April 22 (Bloomberg) — Companies that extend high-interest loans to retirees in return for a share of their pensions will face stricter oversight in Vermont that may make it impossible for them to operate.
Governor Peter Shumlin today is to sign a law requiring lenders to be licensed by the state and comply with interest limits and other banking regulations. The measure is the first by a state aimed at reining in such loans, according to Vermont officials.
Some lenders, who typically operate on the Internet, sometimes charge interest exceeding 100 percent a year. Shumlin, a 58-year-old Democrat, said the state doesn't anticipate that any companies would qualify as licensed lenders, so the legislation will effectively halt such loans.
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"Predatory lending that targets people's retirement and pensions is a growing problem across the country," Shumlin said in a statement. "This bill allows us to get ahead of the problem before Vermonters suffer and hopefully will be an inspiration to other states to stamp out this predatory practice."
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