Pension advance lenders were accused of being deliberately deceptive Wednesday by Sen. Susan Collins.

“These companies exploit their customers’ desperation," said the Maine Republican. "They use flashy, aggressive and misleading advertising to encourage quick and uninformed decisions.” 

With interest rates reaching 120 percent, the firms try to evade state usury laws by calling their products “advances” instead of the loans, which is what they are, Collins told an Aging Committee hearing.

At the session, the lack of transparency in the pension advance contracts was also called into question by the chief forensic auditor of the General Accountability Office, Stephen Lord.

Questionable practices by pension advance companies put retirement security at risk and make it more difficult for consumers to file complaints with federal agencies, he said.

Retired U.S. Navy officer, Dr. Louis Kroot, said his retirement was put at risk when, out of desperation from bad tax planning that cost him $100,000, his wife jumped at the opportunity for an advance.

“We didn’t realize how expensive it was going to be. We simply did not get out the calculator and unpack the complex language in the agreement. We were desperate and we panicked,” he said.

Kroot said the only time the word “loan” was mentioned in his dealings with the company was when it told him the advance was not a loan.

Kroot said after the hearing that if he had talked to a financial advisor before taking out the loan, he probably wouldn’t have because the advisor would have told him the Internal Revenue Service would have easily set up a payment plan.

Military retirees like Kroot are favorite targets of pension advance operators, warned National Consumer Law Center Litigation Director Stuart Rossman.

“The companies that target veterans for these illegal transactions are elusive; they change names and websites frequently and hide the identities of the individuals involved, Rossman said.

It is illegal for the pension benefits of military retirees to be assigned to others, but federal courts have differed on whether pension advances are “assignments.”

Rossman noted one reason pension advance companies try to avoid characterizing themselves as lenders is to avoid usury law interest limits and because the obligations of a borrower to a lender can be eliminated in a bankruptcy, while a bankruptcy requires a person who gets an advance to pay the money bank.

He said most pension advances average $50,000, while other predatory loans are about one-tenth of that.

Sen. Elizabeth Warren (D-Mass.) said pension advances should be stopped.