Businesses that lure retirees and injured workers into selling their pension distributions and settlement income streams have come under attack by federal and state regulators.

The Securities and Exchange Commission and Finra issued an alert earlier this week stating that consumers who sell their pension distributions can be subject to high fees and other risks. The regulators also noted that such deals could in some cases be illegal.

The cost of selling a pension or injury settlement can be high because lump sum payments may be taxable, commissions can be 7 percent or higher and an intermediary in the transactions may require the retiree to buy life insurance, the SEC and Finra warned.

The money consumers get from such deals will almost always be significantly lower than the present value of the future income stream, the regulators noted.

With interest rates sometimes exceeding 100 percent and hidden fees, the advances have been called payday loans in sheep clothing by New York State Superintendent of Financial Services Benjamin Lawsky.

“Pension harvesting schemes that hit financially strapped retirees with sky-high interest rates and hidden fees are simply unacceptable,” he said. “It's especially disturbing that military veterans—who earned their pensions defending our country—are apparently being targeted through these abusive products.”

On Tuesday, the New York financial services regulator sent subpoenas to 10 companies offering advances on consumer income streams as part of an investigation looking into possible fraud, false advertising and illegal harvesting of military pensions.

The businesses are LumpSum Pension Advance, Pension Funding LLC, Pensions Annuities & Settlements LLC, Pension Income LLC, Cash Flow Investment Partners, DFR Pension Funding, Veterans Benefit Leverage, Voyager Financial Group LLC (Pension4Case/Cash Out My Pension/Buy Your Pension), First American Finance Corp. and Investing Forward (Termbrokers LLC).

Legal aid offices in Arizona, California, Florida and New York have had surges in complaints from retirees about the pension advances, according to a recent front-page article in the New York Times.

The SEC alert, entitled “Pension or Settlement Income Streams: What You Should Know before Buying or Selling Them” is available at