Magazine, newspaper and television ads often promise a lump sum in exchange for a veteran’s future disability benefit or pension payments. It’s no wonder veterans are being targeted. According to the U.S. Department of Veterans Affairs (USDVA), veterans were paid more than $53 billion in compensation and pension dollars in 2012. In California alone, which has a higher veteran population than any other state, that number exceeds $4 billion—even with only about 15% of its eligible veterans claiming the benefit.
For senior veterans who are struggling to make ends meet during retirement or who have incurred unexpected or overwhelming debt, offers of quick cash can seem like a godsend. Unfortunately, as the saying goes, if it sounds too good to be true it probably is.
Companies that offer cash in exchange for assignment of future military benefit and pension payments typically pay only a fraction of a veteran’s actual entitlement over time—about 30 or 40 cents on the dollar. Adding insult to injury, veterans may have to agree to sign away 8 to 10 years of their benefits for cash or put up some form of collateral, such as their house, to secure the contract in case they default. They may also be required to take out a life insurance policy payable to the company in case they die before the contract period is complete. With loan charges and other fees, veterans may pay interest rates exceeding 30%.
While acknowledging that these pension buyouts are not necessarily illegal, the USDVA calls this type of offer a “financial scam” that takes advantage of desperate veterans who may be down on their luck and need quick cash.
The best defense against mounting or unexpected debt and against unscrupulous and predatory lenders is a good offense. Work with a low cost and reputable credit counselor who can help you manage your money, use your credit, and assuage your debt wisely. The Federal Trade Commission’s web site offers tips on how to find a trustworthy consumer credit counseling service.
For information about your veterans benefits, visit www.calvet.ca.gov, download the CalVet mobile app, or call 877-741-8532 toll free.
Carolyn Ballou is Communications Director for the Veterans Services Division of the California Department of Veterans Affairs.