Peiffer Wolf Carr Kane & Conway and Rikard & Protopapas are currently investigating claims for anyone who has invested in Future Income Payments (FIP, LLC). If you or someone you know invested in a Future Income Payments, Contact Us Today by calling 504-523-2434 or by filling out an online Contact Form for a FREE Consultation.
Concerns about possible advisor misconduct and investment fraud are serious, and we are committed to fighting on behalf of investors. If you believe you were a victim of investment fraud or advisor misconduct, it is imperative to take action. Peiffer Wolf Carr Kane & Conway and Rikard & Protopapas have represented thousands of individual investors, and we remain committed to recovering as much compensation as possible for our clients.
Structured Cash Flows, or Pension Viaticals, are recommended and promoted to investors as being preferable to traditional life settlements. The sales pitch is that Structured Cash Flow investors begin to receive a return on their investment prior to the death of the “seller.” However, most states have now determined that the “sellers” were actually borrowers and FIP did not hold the licensure necessary to make loans.
According to FIP’s website, they claimed to be “the industry leader and an innovator in buying and selling secondary market pension cash flows, often referred to as Structured Cash Flows.” However, state officials in multiple states have issued cease and desist orders, accusing FIP of issuing loans without a license and disguising them in “sales agreements.” Now, multiple state regulators have agreed that FIP’s alleged pension sales are actually predatory loans.
With the purchase of a structured settlement, investors pay a lump sum in exchange for the assignment of the right to collect payments due to the seller under a pension, disability plan, or other employee and government benefit programs. Thus, the investor plans to receive continued payments for the life of the seller, the seller gets an upfront lump sum payment, and the middlemen (FIP, advisors, agents, Field Marketing Organizations, etc.) get a fee on the transaction.
In addition to FIP’s issues with predatory lending charges, most pension plans are subject to the Employee Retirement Income Security Act of 1974 (ERISA). ERISA is the federal law that sets the standards and regulates pension plans. However, this federal law prohibits many pensions and benefits from being assigned. Therefore, it is likely that many of the contracts with borrowers violate ERISA, as well. However, the middleman (FIP, advisors, agents, Field Marketing Organizations, etc.) still received the upfront fees and the investors are left holding the bag.
Hundreds, if not thousands of investors were harmed by agents’, advisors’, brokers’, and companies’ recommendations and sales of life insurance policies and indexed universal life insurance policies to be funded through the use of “structured cash flows” sold by Future Income Payments (“FIP”). As well as individual agents and advisors, companies like Live Abundant, The Hidden Wealth Solution, and ShurWest provided retirement planning advice to investors.
As insurance agents and/or insurance agencies, most of the retirement planning advice involved the sale of insurance products. With respect to most investors, these agents and advisors recommended that they purchase universal life insurance policies that would be funded at a target level (e.g., $250,000). When fully funded, those policies would provide a death benefit and would have an accumulated value, supplemented by returns in the policy’s investment component, that would allow policyholders to supplement their retirement income by borrowing against the policy.
Many agents and advisors further advised investors that they should implement this strategy (the “Life Insurance Retirement Strategy”) by using structured cash flows acquired through FIP. Policyholders would pay a lump sum to FIP to purchase a monthly income stream that represented the total amount paid to FIP plus a pre-determined rate of return, which depended on the term of the structured cash flow. For example, a policyholder might pay FIP $100,000 to acquire a monthly income stream for a period of 3 years at a 7% rate of return. FIP paid higher returns for cash flows with longer terms.
Additionally, many advisors and agents recommended that investors use FIP income streams to pay their life insurance premiums, as the rate of return that they received on the FIP product would allow them to fund their life insurance policies at a higher target amount than they otherwise could by paying a lump sum or utilizing other options (i.e., a money market account or CD) for the same purpose.
Upon information and belief, these advisors, agents, and/or companies received commissions or “referral fees” on the sale of FIP cash flows to investors. For its part, FIP funded the cash flows it sold to investors by “purchasing” future income from individual pensioners, including retired teachers, police officers, and military personnel. FIP offered pensioners up-front, lump-sum payments in exchange for receiving a portion of their monthly pension payments over a specific term, often three to ten years. FIP would “purchase” these pension payments at a “discount,” such that the total of the monthly payments made by the individual pensioners to FIP far exceeded the amount of the lump-sum he or she received, amounting to an effective interest rate of over 100% in some cases.
Even though FIP characterized these transactions with pensioners as “purchases,” numerous state and federal regulators have investigated and determined that the deals were, in fact, loans. Those loans were unlawful transactions, as they were made by an unlicensed lender (FIP) at effective interest rates that violated state usury laws, without legally mandated disclosures. These regulatory actions resulted in numerous orders requiring FIP to cease and desist its pension advance operations in various states and municipalities.
As a result of this mounting regulatory pressure, FIP ceased collecting payments from pensioners and ceased making payments to income stream “purchasers” around March or April 2018. The loss of the monthly income streams that investors purchased from FIP has been devastating. Those payments represented the only way that purchasers could recoup the funds used to execute the Life Insurance Retirement Strategy, and they were essential to funding their life insurance policies and avoiding a lapse, surrender charges, or other penalties.
As such, investors expected that the FIP income streams they purchased would be safe and secure. Agents and advisors, as the architect of the Life Insurance Retirement Strategy, also clearly understood that the funds its customers paid to fund their life needed to be protected and could not be subject to an unreasonable risk of loss. Despite this fact, we argue that these agents, advisors, and companies recommended the FIP funding strategy to investors without doing adequate due diligence and in negligent disregard of the numerous risks associated with the FIP cash flow transactions. As the regulatory actions against FIP make clear, the FIP cash flow product was inherently flawed and subject to serious risks that should have prevented these agents, advisors, and companies from recommending that investors use it to fund their insurance policies.
In addition to the issues raised in the various regulatory actions, we believe that numerous additional risks made these FIP transactions wholly inappropriate for use in the Life Insurance Retirement Strategy. Thus, we believe that these advisors, agents, and companies violated their duties to investors by recommending that they use FIP cash flows to fund their insurance policies.
Peiffer Wolf Carr Kane & Conway and Rikard & Protopapas are currently investigating claims for anyone who has invested in Future Income Payments (FIP, LLC). If you or someone you know invested in Future Income Payments, Contact Us Today by calling 504-523-2434 or by filling out an online Contact Form for a FREE Consultation.
Multiple Attorney Generals from around the country are suing Future Income Payments on behalf of borrowers, alleging that it targeted elderly veterans and retired civil servants in a scheme that masquerades high-interest predatory loans as “pension sales,” according to one lawsuit filed in Virginia’s Hampton Circuit Court.
These lawsuits seek relief for “some of the most vulnerable” consumers who were “forced by financial distress to take out a loan.” Those people have been solicited by FIP since at least June 2011. Many of the lawsuits also name FIP owner Scott Kohn individually. These lawsuits allege that FIP violated state and federal consumer protection laws while using language misrepresenting its actions to disguise its tactics.
In one exhibit, a veteran agreed to “purchase,” or borrow, $5,500 – which included a $300 “set up” fee. In return, the veteran agreed to “sell,” or repay, $682 monthly for five years. In total, the veteran had to pay FIP $35,420 for a loan of $5,200, for an annual percentage rate of 137 percent. Many states have an APR interest cap on installment loans of 12 percent.
Although FIP has faced scrutiny and multiple lawsuits in the past, FIP’s conduct continued for years.
If you believe you were a victim of predatory lending, investment fraud, or broker misconduct, it is imperative to take action. Peiffer Wolf has represented thousands of victims, and we remain committed to fighting on behalf of investors.