OGDEN, Utah — If you're a veteran and you're approached with an offer to receive a lump-sum pension advance, run as fast as you can in the opposite direction.
That's what veterans groups such as the American Legion, Veterans of Foreign Wars, and the U.S. Veterans Administration are saying as they warn of a new scam that, although technically isn't illegal, could still cause financial ruin for many service veterans who qualify for VA pensions.
According to the American Legion, the scam involves "pension advance products" that offer to pay military retirees a lump-sum payout instead of receiving their monthly retirement payments.
The Legion says the products usually amount to a lump-sum payment that equals only pennies on the dollar and the advances typically carry interest rates from 27 percent to 106 percent, which can be a real threat to a safe retirement.
Terry Schow, an Ogden, Utah-area Vietnam veteran and chairman of the VA's Rural Health Advisory Committee, said there are many pension advance companies on the Internet, often with patriotic-sounding names and logos.
He also said representatives from the companies often visit senior centers and veterans nursing homes, hoping to target vulnerable, older veterans.
"It's a pretty sad deal," Schow said. "They'll go to these senior centers and offer a free breakfast or a lunch, then they'll pitch their deal and then help the veteran fill out the paperwork."
The Legion says if a veteran needs emergency funds from their pension, they should seek advice from a trusted financial expert and never allow a creditor to access the account where they get their benefits.
Some of the companies use VA's Aid and Attendance pension benefit as a way to sell services, the Legion says.
The benefit is available to disabled veterans who require the aid and attendance of another person, or who are housebound.
The companies offer to help veterans obtain the Aid and Attendance benefits, but first require customers to sign up for financial services, then move assets into irrevocable trusts for qualification.
Schow said the Legion, the VFW and both the Utah and federal VA offer the same pension advance services for free.
"The sad thing is, all of these services are available and they're free of charge," he said. "I would tell veterans out there to let the folks who are professionals do this and let them do it for free. These vets don't have to pay for any of this. They've already paid with their service."
A searchable list of VA-accredited representatives including Veterans Service Organizations, agents, and attorneys is available at the VA Office of General Counsel website at www.va.gov/ogc/apps/accreditation/index.asp.
For more information about VA pension eligibility requirements, go to www.benefits.va.gov/pension or call 1-800-827-1000.