Sen. Karen Fraser, D-Thurston County, is the sponsor of legislation to help protect retirees’ state pensions from predatory lending practices that put their pensions at risk.

Senate Bill 6622 would prohibit lenders from offering lump sum loans to retirees in exchange for the retirees, in effect, signing over all or much of their hard-earned pension benefits to the lenders to pay off the loans.

“In a typical case, the retiree would open a joint checking account with the lender, arranging to have their full monthly pension benefits deposited into this account, and then giving the business the exclusive right to withdraw from the account to pay off the loan,” said Fraser. “Sometimes, the retiree is also required to buy life insurance for this transaction, which is an additional expense. Typically, the interest rate is at exorbitant levels, and often not disclosed in advance to the retiree, because the companies that do this are not registered as ’lending’ companies. Further, there might be no protection against the business increasing the interest rate or fees over time, further depleting or eliminating the retiree’s pension asset.”

The Congressional Governmental Accounting Office has studied and reported on the risks of these practices for veterans’ pensions, which have been a significant target of these companies.

“No outside company should have access to a retiree’s pension benefits. If this loophole is legal, it should be repealed,” said Fraser. “Retirees worked hard for these benefits and depend on them for the rest of their lives. This bill will help protect public employees from losing their valuable pensions to unregulated and unlicensed lenders and schemes.”

The Washington State Department of Financial Institutions has been successful in shutting down two companies engaging in this practice in the State of Washington. The court decisions are being appealed.

“Passage of this bill will assure this type of practice can no longer take place and state retirees cannot be duped out of their hard-earned, needed pensions,” said Fraser.

The bill is currently awaiting passage on the Senate floor and will need to pass out of the chamber in advance of the next legislative cutoff on Wednesday.