    [Senate Hearing 114-856]
    [From the U.S. Government Publishing Office]

                                                       S. Hrg. 114-856

                          PENSION ADVANCES: LEGITIMATE
                            LOANS OR SHADY SCHEMES?

    =======================================================================

                                    HEARING

                                   BEFORE THE

                           SPECIAL COMMITTEE ON AGING

                              UNITED STATES SENATE

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 WASHINGTON, DC

                                   __________

                               SEPTEMBER 30, 2015

                                   __________

                               Serial No. 114-13

             Printed for the use of the Special Committee on Aging

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

            Available via the World Wide Web: http://www.govinfo.gov

                                   __________

                        U.S. GOVERNMENT PUBLISHING OFFICE
    48-679 PDF                 WASHINGTON : 2022

    -----------------------------------------------------------------------------------

                           SPECIAL COMMITTEE ON AGING

                       SUSAN M. COLLINS, Maine, Chairman

    ORRIN G. HATCH, Utah                 CLAIRE McCASKILL, Missouri
    MARK KIRK, Illinois                  BILL NELSON, Florida
    JEFF FLAKE, Arizona                  ROBERT P. CASEY, JR., Pennsylvania
    TIM SCOTT, South Carolina            SHELDON WHITEHOUSE, Rhode Island
    BOB CORKER, Tennessee                KIRSTEN E. GILLIBRAND, New York
    DEAN HELLER, Nevada                  RICHARD BLUMENTHAL, Connecticut
    TOM COTTON, Arkansas                 JOE DONNELLY, Indiana
    DAVID PERDUE, Georgia                ELIZABETH WARREN, Massachusetts
    THOM TILLIS, North Carolina          TIM KAINE, Virginia
    BEN SASSE, Nebraska
                                  ----------
                   Priscilla Hanley, Majority Staff Director
                     Derron Parks, Minority Staff Director

                             C  O  N  T  E  N  T  S

                                  ----------

                                                                       Page

    Opening Statement of Senator Susan M. Collins, Chairman..........     1
    Opening Statement of Senator Claire McCaskill, Ranking Member....     2

                               PANEL OF WITNESSES

    Louis Kroot, M.D., CMDR, USN, Retired, (accompanied by wife,
      Kathie Kroot) Lexington, Kentucky..............................     5
    Stephen Lord, Managing Director, Forensic Audits and
      Investigative Service, U.S. Government Accountability Office,
      Washington, D.C................................................     7
    Kaycee L. Wolf, Staff Attorney, Arkansas Securities Department,
      Little Rock, Arkansas..........................................     8
    Stuart T. Rossman, Director of Litigation, National Consumer Law
      Center, Boston, Massachusetts..................................    10
    Maria Cauwenbergh Walden, Director of Legislation and Policy,
      Public School and Education Employee Retirement Systems of
      Missouri, Jefferson City, Missouri.............................    13

                                    APPENDIX
                          Prepared Witness Statements

    Louis Kroot, M.D., CMDR, USN, Retired, Lexington, Kentucky.......    33
    Stephen Lord, Managing Director, Forensic Audits and
      Investigative Service, U.S. Government Accountability Office,
      Washington, D.C................................................    37
    Kaycee L. Wolf, Staff Attorney, Arkansas Securities Department,
      Little Rock, Arkansas..........................................    58
    Stuart T. Rossman, Director of Litigation, National Consumer Law
      Center, Boston, Massachusetts..................................    71
    Maria Cauwenbergh Walden, Director of Legislation and Policy,
      Public School and Education Employee Retirement Systems of
      Missouri, Jefferson City, Missouri.............................    80

                            Questions for the Record

    Kaycee L. Wolf, Staff Attorney, Arkansas Securities Department,
      Little Rock, Arkansas..........................................    87

                           Statements for the Record

    Letter of Resignation to VFG from Jonathan Sheets................    91
    Email to VFG from Jonathan Sheets................................    92
    Consent Order with exhibits A through H..........................    93
    National Law Consumer Magazine regarding military advertisement..   117
    Letters regarding pension beneftis from the Public School &
      Education Employee Retirement Systems of Missouri..............   119
    The New York Times article regarding "Loans Borrowed Against
      Pensions Squeeze Retirees".....................................   126
    News article from Treasurer Clint Zweifel regarding pension
      advances.......................................................   130

                          PENSION ADVANCES: LEGITIMATE.
                            LOANS OR SHADY SCHEMES?

                                  ----------

                         WEDNESDAY, SEPTEMBER 30, 2015

                                           U.S. Senate,
                                    Special Committee on Aging,
                                                        Washington, DC.
        The Committee met, pursuant to notice, at 2:30 p.m., Room
    562, Dirksen Senate Office Building, Hon. Susan M. Collins,
    Chairman of the Committee, presiding.
        Present: Senators Collins, Cotton, Tillis, McCaskill,
    Donnelly, Warren, and Kaine.

                     OPENING STATEMENT OF SENATOR
                       SUSAN M. COLLINS, CHAIRMAN

        The Chairman. Good afternoon. The hearing of the Special
    Committee on Aging will come to order.
        Decades ago, the warning ``caveat emptor,'' buyer beware,
    was the best advice one could give to a consumer seeking to
    borrow money. Well, that advice is still valid today.
        There are laws that seek to ensure that consumers
    understand the obligations that they are taking on and that
    lenders have to play by the rules. Since the passage of the
    Federal Truth in Lending Act in 1968 and similar State laws
    around the Nation, credit providers have been required to
    disclose key terms of consumer credit agreements up front in
    easy to understand language. If you want to know what interest
    rate you will pay on a new credit card, you will find it in
    big, bold letters right there on the front of your application.
    Likewise, interest rates on car loans, personal loans,
    mortgages, and myriad other consumer loan products are clearly
    and conspicuously displayed, but as we will learn today, that
    is not true for so-called pension advances. Pension advances
    are agreements under which consumers, usually retirees, receive
    cash lump sums in exchange for part or all of their monthly
    pension check. The effective interest rate on these lump sum
    payments can be outrageous. One company charged nearly 120
    percent last year. That fact, however, is hidden in the pension
    advance agreements, which do not include the simple and clear
    disclosures required by law for consumer loans. Instead, these
    contracts are so convoluted that it is difficult for consumers
    to realize just how much their lump sum pension advance is
    really costing them.
        By way of comparison, I would like to direct your attention
    to this chart. Using the State of Washington as an example,
    this chart shows the average interest rate charged on various
    forms of consumer debt compared to the effective rates on
    pension advances. The first three bars from the left show
    interest rates on typical sources of consumer credit--4.3
    percent for car loans, 9.7 percent for personal loans, and 12
    percent for credit card debt.
        The three bars on the right are interest rates calculated
    by the Government Accountability Office, better known as GAO,
    on pension advances that one company sold in Washington State
    over the past three years. As you will see, the rates escalated
    to an astonishingly high 117 percent last year. All of these
    rates are higher than the State of Washington's usury rate of
    25 percent.
        As if these interest rates were not bad enough, many
    pension advance companies require their customers to sign
    complex documents whose terms can only be described as
    deliberately deceptive. Typically, customers are required to
    take out life insurance policies naming the pension advance
    company as the beneficiary.
        Most consumers simply do not realize that the rates that
    they are paying are so high. For example, one of my
    constituents did not understand that he was paying a rate of 54
    percent on his pension advance until his tax preparer told him
    that the deal just did not look right and advised him to
    contact the Maine Bureau of Consumer Credit Protection.
        Second, many of these consumers are financially vulnerable
    and desperate for cash. These pension advance companies exploit
    this desperation. They also use flashy, aggressive, and
    misleading advertising to encourage quick and uninformed
    decisions.
        It is extremely troubling that some companies aggressively
    target the patriots who have served our country, our veterans.
    They use websites displaying the uniform and wrapped in red,
    white, and blue, and run ads in military magazines. Federal law
    prohibits the assignment of pensions of enlisted military
    retirees, but pension advance companies too often ignore this
    prohibition, just as they ignore Federal and State laws
    requiring clear disclosure of interest rates on consumer loans
    and just as they ignore State usury laws that set a ceiling on
    the amount of interest that can be charged on consumer loans.
    Pension advance companies claim that these laws simply do not
    apply to them, arguing that their products are not consumer
    loans or assignments, but simply advances.
        Today's hearing builds on this Committee's ongoing
    investigation into pension advances and continues our efforts
    to protect America's seniors from shadowy schemes that threaten
    their financial security. I hope that any retiree considering a
    pension advance will think carefully before taking that step
    and will seek advice on other ways to obtain financial
    assistance.
        I look forward to hearing the testimony of all of our
    witnesses today.
        With that, I would like to turn to our Ranking Member,
    Senator Claire McCaskill.

                     OPENING STATEMENT OF SENATOR
                    CLAIRE McCASKILL, RANKING MEMBER

        Senator McCaskill. Thank you, Senator Collins, Chairman
    Collins.
        Retirement security and consumer protection are both large
    parts of this Committee's focus and mission under the
    leadership of Chairman Collins. Today's hearing presents an
    opportunity to look at an alarming practice that intersects
    both of these Committee priorities.
        The defined benefit pension plan is considered the gold
    standard in terms of retirement security. Although it is not as
    popular as it once was, those people retiring today with a
    defined benefit plan are incredibly fortunate. They get a fixed
    payment for life, so they cannot outlive their savings, and
    they did not have to figure out how to invest this money or how
    much to put aside, so they are saved from the burden that they
    may not have had the financial wherewithal to adequately care
    for themselves throughout retirement, nor do they have to worry
    about an economic downturn happening right before they cash
    out.
        Willie Sutton explained that he robbed banks because that
    is where the money is. Well, these seniors with defined benefit
    plans are similarly ripe targets for a different kind of crook.
    These fraudsters offering pension advances are undermining all
    the advantages of these defined benefit plans, making what had
    been a secure retirement suddenly very unsettled. Worse still,
    these folks are targeting some of the pillars of our
    communities--our firefighters, our teachers, our veterans.
        They are also finding unwitting victims among elderly
    investors looking for a safe investment at a time in their
    lives when they are looking for ways to earn a little bit of
    money without taking a large financial risk. It truly is an
    impressive scam that is able to take advantage of both sides of
    the financial transaction, the investor and the pensioner, but
    that is what these pension advance schemes have been doing.
        Today, we will hear firsthand from victims of these schemes
    as well as those in the public sector and consumer protection
    groups about their efforts to combat this problem. This
    Committee is also investigating the bad actors behind these
    schemes, and I commend Chairman Collins for using this
    Committee's investigative and oversight powers to go after
    these folks.
        Right now, there simply is not enough being done here,
    because it is a legal gray area. While we hear from our
    Arkansas witness about all the good work she is doing down
    there to protect the public, unfortunately, once she catches
    these guys, she cannot prevent the same bad actors changing
    their corporate name and putting down roots somewhere else to
    find new victims in other states.
        There is only one State in the country where pension
    advance companies are not trying to take advantage of teachers,
    veterans, and firefighters, and that, I am proud to say, is in
    my home State of Missouri. I want to commend the work of our
    State Treasurer Clint Zweifel, who joined Republicans in the
    Missouri General Assembly to push for this legislation last
    year. This bill received enormous bipartisan support with no
    one testifying against it.
        Among those who spoke on the bill is one of our witnesses
    today, Maria Walden, from the Public School and Education
    Employee Retirement Systems of Missouri, the largest defined
    plan in our State and one of the best plans in the country. She
    will talk about the legislation banning pension advances and
    the protections that cover her members.
        I am also pleased to say that, thus far, our State has not
    had any reports of pension advance companies coming to Missouri
    since the bill was signed into law. I am hopeful other states
    will follow Missouri's lead and protect those public employees
    who have spent their careers protecting us.
        Once again, I want to thank the Chairman for calling this
    hearing and for our witnesses for joining to discuss this
    problem today. I look forward to your testimony. Thank you.
        The Chairman. Thank you very much.
        We are now pleased to turn to our panel of witnesses.
    First, we will hear from Dr. and Mrs. Louis Kroot. He is a
    retired Navy physician from Kentucky, and he and his wife,
    Kathie, will share with us their personal experience in selling
    their pension to a pension advance company.
        Next, we will hear from Stephen Lord, the Managing Director
    at the Government Accountability Office, who will discuss GAO's
    investigation of the pension advance industry.
        We will then hear from Kaycee Wolf from the Arkansas
    Securities Department, and I would like to call on our
    colleague, Senator Cotton, for the introduction of Ms. Wolf.
        Senator Cotton. Thank you. I am pleased to introduce Kaycee
    Wolf, who will testify about the work she and her colleagues
    did fighting pension advance fraud in Arkansas.
        Kaycee is a University of Arkansas Law School alum and has
    helped to protect Arkansans for the past five years as an
    attorney with the Arkansas Securities Department. Her work with
    the Securities Department was not about preventing
    sophisticated parties from entering mutually beneficial
    agreements. Instead, as we will hear, her team spent thousands
    of hours successfully fighting outright fraud and blatant
    misrepresentation of contracts.
        Kaycee, thank you for appearing before us today. It is an
    honor for this Committee and Arkansas to have you here.
    Arkansas and I are proud of the work you and your team have
    done and hope it can be a model for the entire country.
        The Chairman. Thank you.
        We will then hear from Stuart Rossman, the Director of
    Litigation at the National Consumer Law Center, and I
    understand that Senator Warren would like to introduce this
    witness.
        Senator Warren. Thank you, Chair Collins.
        I am pleased to introduce one of our witnesses today, Mr.
    Stuart Rossman. As you said, Mr. Rossman is the Director of
    Litigation at the National Consumer Law Center in Boston,
    Massachusetts.
        I just want to say about Mr. Rossman, he is deeply
    knowledgeable about the law, but he also has a very thorough
    understanding about what is actually happening to people across
    this country. In other words, he knows his stuff, and we are
    lucky to have him here today.
        Thank you, Mr. Rossman.
        The Chairman. Thank you.
        Finally, I want to ask Senator McCaskill if she would like
    to add anything. You mentioned our final witness on this panel,
    Maria Walden. If you have anything you would like to add to
    what you said in your opening statement.
        Senator McCaskill. Well, as I mentioned in my opening
    statement, she is the Director of Legislation and Policy for
    the Public School and Education Employee Retirement Systems,
    and it is one of the finest pension programs in the country. I
    like to remind our teachers in Missouri that we are not high on
    the scale when it comes to salaries, but when I was an auditor,
    we were number one in the country in terms of pension benefits.
    Are we still number one?
        Ms. Walden. We are very close, Senator.
        Senator McCaskill. Yes. I know that we have one of the
    finest pension programs for people on the front line of every
    social ill that faces our country. I think we forget that it is
    teachers that we are asking to do so much more than teach in so
    many places in our country today, so well deserved, good
    pensions, I think, are something that we all need to in this
    country realize is an important part of financial security.
        I am proud of your organization and so glad that you are
    here today. Thank you.
        The Chairman. Thank you all for joining us. We look forward
    to hearing your testimony, and we are going to start with Dr.
    and Mrs. Kroot.

                 STATEMENT OF LOUIS KROOT, M.D., CMDR,
                   USN, RETIRED, LEXINGTON, KENTUCKY

        Dr. Kroot. Chairman Collins, Ranking Member McCaskill,
    distinguished Senators on the Committee, thank you for the
    opportunity to appear before you today and to testify about our
    family's experience with pension advances. We are here today as
    husband and wife, because in our 34 years of marriage, we have
    always operated as a team and ours is a shared cautionary tale.
        For 22 years, I served our country in the Navy as a
    physician. When I retired as Commander, I intended to continue
    to work as a doctor, and I did so as an ER attending physician
    in several hospitals. Today, I continue to work as an ER
    attending at a VA hospital in Lexington, Kentucky.
        My wife, Kathie, has been at my side throughout most of my
    career and has done incredible work as an advocate for organ
    donation and as a dedicated volunteer at our synagogue.
        When I left the military, I planned to continue to provide
    for our family through work and through my military pension,
    but due to a perfect storm of unfortunate events, we were left
    with debt spiraling out of control. First, we received bad tax
    planning advice in moving funds from a 401(k) and incurred
    around $100,000 in unexpected fees and penalties.
        Second, we suffered over $10,000 in home repair from our
    basement flooding while our house was in escrow.
        Third, we incurred an enormous amount of medical expenses
    when it became necessary for our adopted special needs daughter
    to be repeatedly hospitalized for a serious psychiatric medical
    condition.
        We were financially desperate at that time and did not know
    where to turn. We had incurred an extraordinary and unexpected
    debt. We were looking for any way to pay off this debt.
        We had seen advertisements in military magazines for
    companies that gave lump sum payments for military pensions. We
    contacted one of these companies, Structured Investments, which
    was doing business under the name of Retired Military Financial
    Services, and they offered to provide us with a lump sum
    payment against my future pension payments. We jumped at the
    opportunity. We felt that the lump sum payment structured
    investments offered would allow us to pay off much of our
    existing debt.
        We understood at that time that we were taking an advance
    on moneys that were due from future retirement payments. We
    understood that there would be fees for this service. We did
    not realize how expensive it was going to be. We simply did not
    get out the calculator or see it as a loan. We were desperate
    and we panicked.
        In fact, we realized we had been taken to the cleaners by
    Structured Investments. We were shocked when the complex math
    in the contract was broken down by a reporter and explained to
    us that we were paying over 30 percent interest on our advance.
    The paperwork we signed did not disclose the interest rate. It
    did not break down how the numerous fees we were paying to
    Structured Investments raised our interest rate.
        An example of these fees are the thousands of dollars we
    paid for a life insurance policy on me, required for the
    advance by Structured Investments, listing Structured
    Investments as a beneficiary, and we needed to continue to pay
    this two years after the loan was paid off because we needed
    consent from them in order to stop the insurance policy.
        We ended up paying more in interest with our pension
    advance than we would have paid if we had simply paid off the
    interest over time on our existing debt load.
        Moreover, we learned after the fact that there were
    alternatives we could have used to reduce our debt load while
    avoiding paying the high fees charged by Structured
    Investments.
        We have fully paid off Structured Investments. Looking back
    on our experience, it is clear that we made a mistake. We
    should have been more aware of what we were buying. We also
    want to make clear that we accept that we signed the contract
    and we accept responsibility for that. We should have known
    better.
        As we said, ours is a cautionary tale and we want to make
    two points to those who may find themselves in a situation
    similar to ours. First, you have other options. You should
    explore those options and should resist the urge to reach for
    easy, immediate cash. Second, had we known what we now know, we
    never would have taken out the pension advance from Structured
    Investments with their unreasonable fees.
        We wish we could do everything over again and make better
    decisions. It is our fervent hope that by testifying today, we
    can prevent other individuals from making the same mistake we
    did.
        Thank you again for the opportunity to be here and we look
    forward to your questions.
        The Chairman. Thank you very much for sharing your personal
    experience. When people hear that a physician can be tricked by
    these convoluted contracts with the lack of disclosure, I think
    it is a cautionary tale to others, and by coming forward and
    being willing to share your story, I believe that you will save
    others from making the same mistake, so I very much appreciate
    your sharing your story with us today.
        Mrs. Kroot, do you have anything you would like to add from
    your perspective?
        Mrs. Kroot. No. We should have known better. I am a math
    major and I should have done the math.
        The Chairman. Well, I think the fact that these contracts
    could fool a physician and a math major probably tells you all
    you need to know about the lack of disclosure, the deception in
    the contracts, the hidden fees, the charges, and I think we
    will hear next from Mr. Lord that based on GAO's investigation,
    your experience is not at all uncommon, unfortunately. Thank
    you.
        Mr. Lord.

             STATEMENT OF STEPHEN LORD, MANAGING DIRECTOR,

            FORENSIC AUDITS AND INVESTIGATIVE SERVICE, U.S.

           GOVERNMENT ACCOUNTABILITY OFFICE, WASHINGTON, D.C.

        Mr. Lord. Thank you, Chairman Collins, Ranking Member
    McCaskill, and members of the Committee. I am really happy to
    be here to discuss our June 2014 report on pension advances and
    the status of agency efforts to implement our really important
    recommendations. This is a really important issue, because, as
    highlighted by Dr. Kroot, there are companies out there using
    aggressive marketing techniques to target those who are
    vulnerable and those in urgent need of cash.
        Today, I would like to discuss three issues. First, the
    number and types of companies marketing these types of
    products. Second, I would like to discuss how the terms of
    these products compare to other similar financial products,
    such as consumer loans, and finally, I would like to clarify
    the role of the CFPB and the Federal Trade Commission in
    overseeing these activities.
        First, regarding the overall numbers, at the time of our
    review, we identified 38 companies that offered lump sum
    pension advance products. While 18 of these companies were
    located in California, the remainder were spread across several
    other states and virtually all of them marketed these products
    on a nationwide basis through websites. I think that is one of
    the key points we revealed through our work, as well, and we
    found--interestingly, we found that at least 30 of these 38
    companies were affiliated in some manner with each other, and
    if you could turn your attention to, I called this our
    ``connecting the dots'' chart. This is not obvious from a
    consumer perspective, because if you make phone calls or
    conduct website research, you are initially led to believe
    there are 38 companies out there operating independently. Yet,
    by virtue of our undercover phone calls and follow-up research,
    we were able to identify connections between these entities.
        For example, Dr. Kroot, the two companies he dealt with are
    exhibited in the upper left-hand corner. That is Company four,
    as well as Company five. Structured Investments is Company
    four, and Retired Military Financial Services is Company five.
    It was obvious--it was not obvious to him at first blush that
    they are related, but through our work, we were able to
    identify these connections.
        The bottom line is the lack of transparency can make it
    difficult to file a complaint if you are a consumer, because
    you really do not know who you are dealing with. Also, if you
    are considering making an investment in one of these companies,
    it is difficult to do any research to assess the reputability
    of these vendors before making a financial decision.
        A second key point is regarding the terms of these deals.
    As highlighted by Dr. Kroot, the terms do not compare favorably
    with other similar financial products. How did we determine
    this? We analyzed 99 offers provided by six companies in
    response to our undercover phone calls. They did not know we
    were GAO calling. They assume we were a consumer interested in
    investing in these, and we found, first, these products had
    effective interest rates that were significantly higher than
    the legal limits set by states on consumer credit, called the
    State usury limits, and these rates range from 27 percent to 46
    percent interest rates. As you can see, that is considered
    really high.
        Second, we also found that these lump sums offered through
    these companies were about half of what you would get through a
    defined benefits pension provider. If you were to get it
    directly from your pension provider, it averaged about half.
    The percentage was 46 to 55 percent, so again, you could see
    these terms were not really that attractive from a consumer
    perspective.
        In terms of disclosure, as also highlighted by Dr. Kroot,
    we found that of the 38 companies, most did not disclose an
    effective interest rate, so it is really difficult to assess
    what type of rate is being provided.
        The bottom line of all our analysis, that these were not a
    good deal for consumers and the companies appear to be
    operating in a regulatory gray area.
        There is some good news here. In terms of our report
    recommendations, CFPB has taken some recent enforcement action.
    In August of this year, it filed a complaint against Pension
    Funding LLC. That is one of the entities Dr. Kroot was dealing
    with, as well as one other related entity. They also have
    released, CFPB and FTC, some consumer advisories in this area,
    so it is encouraging that the regulatory agencies are taking
    some regulatory and enforcement action, as we recommended in
    our report.
        This concludes my prepared remarks and I look forward to
    answering any questions you have later. Thank you.
        The Chairman. Thank you very much.
        Ms. Wolf.

                   STATEMENT OF KAYCEE L. WOLF, STAFF

               ATTORNEY, ARKANSAS SECURITIES DEPARTMENT,

                         LITTLE ROCK, ARKANSAS

        Ms. Wolf. Good afternoon, Chairman Collins, Ranking Member
    McCaskill, Senator Cotton, and other distinguished members of
    the Committee. I appreciate the opportunity to speak with you
    today about the investigation that the Arkansas Securities
    Department conducted against one such pension advance company,
    Voyager Financial Group, or VFG, and its owner, Andrew Gamber.
        What we found in our investigation is that although VFG was
    located in Little rock, Arkansas, it used a network of
    individual agents who were located throughout the United States
    as well as various websites with multiple domain names,
    different company names--that was mentioned by the GAO--under
    this one company, and so, it seemed like there were several
    different companies out there and it was all under the umbrella
    of VFG.
        Through these websites, they would try to locate pensioners
    who were interested in selling the right to their pension
    payments for a lump sum, and they would also look for buyers
    who were interested in paying a lump sum amount for a steady
    return on their investment. I believe some of the interest
    rates promised were between seven and nine percent, which was
    more than what the market was offering.
        Some of the investors also found out about this product
    through agents with whom they had already a professional
    relationship.
        VFG facilitated everything for the transactions on both
    sides. The pensioner and the investor never spoke and never
    dealt directly with each other. They always dealt with VFG and
    VFG's agents.
        Once a pensioner was located, VFG would place the pension
    up for sale and they would help the pensioner establish an
    escrow account. The pensioner would then submit paperwork
    provided by VFG to their pension company and the pension
    company would be instructed to forward the pension amount to an
    escrow account. In turn, once that money was in the escrow
    account, it was then directed to be forwarded to the investor
    each month.
        This is an important distinction, because at no time was
    the actual pension assigned. At no time did the pensioner
    relinquish control over his pension, and at no time did the
    investor have control over that pension. The reason why this is
    important is because the number one complaint that we received
    was the failure of VFG and its agents to disclose the redirect
    risk, and what I mean by this is because the pensioner
    maintained control of his account, because especially with
    military pensions it is illegal to assign away your pension,
    they could direct the escrow company to--or direct the pension
    company to redirect the funds back to a different account and
    no longer to that escrow account. If the pensioner got into
    financial trouble and had to file bankruptcy, the pension would
    get caught up in the bankruptcy and would no longer go to the
    escrow account, so from the investor perspective, they were no
    longer getting that monthly return. They were never warned that
    this was possible.
        The problem is, that a lot of the investors we saw were
    senior citizens looking for a safe, low-risk investment, and
    that is how this product was packaged to them, that this was
    safe. You would get a seven to nine percent return on your
    investment each month, and some of the investors were told it
    was government insured, which was patently false.
        Another miscommunication and blatant, outright lie from VFG
    was the failure to disclose the fees involved in these type of
    products, and you have heard some about that. VFG failed to
    disclose a fee breakdown on both sides of the transaction. A
    pensioner never actually knew what their pension sold for lump
    sum, and on the other side of the table, an investor never knew
    how much of that lump sum they paid actually went to the
    pensioner. They were told VFG would receive a fee, sometimes an
    administrative fee is how it was couched, and the investors
    were told, but most of your money is going to go to the
    pensioner, and that ended up not being the case because there
    was a failure to disclose the fees.
        What happened in reality was that VFG would receive the
    lump sum payment from the investor. They would cut themself a
    rather large commission off the top. Then they would forward
    all of the commissions on to the individual agents. I saw one
    contract that had as many as six individuals receiving
    commissions off of one sale.
        Then they would pay out administrative fees, such as the
    escrow fee and other various fees, and then along down the
    line, finally, the pensioner would receive a much smaller lump
    sum amount than what it was purchased for, and again, there was
    no detailed disclosure about that to either side, either the
    investor or the pensioner.
        Unfortunately, with the Arkansas Securities Department in
    its name, we are a securities regulator, so we were looking at
    this from the investor side and we were very limited in the
    type of regulatory action we could take. Fortunately for us,
    Arkansas State law is the risk capital test to be able to
    analyze it as an investment contract, and we determined that it
    was under our State test, and, therefore, it was a security, so
    we were able to take enforcement action against VFG. However,
    the risk capital test is not the analysis in every State, nor
    is it the analysis federally, so it does vary State to State
    whether this would be considered a security.
        Although we were able to shut down VFG, it is unfortunate
    that Mr. Gamber has not learned his lesson, because it seems
    that he has continued to flout authority and has developed
    other companies and looks to be doing the exact same thing, and
    we currently have an ongoing investigation against him and some
    additional companies.
        So, I want to conclude by thanking you for having me here
    to talk about our investigation and I look forward to any
    questions you have.
        The Chairman. Thank you very much.
        Mr. Rossman.

                STATEMENT OF STUART T. ROSSMAN, DIRECTOR

              OF LITIGATION, NATIONAL CONSUMER LAW CENTER,

                         BOSTON, MASSACHUSETTS

        Mr. Rossman. Thank you, Chairman Collins and Ranking Member
    McCaskill, Senator Warren, members of the Special Committee on
    Aging. I appreciate being invited to testify today regarding
    pension advances and to report on recent cases involving
    military pension assignments where I have been counsel of
    record on behalf of disabled and retired veterans of our armed
    forces.
        As Senator Warren noted, I am the Director of Litigation at
    the National Consumer Law Center. For the past 16 years, I have
    been responsible for coordinating and litigating cases at NCLC
    on behalf of income-and age-qualified individuals, and I
    testify today on behalf of NCLC's low-income and elderly
    clients.
        In May 2003, NCLC was researching consumer scams
    perpetuated on active military personnel and ultimately issued
    a report, but while we were investigating that report, we came
    across a separate issue. The Judge Advocate General Corps felt
    that some of the greatest abuses that they were seeing
    concerned the solicitation of retired military personnel to
    gain access to their pension payments. What we discovered was
    that companies and individuals were targeting veterans'
    benefits, usually by offering those up-front cash payments in
    return for several years of the veterans' monthly payments.
        Veterans receiving retirement and disability benefits are
    highly attractive targets for financial exploitation. I like to
    say that guaranteed streams of income are sort of like honey to
    bees. They are just naturally attracted to the fact that the
    money is there, and particularly where we are dealing with
    vulnerable populations that are relying upon their pensions for
    their safety net. Retirement and disability benefits are
    regular, dependable, and long-term, and it is very easy to
    automatically transfer the funds each month. In the military
    setting, it is done by way of allotments through the Defense
    Finance and Accounting Services.
        Veterans are also easy to reach through affinity marketing
    and advertising in targeted publications. More and more, it is
    now proliferated through the Internet. The companies engage in
    what we call lead generators. When Dr. Kroot was contacted by
    RMFS, that was a lead generator which then turned him over to
    Strategic Investments, which was, in fact, the lender, so they
    are actually serving as the agents, as we previously heard.
        And, finally, veterans may have perceived themselves to
    have--they usually have heavy debt burdens or poor credit as a
    result of the financial strains of their deployment and their
    frequent relocations.
        I want to talk about a specific case that we had. We
    represented Darryl Henry, who retired as a Chief Petty Officer
    after 20 years of military service and had both combined
    pension and disability payments of over $1,000 a month. When he
    went to purchase a home, he found out that because of the debts
    that he had had when he left the service, he did not qualify
    for a prime loan to purchase, and in trying to find a better
    option, he found an advertisement for Retired Military
    Financial Services, the same company that reached out to Dr.
    Kroot. They then referred him to the Structured Investors
    Company, once again, the same company, and I have included the
    ad as part of my testimony, and he got a lump sum set of
    payments, which if he as a Chief Petty Officer had figured out
    what the actual interest rate was, it was 28 percent, which is
    far above the California usury law would permit.
        I do want to point out that we keep on pointing out on the
    usury laws. Unfortunately, only approximately one-third of the
    states in our country have usury laws at this point, so the
    fact in California, he would have been protected under those
    circumstances, but in many states, that would not have been
    true.
        Mr. Henry was told that since the transaction was not a
    loan, his credit score did not make any difference. They
    actually used it as a way of selling it to him that he could
    improve his credit score by paying down his loans.
        Mr. Henry got in touch with us and we ended up bringing
    suit on behalf of him and other enlisted personnel in a case in
    California in Superior Court. We alleged that it was a contract
    that violated the usury statutes and was also a violation of
    the Truth in Lending. We also indicated that it was in
    violation of the Federal statutes both from the Department of
    Defense and Veterans Administration that prohibit assignments,
    putting them in a rock and a hard place. If they said it was
    not a contract and it was an assignment, if it was not an
    assignment, it was going to be a contract, and then if it was,
    in fact, a violation of either of those statutes, we claimed it
    was a violation of the California consumer protection statute.
        We actually tried the case in May 2011, and in August 2011,
    the judge issued his rulings, finding that, in fact, it was a
    violation of DOD and Veterans Administration regulations and,
    therefore, was a violation of the California consumer
    protection statute, and awarded our clients $2.9 million worth
    of damages.
        Unfortunately, in the interim, the California Division of
    Corporations had shut down SICO, mainly because our litigation
    had stopped their flow of income, and that subsequent to our
    getting the judgment against SICO and the two principals, they
    all filed for bankruptcy and received bankruptcy protection.
    Interestingly enough, one of the reasons why they do not want
    these to be contracts is because as contracts, they would be
    dischargeable as unsecured debts. Yet once we got the judgment
    against SICO and the individuals, they sought the protection of
    the bankruptcy courts to protect having to pay the judgments.
        Our client, Mr. Henry, ended up getting nothing out of the
    deal because he had paid off his loans already. A number of
    individuals who had been in the process of paying off their
    loans at least could stop at that point and we were able to
    save them funding.
        Mr. Henry told me that at least he stopped this company
    from doing these bad transactions. Unfortunately, and quite
    honestly, my clients here are the heroes here. The lawsuit that
    Mr. Lord was just referring to was filed a couple of weeks ago
    by the Consumer Financial Protection Bureau along with the New
    York Department of Financial Services was against a company
    called Pension Funding, and three of their managers were named
    as defendants in those suits, one of whom was Mr. Steven Covey,
    who used the bankruptcy laws in order to get out of the debt
    that he owed in my case back in 2011. The Pension Funding Group
    does not do military loans. He apparently learned enough of
    that lesson, but fortunately, the regulators in that case were
    able to step forward.
        I think the bottom line answer to this is that we certainly
    need full disclosure. We need to ensure that the usury laws are
    obeyed. We need to make sure that the various Federal and State
    agencies are enforcing the law. Individuals have the ability to
    use consumer advocates in order to protect their rights, but
    ultimately, preventing this from the very beginning is the best
    way to deal with this problem. There are many, many other
    alternatives that are much better than these loans.
        The Chairman. Thank you very much.
        Ms. Walden.

            STATEMENT OF MARIA CAUWENBERGH WALDEN, DIRECTOR

                OF LEGISLATION AND POLICY, PUBLIC SCHOOL

               AND EDUCATION EMPLOYEE RETIREMENT SYSTEMS

                 OF MISSOURI, JEFFERSON CITY, MISSOURI

        Ms. Walden. Chairman Collins, Ranking Member McCaskill, and
    other distinguished Committee members, my name is Maria
    Cauwenbergh Walden. I am the Legislative Director of the Public
    School Retirement System and the Public Employee Retirement
    System of Missouri.
        There are over 575,000 Missourians that are now protected
    under the statewide law ban that prevents pension advances in
    the State of Missouri. Since 1946, PSRS/PEERS have worked to
    provide strong, stable, secure retirement benefits to over
    250,000 Missouri public school teachers and public education
    employees. We pay more than $2.5 billion annually in benefits
    to over 82,000 retirees. We continue to be a financially stable
    defined benefit plan for our members. We have over $37.4
    billion in assets. We are the largest public retirement plan in
    the State. If you combine all other 85 retirement plans in the
    State, we have more assets and more membership than all other.
        The quality of our plan design, as Senator McCaskill
    mentioned, has been nationally recognized by the Public Pension
    Coordinating Council. We are governed by a seven-member board
    of trustees. That system is an independent trust fund. The
    board is charged by law with the administration of those
    systems. Due to the independent nature of our trust fund, staff
    is limited in the ability to support matters of which the board
    have not yet taken an official position. The comments that I am
    making today are solely for informational purposes and require
    that the systems remain neutral on this issue.
        As the Chairman indicated, pension advances are financial
    instruments where an individual with a pension receives an up-
    front lump sum payment in exchange for contracting away a
    portion of that individual's pension payment.
        During the fall of 2013, there were several national media
    reports on predatory practices of pension advances across the
    Nation. They started in Missouri in the boot heel and they
    worked their way up to Jefferson City. The news reports during
    that time stated the monthly payments made by the borrower can
    be subject to effective interest rates of 27 to 106 percent. In
    some cases, as was mentioned earlier, borrowers are required to
    take out a life insurance policy and name that pension advance
    as the sole beneficiary to ensure payment.
        In September 2013, State Treasurer Clint Zweifel went on
    record as being very concerned about the predatory practice of
    pension advance companies in Missouri. In an effort to protect
    Missourians, he established the Pension Advance Portal on his
    website to allow public pensioners the ability to report any
    concerns or problems they had faced.
        That same month, the systems held several internal meetings
    to discuss the impact of those pension advance companies on our
    own members. Any time we see any firm or organization that
    might attempt to take advantage of our members, we become
    concerned and we work toward ensuring that our members are
    aware of any potential challenges or pitfalls they might face.
        In light of the media reports of these type of services, we
    really took a proactive stance and updated our website to
    educate our members, and we also informed them of the current
    statutory provisions that were in place that would protect
    them. In addition, management notified our staff regarding
    pension advances to ensure that retirees would be informed of
    this type of practice during any of our educational meetings
    that we hold throughout the State.
        One of the challenges the system faced was educating
    members and the public on the statutory protections that were
    already in place. PSRS/PEERS members are covered by an anti-
    alienation and an anti-assignment provision in statute. As you
    are aware, an anti-alienation clause is a provision in the
    governing documents for an arrangement such as a trust as ours
    that specifies that the beneficial or equitable owner of that
    property held in that arrangement cannot transfer the interest
    to a third party. Those provisions prevent PSRS/PEERS from
    paying benefit payments to anyone other than the retiree or
    from accepting an assignment of the retiree's benefit payment.
        Therefore, by statute, we are prohibited from paying
    benefit payments directly to a pension advance company, and
    many of our statewide plans provide similar protections in
    their statutes. However, after receipt of the benefit payment
    from PSRS/PEERS, a retiree can use his or her pension benefit
    in any manner. Therefore, a PSRS/PEERS retiree would be able to
    enter into a contract with a pension advance company as long as
    the contract did not require PSRS/PEERS to make that payment to
    anyone other than our retiree.
        On January 7th, at the request of State Treasurer Zweifel,
    Representative Tony Dugger and Senator Mike Cunningham
    sponsored House Bill 1217. It prohibited pension advances from
    being sold in Missouri to public pensioners. House Bill 1217
    specified that the right of a person to a public employment
    retirement benefit cannot be transferred or assigned at law or
    in equity. A pension assignee would be prohibited from using
    any device, scheme, transfer, or other artifice to evade the
    applicability and prohibitions of this provision. Any contract
    or agreement made in violation of these provisions would be
    considered void and all sums paid and collected by the assignee
    would be returned.
        During the legislative process, proponents of House Bill
    1217 testified that the bill served as a good consumer
    protection for all Missouri public pension retirees. Proponents
    testified that the bill prohibited a person's Missouri public
    employment retirement benefit from being transferred or
    assigned to a pension advance service and would keep the
    benefit for what it was meant to be, a retirement benefit. The
    bill created a ban on pension advance lenders and would ensure
    that pensions earned by teachers, our firefighters, our police
    officers, and other public servants would be protected from
    such a practice.
        One of the reasons cited for the need of this legislation
    was to protect all of Missouri's public pensioners, especially
    any of those members whose plans might not have an anti-
    assignment provision.
        We had five groups that testified in support of the
    provision. There were no groups that opposed the legislation.
    It was approved by the Governor on July 9, 2014, went into
    effect that August. Since the implementation of this law, we
    are not aware of any retiree---of our retiree--who has been
    sold an income stream for all or part of his pension. We also
    have not received a request from a retiree to make a payment to
    a pension advance service or into an escrow account.
        Thank you so much for the opportunity to testify today. I
    look forward to answering any questions you may have.
        The Chairman. Thank you very much for your testimony.
        Dr. Kroot, what we have learned from your experience, from
    the testimony of Mr. Lord and Mr. Rossman, is that veterans are
    frequently targeted, probably because it is known that military
    retirees have pensions the way other public employees do, and
    so there is a regular stream of income. You mentioned that you
    saw an ad in a military magazine for one of these pension
    advances, and I want to put up a couple of examples of the
    typical ads that we are finding as part of our investigation,
    very patriotic looking.
        You also initially dealt with an organization that was
    called Retired Military Financial Services. Did that give you a
    sense of comfort that this was a legitimate offering?
        Dr. Kroot. Yes, it did, Senator.
        The Chairman. How long did you sign away your pension--for
    how long a period did you agree to sign away your pension?
        Mrs. Kroot. Senator, it was for eight years. If we failed
    to make a payment, then we would automatically go into a 10-
    year repay.
        The Chairman. Eight years is a very long time. Can you tell
    us what portion of your pension that you agreed to give up for
    those eight years in return for the lump sum, approximately?
        Mrs. Kroot. Approximately? Currently, we are receiving a
    little over $3,000, like, $3,015 in retirement benefits. During
    the time that we were paying Structured, we would get a check
    from Structured every month for about $300. I would say between
    $2,500 and $2,700 was taken each month.
        The Chairman. Instead of getting your military pension
    check each month of about $3,500, you instead were getting
    $300?
        Mrs. Kroot. Yes, ma'am.
        The Chairman. That must have been so difficult for you.
        Ms. Wolf, I want to commend you for being very aggressive
    in closing down Voyager's operations in your State. In my past,
    I spent five years as the chief regulator overseeing the Bureau
    of Insurance, Consumer Credit Protection, Banking, and the
    Security Division. I was very interested--in the State of
    Maine, I am talking about--I was very interested to hear you
    talk about not only the effect on the military retiree or the
    person giving up the pension, but on the investor on the other
    end of the transaction. You looked at it as if it were a
    security, whereas the Consumer Credit Protection Bureau in my
    State would look at it as a consumer loan.
        My point, however, is this. You were able to close down
    this bad company in Arkansas and protect the people of Arkansas
    from this bad actor, but you pointed out he simply set up shop
    in another State. Does that mean that we need to have some sort
    of Federal regulation or legislation in this area?
        Ms. Wolf. Well, I certainly--it is very limiting, what we
    can do as a securities regulator, because you are right, we
    were looking at it from the investor standpoint, and
    unfortunately, with the nature of Mr. Gamber, and it sounds
    like from other types of pension companies like this, they do
    shut down in one State, and although Mr. Gamber, we believe, is
    still in Arkansas, he has formed companies in Texas and seems
    to be doing the exact same thing one State over, and that seems
    to be quite common.
        I cannot speak to Texas securities laws as well as other
    states' securities laws, and so strictly from a security
    standpoint, it varies State to State, and if there is not some
    type of overreaching protection otherwise in place, then we are
    limited to the action we can take.
        The Chairman. Obviously, Missouri has taken care of this,
    the only State in the Nation, by banning this kind of practice
    when it comes to public pensioners, but there are a lot of
    private sector people, as well. Although defined benefit plans
    have greatly declined, there are still some. In Missouri, Ms.
    Walden, is there any protection for those who are receiving
    private pensions?
        Ms. Walden. Not that I am aware of. The State law only
    addressed public pensioners.
        The Chairman. Mr. Lord and Mr. Rossman, I want to give you
    the opportunity to give us your recommendations on whether or
    not, given the ease with which people can move from State to
    State, the bubble chart that Mr. Lord put together showing the
    interlocking companies. We will start with Mr. Lord. What do
    you think Congress could do to help protect people in this
    area?
        Mr. Lord. Well, there are a couple things. It has been a
    long unsettled question on whether these constitute consumer
    loans or not and, therefore, should be subject to the Truth in
    Lending Act disclosure requirements. If there is some way to
    clarify that, number one.
        Also, just in terms of transparency, you could require in
    some respects more reporting about who these entities are or
    just have some sort of minimum reporting requirements that help
    enhance the transparency in this area. It is a very murky area.
    I know they are doing this--they structure these products
    deliberately by design so they fall outside some of the
    existing statute, but from a consumer perspective, it is
    simply--they do not have a lot of visibility.
        I think there is a clear Federal role in consumer
    education. There is a Financial Education Literacy Commission.
    It is vice chaired by CFPB. I think they could take additional
    steps to educate the consumer. Obviously, consumers are
    ultimately responsible for their own financial decisions, but I
    think they need to better understand the risk of these
    transactions going into them.
        The Chairman. It is clear that the companies are taking
    advantage of this murkiness, and the fact that in one State it
    is going to be treated as a security in order to get at them
    and in another as a consumer loan shows you some of the
    problems.
        My time has expired, so Mr. Rossman, I will get to you on
    the second round.
        Mr. Rossman. Fair enough.
        The Chairman. Senator McCaskill.
        Senator McCaskill. Thank you.
        Ms. Walden, one of the more disturbing parts of these
    schemes--I know this was applicable to your members--is the
    idea that your pension members do not have Social Security.
        Ms. Walden. Correct.
        Senator McCaskill. Even those that do are subject to the
    complicated rules under the windfall elimination provision, so
    for these people, selling off future income is even more
    dangerous because they do not even have Social Security to fall
    back on. How does this work with your plan? If someone signed
    up for a pension advance, assuming they were still legal in
    Missouri, would they typically, any of your members, any of
    them have Social Security income they could rely on?
        Ms. Walden. Some of them do. It depends on what they did
    prior to teaching. It also depends on what they do during the
    summer months. As you know, most teachers work year-round, but
    at the same time, they have a little bit of a break during the
    summer months. They can earn some Social Security benefits.
        Senator McCaskill. Are there any options that your
    pensioners have if they needed a substantial sum of money? Can
    they take a lump sum at any time from this system? Is that
    allowed in Missouri?
        Ms. Walden. The only allowing that we have is if a member,
    before they retired, we have an option called a partial lump
    sum. That allows a member to take a portion--it is either a 12,
    a 24, or a 36-month portion--and what it basically does is give
    them that pension for those years that they take and it reduces
    their overall--actuarially reduces the pension they receive,
    but they do get a lump sum, so if you have an individual who
    wants to pay off their house before they retire, they will work
    an additional three years and get that 36-month partial lump
    sum so they can pay off their house, and it is actuarially
    reduced, so it is a dime-for-dime transaction. There is no
    enhanced benefit for the system at all.
        Senator McCaskill. If something occurred unexpected after
    they had made their decisions about retirement, there is no
    options for them, perhaps, except something like these scam
    artists.
        Ms. Walden. They could potentially--in Missouri, it is not
    allowed at all for our teachers due to the law that was passed.
    Prior to that, most of our teachers will call in. We have an
    unbelievable member education system, and we touch teachers
    every day. The call volume is unbelievable. They call us when
    they have any kind of question, and what is great about it is
    we have that type of relationship with the teachers. Our
    teachers give 14.5 percent contribution rate. They love their
    retirement plan and they want to make sure what they are doing
    is protected, and so we get calls and that is where part of our
    education process was also to educate our staff, to let them
    know if they received any calls regarding this to, one, inform
    them of the problems that could result from it, such as we have
    seen earlier today.
        Senator McCaskill. Right, with Dr. Kroot.
        Mr. Rossman, these products remind me a little of life
    settlements or payday loans in the sense they allow a consumer
    who is desperate and feels pressure and needs cash in exchange
    for promises of something that would happen in the future.
    These industries are regulated in some capacity, although there
    is certainly a concern with both products, but there is a
    market out there for people who need a large sum of money. Do
    you think pension advances should be regulated like those
    products for people who really need the money, with some sort
    of interest rate cap? I mean, are we making a mistake by
    outlawing these a opposed to just making them behave like moral
    human beings?
        Mr. Rossman. That would be a good start. I think that,
    first of all, you have to distinguish between the payday
    lenders and the other products, predatory products, that are
    out there. What is unique about these pension advance
    companies, and it was a great surprise to us, was that they are
    much smaller in size. Many of the other predatory lenders are
    now publicly held companies, and these were pretty much thinly
    capitalized corporations that had absolutely no skin in the
    game. What we found out with each of these entities, and I do
    not know if Mr. Lord found the same experience, was that they
    only loaned out what they were able to get in from investors,
    so the individuals who were running the show----
        Senator McCaskill. That is like a bookie.
        Mr. Rossman. Yes, exactly.
        Senator McCaskill. They are just taking the ``vig.''
        Mr. Rossman. They are just taking the ``vig,'' exactly,
    and, so, the other issue----
        Senator McCaskill. I do not know how I knew that word, I
    just want to say for the record.
        I just want to put that on the record. I do not know where
    that came from.
        Mr. Rossman. I come from Boston, so I know exactly what you
    mean.
        Senator McCaskill. You know exactly what it is.
        The Chairman. I do not. I come from Maine.
        Mr. Rossman. I think that the other thing that is
    significant is that most of the predatory loans that we usually
    see out there are in the $5,000 to $10,000 range. As I think
    Mr. Lord said, and we found certainly in our reports, we were
    seeing averages of $45,000 to $50,000 and upwards over
    $100,000, which is a much bigger sum.
        Look, we understand that individuals run into difficult
    times financially, like the Doctor was testifying. There are--
    certainly each--in my case in the military, each of the
    branches of the military have relief funds to help people in
    cases of emergency. There is also the possibility to use the
    guaranteed stream of income in order to secure a loan from a
    more responsible and regulated source. You could go to a credit
    organization or a savings and loan to be able to take out the
    loan and then secure it. The key here, though, is that you are
    controlling your funding, and that is not the case with these
    companies. You literally lose control over your pension over
    that time.
        I thought that the Doctor was absolutely correct, and we
    had found the same situation, that if, in fact, you tried any
    way to get yourself out of the transaction, you were penalized
    with a two-year addition. That is two years, in their case, of
    almost $3,000, so looking at a $25,000 penalty. It is
    outrageous. It is unconscionable. It is a sharp practice that
    really cannot be tolerated.
        So, I do not know that regulating that makes a great deal
    of sense. I think that providing other alternative products are
    important.
        The last thing I want to just ad on this, Senator, is the
    fact that we are dealing here with an Internet product now. It
    is very different than when we started this back in 2003.
        Senator McCaskill. Right.
        Mr. Rossman. You know, you are saying they went from
    Arkansas to Texas, half the time, you have no idea where this
    company is located.
        Senator McCaskill. Right. This is an IP address.
        Mr. Rossman. Exactly.
        Senator McCaskill. Right. Thank you very much. Thank you,
    Madam Chair.
        The Chairman. Senator Tillis.
        Senator Tillis. Thank you, Madam Chair. I made a personal
    note to go on the Internet and look up what a ``vig'' is.
        Senator McCaskill. Oh, come on. I do not believe you. You
    know what a ``vig'' is.
        Senator Tillis. Dr. Kroot, first of all, thank you for your
    service in the Navy and thank you for your continued service
    for our veterans. I wanted to get to the--you were required to
    take out a life insurance policy, I think, for $180,000. This
    is after you have agreed to pay about $230,000 back for a
    $91,000 loan. What is the nature of the requirement that you
    have now in terms of keeping that life insurance policy
    current? I mean, are they paying it at this point and you have
    to keep it--I need to understand a little bit about that
    ongoing obligation.
        Dr. Kroot. We paid for this and it was paid up, and when
    we----
        Mrs. Kroot. It was a term life insurance and the term ends
    in October. We were unable to stop paying it until the end of
    the term because we needed permission from Structured to stop
    paying it.
        Senator Tillis. Thank you, and I am sorry for what you went
    through.
        Ms. Wolf, I had a question for you. The Operation Voyager
    in Arkansas, it sounds like this--I think it is fair to call
    him a thief--he would originate some of these loans and then
    distribute them and sell them. I am trying to get a sense of
    what his business operation. It sounds like he would do a loan
    for Dr. Kroot, identify people that would buy the product that
    he has sold, and did he continue to service these loans? Did he
    have a business operation, or did he wash his hands of it after
    he transferred it or distributed it?
        Ms. Wolf. Originally--well, pretty much, he washed his
    hands of it. What would happen is the company would, through an
    agent, say, in Florida, would find a pensioner who went to the
    website and filled out the information that wanted to sell
    their lump sum--their pension for a lump sum. This person in
    Florida, usually a military veteran, put the amount that they
    were looking to sell it for or the amount of money they needed
    and the amount of money that they got each month from their
    pension.
        Voyager would then package these and put a purchase price
    on them, unbeknownst to the pensioner, and through another
    network of agents would find a buyer who was willing to pay
    that amount of money for, say, $1,000 a month for six years
    coming in, but Voyager would facilitate all the paperwork
    between the parties and would kind of stay out of it. They
    would facilitate everything----
        Senator Tillis. Yes, but who--I was trying to get a sense
    of who is actually doing the servicing of the loan, though,
    because there is still that process of, I guess, processing the
    pension payments, providing some disbursement back to the
    person who is providing the loans. I was trying to figure out
    or get a better understanding of the underlying business
    enterprise that exists for the life of the loan.
        Ms. Wolf. Voyager would set up an escrow account for the
    lump sum payment, but then they would have the pensioner set up
    an escrow account for a certain amount of time to direct the
    pension, so there was never actually a loan. They would just
    have the pensioner direct that money into the escrow account
    for a certain amount of time, and that is where the issue came
    from, because the pensioners would then turn around and either
    redirect the money back to themselves or have to file for
    bankruptcy and get caught up in the bankruptcy. There was never
    the--or, the money to the pensioner would be distributed at the
    very beginning----
        Senator Tillis. Okay.
        Ms. Walden [continuing]. and--yes.
        Senator Tillis. Mr. Rossman or Mr. Lord, or anyone else who
    may want to contribute, the law that was passed by Vermont, is
    that a best practice law? Is that something that all states
    should consider, or is there a best practice baseline out there
    that as we discuss what we may do at the Federal level, that we
    should be encouraging our respective states to take up?
        Mr. Lord. Unfortunately, I do not know enough about the
    Vermont specifics to comment on, other than they do have a law
    that pertains to this issue.
        Mr. Rossman. The problem--the Vermont law is a good law,
    there is no doubt about that. The problem is that because of
    the situation of the Internet--it stops at the State line.
    States can only do so much to protect their citizens from
    people coming from outside the jurisdiction, and I think that
    the proposal of having a Federal system that would guarantee
    uniformity across the country would be a very good one, because
    there is going to always be a situation where they are going to
    be able to find a jurisdiction to be able to hide out, so to
    speak, in order to market their bad wares.
        Senator Tillis. Thank you very much, and thank you all for
    the work that you are doing. Again, Dr. Kroot, thank you for
    your service to our country.
        The Chairman. Thank you.
        Senator Warren.
        Senator Warren. Thank you, Chair Collins. I want to thank
    you for holding this hearing today. This is really important,
    and thank you, Ranking Member McCaskill, for doing this, and
    thank you to all the witnesses for coming. We really appreciate
    your coming and telling this story. I know it is hard to do
    that, but it is very important that we understand what is
    happening here.
        I just want to see if I can pull this together so we have
    kind of got it all in one place, so defined benefit pensions,
    the steady, guaranteed income stream throughout retirement, we
    know these pensions are disappearing and the Americans who
    still have them know that they are lucky to have these
    pensions, but now there is this interconnected industry that is
    targeted to getting their hands on pensions. These pension scam
    companies turn a profit by offering retirees cash in exchange
    for a fixed amount of the buyer's future pension, as you
    testified to, plus, of course, interest and fees, and according
    to a 2014 report from the nonpartisan Government Accountability
    Office, and also as we have learned today from Senator Collins,
    these loans can have pretty shocking fine print, for example,
    effective interest rates over 100 percent, and to make sure
    that they get paid no matter what, these companies require the
    retirees often to buy a separate life insurance policy to cover
    the loan if the retiree dies and the pension stops, so it is a
    great deal for the companies running the pension scam. No risk
    and a hundred percent-plus interest rates on this.
        I just want to pull a couple of the pieces apart here. Mr.
    Rossman, as the Director of Litigation at the National Consumer
    Law Center in Boston, you have seen the damage that these
    predatory pension scams do firsthand, and I want to ask about
    some of the details. Who is the typical victim of this kind of
    scam?
        Mr. Rossman. The typical victim of the scam, you are going
    to have someone who has a guaranteed stream of income-----
        Senator Warren. Who does that tend to be?
        Mr. Rossman. You will be including in here you are going to
    have retired military personnel, you are going to have disabled
    military personnel, State, municipal, and Federal Governmental
    employees who are covered, and then in our case, those
    individuals who are covered by ERISA will very often have--and
    ERISA does have protections for anti-assignability----
        Senator Warren. So, military, teachers----
        Mr. Rossman. Teachers----
        Senator Warren [continuing]. firefighters----
        Mr. Rossman [continuing]. firefighters, exactly.
        Senator Warren. All right. Now, lots of states have
    consumer protection laws prohibiting loans with exorbitant
    interest rates, usury laws, and then there is the Federal Truth
    in Lending Act to protect consumers from loans like this, as
    well, so how can this be legal?
        Mr. Rossman. In our case, every single page of the contract
    was stamped on the bottom of the page with a rubber stamp that
    said, ``This is not a loan.'' ``This is not a loan.'' Now, I
    must tell you, after having done this for 20 years, if it
    quacks like a loan and it waddles like a loan and it smells
    like a loan, it is probably a loan----
        Senator Warren. It is probably a loan.
        Mr. Rossman [continuing]. but they went to great lengths in
    order to avoid having typical contract loan language and
    discounting that it was a loan.
        One of the things that was rather interesting, though, and
    we caught them on, is that there were a number of cases early
    on where people tried to discharge in bankruptcy and we were
    able to get the bankruptcy records where the same company came
    running in and saying, ``No, no, no, it is not a loan. It is an
    assignment.'' Then when we got in California, we said, ``Wait a
    minute, Your Honor. They were just in bankruptcy court saying
    that this was an assignment. Now they are saying it is not a
    loan. It has got to be something.'' You have got them on the
    horns of a dilemma.
        Senator Warren. I want to pursue that, but I just want to
    make sure. The reason they say it is not a loan----
        Mr. Rossman. Is because, first of all, you want to avoid
    the usury statute----
        Senator Warren. They are trying to avoid laws that govern
    loans.
        Mr. Rossman. Loans----
        Senator Warren. Second?
        Mr. Rossman [continuing]. including Truth in Lending, and
    second, they want to avoid having it discharged in bankruptcy--
    --
        Senator Warren. That is right, so they do not want to have
    to make the disclosures.
        Mr. Rossman. That is correct.
        Senator Warren. They do not want to comply with the laws
    around loans, so they go over to the other side and they say
    they are not loans, they are assignments.
        Mr. Rossman. Mm-hmm.
        Senator Warren. Let me ask that question, then. If these
    are assignments, are they then legal?
        Mr. Rossman. In certain cases they are not, and that is
    where the cloudiness comes. If it is military pay for a retired
    veteran, for enlisted personnel, you are protected by the
    Military Pay Act, but if you are, unfortunately, like the
    Doctor, a commissioned officer, you are not protected. All
    disabled veterans are covered under the VA by anti-
    assignability. Virtually every Federal and State employee
    statute--pay statute--includes provisions for anti-assignment
    provisions, as well, and as I said, ERISA in many cases
    prevents it, but that is not a majority of the pensions that
    are still out there.
        Senator Warren. For some people, it is the case----
        Mr. Rossman. That is----
        Senator Warren [continuing]. that it does not matter
    whether it is a loan or an assignment. It is not legal----
        Mr. Rossman. That is correct.
        Senator Warren [continuing]. either way.
        Mr. Rossman. You have got them on the horns of a dilemma.
        Senator Warren. That is right. For some, assignment is
    still legal, and this is just a place where the law has not
    given full protection.
        Mr. Rossman. That is correct.
        Senator Warren. It sounds like we are starting to get some
    action on this. Five years ago, Congress passed Dodd-Frank,
    created the Consumer Financial Services Bureau to try to
    prevent companies from cheating consumers, and as someone
    mentioned earlier in their testimony, the CFPB has now
    partnered with the New York Department of Financial Services to
    file two suits against two of the largest pension scam
    companies for using these deceptive marketing practices to dupe
    retirees into borrowing from their pensions. Obviously, a good
    first step, but we need to do more. There is no excuse for
    this. It is time to put a stop to these scams.
        Thank you, Madam Chair.
        The Chairman. Thank you.
        Senator Kaine.
        Senator Kaine. Thank you, Madam Chair, and thanks to all
    the witnesses. This is, sadly, eye opening, and especially the
    specter of ads targeting veterans with sort of flag waving and
    patriotic themes and pictures perpetrated by scam artists. It
    just makes you sick to your stomach. I mean, I am really
    discouraged at this.
        A couple of questions I was going to ask you. Maybe I will
    start with Ms. Wolf, so Andrew Gamber, he had had a previous
    history before getting into this pension advance area. He had
    permanently lost his license as an insurance broker for grossly
    misleading his customers, according to the Committee briefing
    for this. I guess he was in a field where there was a regulated
    environment and he had engaged in activities that caused him to
    have his license pulled.
        Ms. Wolf. Right.
        Senator Kaine. I guess it is an indication that this kind
    of falls in the cracks, these pension advance, because he could
    go from a regulated area, losing his license, to setting
    something like this up without a license.
        Ms. Wolf. Right.
        Senator Kaine. Is that just the quirks of all the different
    State laws and how this kind of financial product is treated,
    or maybe more often not treated under State law?
        Ms. Wolf. I would think so, but also, Mr. Gamber seems to
    not really have a conscience and not really care what the laws
    are. He was--his license was revoked in 2009 from the Arkansas
    Insurance Department. He was not regulated as a broker-dealer
    or an investment advisor under our act, but that is not to say
    that he was not selling securities, because it was a security
    under Arkansas law, we were able to take action. I do want to
    point out, his license was revoked in 2009. He formed VFG in
    2010.
        Senator Kaine. Mm-hmm.
        Ms. Wolf. We took action against him in 2013 and 2014, and
    now he has formed a new company, and so he is definitely
    finding ways to skirt the law and finding those gray areas to
    exploit.
        Senator Kaine. The GAO report is interesting, because I
    think your study indicated with this bubble chart that the
    pension transactions are concentrated in these two large
    groups, and one was Mr. Gamber, and we talked about him, and
    the second, Future Income Payments Group, is run by Steven
    Kohn, whose earlier business endeavors prior to his involvement
    in the pension advance business led to him being convicted of
    Federal criminal counterfeiting, so, you have got the two main
    groups. One is being run by somebody who has lost his license
    because of misrepresentations to insurance clients, and the
    other is being run by somebody who had been convicted of
    Federal criminal counterfeiting, and these are the two main
    groups that are doing this in the country right now.
        Mr. Lord. Well, unfortunately, you have several unsavory
    characters operating in these business lines. From a consumer
    perspective, again, it is very difficult to really know who you
    are dealing with, because that is not revealed on the company
    website, so again, from a disclosure perspective, that is why
    we raised that as an issue in our report.
        Senator Kaine. Again, from sort of a regulatory problem, if
    you have got, you know, folks who have been in different sort
    of financial capacities and one has been suspended, his license
    is, because of insurance challenges, and the other has been
    convicted of Federal criminal counterfeiting, but nevertheless
    they can do this kind of a business, this suggests that there
    is sort of, like, a gap in which they are trying to fit their
    work in a less regulated area.
        Mr. Lord. Yes.
        Senator Kaine. It is amazing that we would have less
    regulation for these kinds of pension transactions than we
    would for insurance. I mean, insurance is really important.
    Pensions are really important, too, and that that would be a
    gap is something that is notable.
        I want to take the Kroots' testimony--and I really
    appreciate you coming and sharing the experience, and I often
    find these hearings are really valuable because people are
    willing, thank God, to come share what has been a painful
    experience and we can learn from it. Thank you for being
    willing to do that, but they talked about--and I am going to
    ask the other witnesses to kind of help me with this question.
    They talked about the challenge they were dealing with. They
    had a challenge with medical bills for a daughter. They had a
    challenge with some housing expenses. These are the kinds of
    things that people run into every day, and one of you
    indicated, there are many alternatives that are better than
    these kinds of loans, so be sort of generic advisors to seniors
    or veterans that are confronted with financial needs like they
    described. You have got some real legitimate concerns. You see
    these kinds of ads in the paper about maybe take advantage of
    this 800 number, or get on this website to get help. What are
    the better alternatives? We are having hearings like this to,
    you know, educate people. What are the better alternatives that
    folks should explore? And I just would love to have any of you
    talk about that, and again, we are not talking about a
    particular circumstance.
        Mrs. Kroot. Right.
        Senator Kaine. We are just generally--and, Mrs. Kroot, you
    want to jump in first, so please.
        Mrs. Kroot. Yes. One of the things that happened with us in
    Structured, we took this money out to pay the IRS, and at the
    end, when the loan was concluded, we were given a list of who
    we could pay and who we could not. The IRS was not on it, so we
    paid those other ones and we had to finally call the IRS, who
    has worked with us on a payment plan for the $100,000.
        Senator Kaine. Mm-hmm.
        Dr. Kroot. I wish to put on the record, the IRS was
    extraordinarily cooperative in coming up with a payment plan
    that was not a burden to us.
        Senator Kaine. Mm-hmm.
        Mr. Rossman. Senator, one of the things that is important,
    and we were talking before about why they were treated as loans
    or assignments, one of the pitches that these companies will
    make is that because it is not a loan, you do not have to worry
    about your credit score. Many of the people who are in dire
    financial straits, it is because their credit scores have
    deteriorated to the point where they cannot have access to
    prime loans and other sources of funding, and what they are
    saying is that since this is not a loan, we do not care about
    your credit score. Yes, you have got the U.S. Government paying
    you off, so what are you going to worry about? And you have got
    insurance covering you, as well.
        I think that you are dealing with a community which has
    difficulties because of their credit scores and they are
    looking for options. There are a number of things. If you are
    dealing with credit cards, for example, working with the credit
    card companies or dealing with a nonprofit----
        Senator Kaine. Credit counseling----
        Mr. Rossman [continuing]. a credit counselor----
        Senator Kaine. Right.
        Mr. Rossman [continuing]. to help you work out a plan to be
    able to pay off is certainly better.
        As I said beforehand, you do have this guaranteed stream of
    income which, although you do not want to lose control of it,
    you can still use it as a collateral as part of a good plan in
    order to pay down your debts in order to be able to secure
    funding against it but while maintaining control of the funding
    and not turning it over to someone else.
        I would say the final area, at least in the military, is
    that the JAG Corps was very upset because there are various
    programs set up within the military with relief funds--Naval
    Relief, Air Force Relief, Army Relief--to be able to work with
    their veterans to help them in distress.
        I think the thing that is so disturbing to me in the
    military area is that these thieves are stealing what are
    essentially tax dollars that are being paid on pensions,
    stealing them from veterans who have served their country, and
    then expect us to be able to take care of those veterans
    afterwards because, of course, we are not going to abandon them
    when they do not have the ability to take care of their own
    needs, so where is--there is just no justice in there
    whatsoever. Everyone is being victimized and these thieves are
    ripping us all off at the same time.
        Senator Kaine. Madam Chair, I think Ms. Wolf was going to
    answer for me, too, and I know I am over time, but is that
    okay? Ms. Wolf, were you going to weigh in?
        Ms. Wolf. I will keep this very brief. Not necessarily an
    alternative, but I do want to thank Dr. and Mrs. Kroot for
    coming forward, because as a securities regulator, a lot of
    times, we do not hear about these scams until someone is brave
    enough to pick up the phone and call us, because we do not--we
    are not on the front lines every day, and so, one of the most
    important things is that if you are in doubt or you hear about
    a new company, especially these companies that are very good at
    tricking you and making you think they are one entity but they
    are really another, call your local State agency, and whether
    it is an Attorney General's office or the securities
    department--a lot of times you do not know which agency would
    regulate what--they are very good about working together and
    referring cases. If ever you have a question, call your State
    regulator and ask and see if they are regulated or if they have
    had complaints on this company, and that way, you at least can
    know going forward--hopefully know what you are getting into.
        Senator Kaine. Great. Thank you, Madam Chair.
        The Chairman. Thank you.
        Mr. Rossman, I want to give you a chance to answer the
    question that I posed about what we should do about this.
    Obviously, states can take action. Litigation can be filed.
    Regulation can be implemented at the State level. There are new
    laws, lawsuits filed, et cetera, but I am so outraged by what
    has happened to the Kroots and so many others, particularly, as
    you said, those who have served our country, or served our
    states and cities and are now being taken advantage of, and it
    is evident that these transactions fall in a very gray area, as
    Mr. Lord said, so do we try to get Federal legislation passed?
    Do we amend the Truth in Lending Act to have better disclosure,
    at least? What is your suggestion for us?
        Mr. Rossman. Well, the simple practical responses are that
    there are many laws already that are not being enforced, and I
    would love to be able to see them being enforced. I would love
    to have the Department of Defense, for example, monitor these
    allotments that, if they are being placed into separate escrow
    accounts, that it should send up some red flares to find out
    what is going on and whether or not there has been a violation
    of the laws.
        I thought, Senator Tillis, your comment was rather
    interesting, because in the case with Dr. Kroot with RMFS,
    which was the lead generator, they were the agent that was out
    there trying to solicit for Strategic Investments, they are
    owned by the same people. It is the same ganif who is the guy
    who had been convicted for Federal law, and then turned around
    and avoided liability through bankruptcy court, getting his
    judgment discharged.
        I am a former prosecutor. I would like to see some RICO
    claims brought against these folks and maybe some jail time. As
    I said beforehand, they are the worst of the worst since they
    have literally nothing invested in these cases whatsoever. They
    are taking investors' money. They are taking the money that
    belongs to the taxpayers and to the pensioners. They are taking
    their cut for providing no service whatsoever and then they are
    returning into the dark where they can get away with this time
    and time again, and it is about time that someone stopped this
    kind of behavior with something more than a slap on the wrist.
        Beyond that, just clearly disclosure, so people understand
    the product that you are getting, so you have the Schumer Box
    equivalent for pension loans that clearly identifies the
    interest that is being charged. I think that, certainly, having
    anti-assignment provisions that extend beyond public officials
    but would apply to all pensioners would be very, very helpful,
    as well.
        The Chairman. Thank you. That is very helpful, and I want
    to remind everyone that RMFS, which you mentioned, was Retired
    Military Financial Services. If you saw that name, you would
    think it was a completely legitimate organization, particularly
    if the ad appeared in a military magazine, and I think that is
    why the Department of Defense needs to be more proactive in
    warning its military retirees that these schemes are out there.
        I hope that the hearing that we have had today will help to
    heighten public awareness, and that is why I am so particularly
    grateful to Dr. and Mrs. Kroot for coming forward, but for all
    of you sharing your personal experiences in this area.
        I want to ask my colleagues if anyone has a final question
    that they would like--yes, Senator Tillis.
        Senator Tillis. Thanks again for all of you being here
    today.
        The one thing that just strikes me about--and I really do
    think there is a criminal enterprise there. We have got some of
    the bad actors we named here, but there are a lot of people in
    this process or this chain that probably also need to be smoked
    out, as well.
        It does not seem to me--is there any possible way that
    after you get these agreements in place that you could actually
    have any kind of defaults?
        Mr. Rossman. Certainly not in the ones that we were looking
    at, no.
        Senator Tillis. The one thing--I think that this is
    extraordinary. We can have our discussions about some other
    lending practices and what is a fair rate, but at least some of
    their rates are driven by loss ratios that they have to manage
    to be able to provide a service, but this is completely
    independent of that discussion, whether it is payday or
    residential lending or whatever else. This is just purely
    criminal activity, where they are getting a guaranteed rate of
    return, charging an exorbitant interest rate, all upside, and
    actually, to the point here, if you miss a payment, even
    greater upside, zero downside. It is a criminal practice that
    we need to work to eliminate.
        Mr. Rossman. You are absolutely right.
        Senator Tillis. Thank you.
        Chairman Collins. Thank you.
        Senator McCaskill.
        Senator McCaskill. I just have one question.
        Mr. Lord, I have found time and time again in doing
    oversight that one of the biggest enemies of oversight is a
    whole lot of cooks in the kitchen that have a piece of it, and
    because then when there is something bad going on, everybody
    does like this. Well, why is not--I mean, to Mr. Rossman's
    point, things are not being enforced, but, you know, we have
    got FTC, we have got CFPB, we have got SEC. Then you have got
    Treasury, you have got PBGC, you have got DOD, you have got VA.
        If we were to work on a legislative action around these
    scams, where should we place primary responsibility for
    oversight for these products?
        Mr. Lord. Well, I think CFPB--I mean, their authority is
    already well established and clear. To me, it is just a matter
    of exercising it. I think the good news is they took
    enforcement action on two of the 38 companies we referred to
    them, but my question to them is, well, what about the
    remaining 36, to the extent they are independent entities? I
    think it is more----
        Senator McCaskill. It is like shooting fish in a barrel.
    These two guys should go to jail, like, immediately. Do not
    pass go. One of them has already been in jail, I believe. Yes.
        Mr. Lord. I mean----
        Senator McCaskill. I am shocked, just shocked.
        Mr. Lord. I am not sure they need more authority, but it is
    what are they doing with the authority they already have.
        Senator McCaskill. Do you believe that the primary
    authority now is at CFPB?
        Mr. Lord. Well, it is shared with FTC. They also have an
    enforcement role in this area, but if you--I mean, those are
    the two key agencies, and again, in terms of consumer
    education, Treasury chairs the so-called FLEC----
        Senator McCaskill. Right.
        Mr. Lord [continuing]. Financial Literacy and Education
    Commission, but CFPB, they are the vice-chair, so----
        Senator McCaskill. Yes.
        Mr. Lord [continuing]. they have a role in that, as well.
        Senator McCaskill. Maybe we need to direct an inquiry to
    the CFPB and to the SEC, or the FTC, and talk to them about
    what is their plan----
        Mr. Lord. Yes.
        Senator McCaskill [continuing]. of going after these guys.
        Mr. Lord. They will talk a lot about the consumer
    education, but I----
        Senator McCaskill. Yes. No, no, no, no----
        Mr. Lord [continuing]. clarify the enforcement side----
        Senator McCaskill. We need some deterrent here.
        Mr. Lord [continuing]. so the FTC----
        Senator McCaskill. Yes. People need to go to jail. Thank
    you, Mr. Lord.
        Mr. Lord. Thank you.
        The Chairman. I want to thank our excellent panel of
    witnesses for appearing today. You have really increased our
    understanding of what truly is an unconscionable scam so
    frequently directed against patriots who have served our
    country or those on the front lines in municipal and State
    governments, and we are going to continue this investigation.
    This is a first of a series of hearings as we begin to delve
    even deeper into these schemes.
        I want to thank each and every one of you for being here
    today, and again, particularly my thanks to the Kroots for
    coming and sharing your personal story. I can assure you that
    because of your willingness to share a very painful episode in
    your life, that you will, in fact, prevent others from making
    the same mistake, so thank you for coming forward, and my
    thanks and gratitude to all of our witnesses.
        The Committee members will have until Friday, October 9th,
    to submit additional questions for the record, which we will
    send your way if there are some, or any additional statements.
        The posters that have been displayed will also be included
    in the hearing record.
        The Chairman. Again, my thanks to our expert panel, to my
    Ranking Member Senator McCaskill, and to all the Committee
    members, including the ever-faithful Senator Kaine, who comes
    to all of our hearings, for participating in today's
    investigation and hearing.
        This concludes the hearing. Thank you.
        [Whereupon, at 3:57 p.m., the Committee was adjourned.]

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