total cost of the loan was $21,180, or an interest rate of 36.4 percent, according to the Times.
“In lean economic times, people with public pensions — military veterans, teachers, firefighters, police officers and others — are being courted particularly aggressively by pension-advance companies, which operate largely outside of state and federal banking regulations, but are now drawing scrutiny from Congress and the Consumer Financial Protection Bureau,” writes reporter Jessica Silver-Greenberg.
The Times looked at more than two dozen pension advance contracts and found that, after factoring in various fees, the effective interest rates ranged from 27 percent to 106 percent. And here’s the real ugly side of these loans: The information about the rates isn’t disclosed in the ads or in the contracts. Additionally, to qualify for one of the loans, borrowers are sometimes required to take out a life insurance policy that names the lender as the sole beneficiary.
The pitches for pension loans are luring retirees with scant savings and poor credit, which makes it difficult for them to get traditional loans. Data from the Federal Reserve found that the combined debt of Americans ages 65 to 74 is rising faster than that of any other age group.
Live Chat With Stan Hinden
Speaking of seniors, if you’re close to retirement or already in retirement, join me today at noon ET for a live online discussion.
My guest will be Stan Hinden, author of “How to Retire Happy: The 12 Most Important Decisions You Must Make Before You Retire.” Hinden’s book was the April pick for the Color of Money Book Club.
If you can’t join live, send your questions in early.
The Tipping Point
Many restaurant diners leave a standard tip of 15 percent to 20 percent regardless of the service they receive, according to Tom Frank, a restaurant consultant and one of the founders of P.F. Chang’s China Bistro restaurant chain.
But if you get bad service, you shouldn’t feel obligated to leave a tip, Frank tells Kiplinger Magazine.
In looking at tipping habits, Frank found that nearly 40 percent of survey participants said they felt obligated to leave a tip despite the bad service.
Stop feeling sorry for servers and use your tips to reward good service, Frank says. “There is nothing else you would pay for if you didn’t get it,” he says in the article. “Yet people pay -- by leaving a tip -- for service they don’t get.”
Because tips are built into the pay structure for servers, I understand why people to still tip when they don’t get good service. And often the service can be dictated by other factors – slow kitchen, crowded restaurant, etc.