Retirement Policy

A bipartisan bill offered in the House is designed to protect federal retirees from a form of lending called “pension advances.”

In a pension advance, the retirement benefit in effect is used as collateral for a loan that can have very high interest charges as well as hidden fees. The bill would apply Truth in Lending Act disclosure requirements to providers of such loans and give the Consumer Financial Protection Bureau authority to oversee compliance.


The measure would cap the maximum interest on any such loans at six percentage points above the prime rate, a standard lending rate, and would create new legal rights for those who take such loans to sue the lenders for violations.

“While current federal law already prohibits federal and military retirees from assigning their pensions to a third party, many companies have resorted to skirting state and federal laws by requiring the retiree to deposit his or her pension in a separate bank account controlled by the firm,” said sponsor Rep. Matt Cartwright, D-Pa. “Moreover, firms refer to the product they sell as a ‘pension advance’ rather than a loan. In reality, these ‘advances’ require borrowers to sign over all or part of their monthly pension checks and carry interest rates that are often many times higher than those on credit cards.”