The Consumer Financial Protection Bureau warned Tuesday pension advances could threaten the retirement security of older Americans.
The agency said pension advances can carry high interest rates and fees that reduce retirement wealth.
To protect seniors who go after pension advances, the CFPB advised them not to sign over control of retirement checks.
Pension advances are when companies offer seniors money now in exchange for pension payments they are scheduled to receive later.
“Companies sometimes arrange for monthly payments to be automatically deposited in a newly created bank account so the company can withdraw payments, fees and interest charges from the account,” the regulator explained.
In addition, the CFPB warned pension advance shoppers not to buy life insurance they don’t want or need.
“Pension advance companies sometimes require consumers to sign up for life insurance with the company as the consumer’s beneficiary. If you sign up for life insurance with the pension advance company as your beneficiary, you could end up footing the bill, whether you know it or not,” the CFPB said.
The Securities and Exchange Commission, Financial Industry Regulatory Authority and the New York State Department of Financial Services put out warnings about pension advances in May 2013.