Structured Settlements 4Real: What's Real News in the Structured Settlements, Settlement Planning, Consulting and Lawsuit Recovery Space?

Annuitant "Forum Shopping" For Independent Professional Advice Part 2

From an anonymous source in response to yesterday's post::

"John, The truth to this matter was that the annuitant had a list of questions for the attorney to answer. The attorney didn't answer any questions asked by the annuitant and just sent over some crap that took 3 minutes to complete. The annuitant is in the process of filing a complaint with the California Bar Association against this attorney. The annuitant is in her early 20's and is using the money to go back to school. She explained to the attorney that she is unable to get financial aid because of her age, family status, and other reasons. Background: In order to obtain financial aid an individual has to be over 24 or needs a parent to co-sign on the financial aid. This was explained along with several other important facts to the attorney when the IPA was requested. Not only did the attorney not pay any attention to what was written to him, he provided stock responses that would never solve her financial issues. He told her to go get a student loan which was impossible to do so. When the annuitant received the IPA from the attorney, she had questions about his remarks which went unanswered and when he did answer he provided sarcastic responses to her situation. BTW, at the time this article was written the both attorney's had already been paid".

Note: The attorney in question call who contacted me yesterday claimed he had not been paid.

Annuitants "Forum Shopping" For Independent Financial Advice in Structured Settlement Cash Outs?

A California attorney who dispenses independent financial advice to annuitants considering selling structured settlement payments to raise cash called me today. Apparently an annuitant didn't like the fact that his "independent financial advice" was not to sell ("was a bad deal"), so the annuitant sought other "independent financial advice" until they heard what they wanted to hear.

To top it off the factoring company attempted to stiff the attorney providing the "independent financial advice"

It's nice when a statute has teeth in it!

Reference

Here's the relevant section of the California Insurance Code.

California Insurance Code Section Section 10139.5 concerning structured settlement transfers (structured settlement factoring transactions):

(d) All court costs and filing fees shall be paid by the transferee.

(e) No later than the time of filing the petition for court approval, the transferee shall advise the payee of the payee's right to seek independent counsel and financial advice in connection with the transferee's petition for court approval of the transfer agreement, and shall further advise the payee that if the payee retains counsel, a licensed certified public accountant, or a licensed actuary in connection with a petition for an order approving the transfer agreement, that the transferee shall pay the fees of the payee's counsel, accountant, or actuary, regardless of whether the transfer agreement is approved, and regardless of whether the attorney, accountant, or actuary files any document or appears at the hearing on the application for transfer, in an aggregate amount not to exceed one thousand five hundred dollars ($1,500). The transferee's accountant, counsel, or actuary may not advise the payee.

(f) The court shall retain continuing jurisdiction to interpret and monitor the implementation of the transfer agreement as justice requires.

Structured Settlement and Factoring Advertising

J.G. Wentworth's own statistics suggest that less than 5% of structured settlements have been factored yet some attorneys shun structured settlements because of their fear that their clients will factor their settlements. Is this fear rational or irrational? This post examines the fear, explores the root of the fear and suggests a solution.

I was at an ABA TIPS conference in Washington in November 2005 where I was speaking on a panel about structured settlements. At the speakers dinner I overheard a fear mongering stock broker repeatedly emphasizing to anyone that would listen that structured settlements can be sold and the attendant risk to their clients.

The structured settlement industry has done a generally poor job of capturing advertising "shelf space" particularly on the Internet. Only a handful of primary market players regularly place high in the search results. Many companies have not found a way to effectively compete with the hedge fund and foreign money that is (one way or another) pumped into the advertising budgets of the likes of JG Wentworth, Peachtree and others. 

As one time visitor to the Galapagos Islands I gained a natural appreciation for the Darwinian theory of evolution or survival of the species, so I'm not whining about silver spoons, deeper pockets or ineffectual efforts of some competitors. What I am saying is that the advertising approach of some factoring companies may be harmful to the sale of structured settlements and ultimately the opportunities for such companies. If JG Wentworth is truly the "thought leader" that their "snookems" Pat HIndert characterizes them,  then why have they done so little about their over saturated advertising? So what if it's memorable.  If you pull your pants down in public it might also be memorable but distasteful. Same goes for "Beastly Settlement Funding" ,"123 Lump Dumb", Woodbridge and others.

Fraudulent advertising with the "cash now" message does not help build prestige for the factoring industry For some attorneys it erodes confidence in the structured settlement product and creates an open opportunity for competing products. I know I know. You try to explain it away by  giving them a "tuppence" now or say 90 days is "somewhat like now" depending on your perspective but who are we kidding?

"It Doesn't Matter The Loss We Had To Take" Cash Now Victim

The following comment now appears in the Morning Call article I critiqued in the previous post:

"Well unless you are in a situation where you have four children and the mom only working becasue (sic) Dad cannot - from two incomes to one, you don't know what you are talking about. And may I say WRKUPA1, I resent your comment. I have never been on food stamps, Welfare, SSI, or the Chip program. That's what the money went for to help in the raising of those four kids - so I would NOT be on any assistance programs. That's not how I was raised. My pride would not let me. And yes, we sold annuities and received much lower payment as this article states, but when you are in a position of need, it doesn't matter the loss we had to take. My children were provided for and that was the bottom line! And when you are in that position, no bank will give you a loan despite the future income promise. I tried. They want to see you can pay it back now. So hopefully this is some food for thought to all of you out there who judge. Walk in my shoes for 20 years"

We publish this to offer a different perspective. Sometimes there are valid reasons for people to sell their structured settlement payment rights. Under present law in most states, a Court determines whether or not such transfers are in the best interest of the payee and their dependents.

While we are not judging this woman,  we believe that pride and unwillingness to shop alternative purchasers possibly cost her and her family a lot of money. For example she should have gone to a factoring exchange where a competitive bidding process would have taken place.

If you have a structured settlement, need cash AND have exhausted other alternatives to raise money so you have to sell some of your structured settlement payment rights, make sure you shop around. There are often better deals to be had than Peachtree Settlement Funding.

"Rate Rape" Time to Fight Back!

In today's issue of Morning Call Riley Yates underscores the perils of any structured settlement annuitant doing business with Peachtree Settlement Funding. In a piece entitled "Need Cash Quickly? You'll Settle For Less" several stories are presented which show annuitants selling their structured settlement payment rights to Peachtree "for pennies on the dollar", when far more competitive options are readily available.

Peachtree is not known for competitive rates and they opportunistically prey on consumers who are either too desperate, lazy or unsophisticated that they do not take the time to shop. If they did take the time to shop they would be able to get more for the short term solution they hope to receive in exchange the long term financial security they are giving up. Peachtree is infamous for once "jacking" a Florida woman with a discount rate in the 40% range. Why fall into this category? 

A recent Peachtree Settlement Funding advertising features a guy who ages going to his mail box every month to get his stereotypical "tiny" annuity check. Since we're talking about "size", perhaps a deserved response to the Peachtree ad would be to feature a hot and steamy love scene which concludes with the woman mockingly exclaiming about THEIR "manhood"  "THAT'S ALL?"

P.S. A nod to John Machir of Ringler Associates for the "find"

 

Structured Settlement Servicing By Factoring Companies Redux

Settlement Capital's Matt Bracy aired the the 2nd in a two part series "The Problem With Factoring" on the Legal Broadcast Network (LBN) and does an excellent job addressing the subject of servicing of structured settlement payments by factoring companies. This author, John Darer, aired a 2 part series on the subject of factoring company servicing of structured settlement payments last Fall on LBN.

Key points

1. Servicing is a chore for factoring companies caused ostensibly by the unwillingness of SOME structured annuity insurance companies to split payments when the annuitant is not selling of their structured settlement payment rights. The end result that plaintiff attorneys and structured settlement brokers must know is that as a result of some of the annuity issuers' unwillingness to split payments, their clients WILL NOT BE RECEIVING THEIR PAYMENTS DIRECTLY FROM THE ANNUITY COMPANY ANYMORE. They will be dealing with the factoring company.
2. Many state structured settlement protection laws essentially state that the annuity issuer CANNOT be forced to split the payments.
3. Bracy acknowledges the validity of the question I've raised and states that while the insolvency of the factoring company MAY still result in the annuitant ULTIMATELY getting their payments, there "SURELY WILL BE A DELAY" and THERE MAY BE COSTS INVOLVED to the annuitant. This is the same conclusion that Texas lawyer Bruce Akerly and I reached last Fall.
4. Bracy states that some, but not all companies have back up servicers. His does.
5. Bracy states the good news is that there has yet to be an insolvency. The same perhaps could be said of structured settlement issuing companies prior to 1991. We all now know the effect of Executive Life. Sufficed to say that many of the insurance companies issuing the annuities have billions more assets than any of the factoring companies.
6. Sellers of structured settlement payment rights should be looking closely at the documents. Common sense. (1) Beware of attempts to bind you into a right of first refusal to the servicing factoring company (2) Check for any fees charged for the servicing (3) Check for back up servicing (or bonded 3rd party servicers as suggested by Andrew Cravenho)
7. In a nod to John Darer's relentless attack on what is in his opinion the slimy business practice of Structured Asset Funding, LLC suggesting that fancy sports cars and boats are a reason to sell structured settlement payment rights, interviewer Scott Drake questions the ethics of such practice. Bracy emphasizes that each structured settlement factoring transaction requires court approval and he doesn't believe that anyone would have the guts to seeks Court approval using a boat or fancy sports car as part of the "best interest" prove up. Coincidentally Structured Asset Funding's website has been disabled at the time of this writing. Stay tuned!

 

  

View "The Problem With Factoring 2-Servicing"

View Structured Settlement Servicing Agreements-Good Or Bad  Part 1 Oct. 2009

View Structured Settlement Servicing Agreements-Good Or Bad For Annuitant? Parts 2A and 2B (with Bankruptcy Expert Bruce Akerly) October 2009

2A 2B

Links and Exhibits of Interest

• Wikipedia entry for Structured Settlement Factoring Transaction entitled "Controversy Concerning "Servicing" of Structured Settlement Payments By Factoring Companies" 
• John Darer's August 10,2009 email to NSSTA President Dan Durbin and President Elect Mike Kelly copied to the NSSTA Board of Directors and other industry notables. Download 8-10-2009 email to NSSTA President Durbin and President elect Kelly with copies to Board members and othersThe content is self explanatory. The NSSTA has not responded to this author or addressed this issue with its membership.  WHY? NSSTA members include life insurance companies, among them those who do not split structured settlement payments.
• Our August 17, 2009 post Matt Bracy Says That Structured Settlement Servicing Is The Fault of The Life Insurance Companies Issuing Structured Settlement Annuities.  Only one life insurance company responded!
• Our April 23, 2008 post "Factoring Company "Servicing" of Structured Settlement Payments-Thought Leaders Butt Heads"

Proper English Usage for Structured Settlement Brokers and Settlement Planners

Paul Brian's "Common Errors in English Usage: 2d- William James Co." has been decscribed as "the most cheerfully useful book since the Kama Sutra" by Scott Simon of NPR Radio. I'm not sure I'd go THAT far, but with financial literacy month about to begin why not highlight this incredibly useful resource?

In my opinion it would be particularly useful for some members of an industry whose marketing teams have regaled the legal world with such ditties as:

• Plaintiff versus Plantiff
• Structured versus Structered
• Complementary versus Complimentary
• "Quailed" versus qualified
• Bentzen versus Benzten

and let's not forget...

  Settlement Professionals Inc- Oregon's one page settlement planning "trifecta" of Judgement, Judgment and Judegements**

Here's the scoop from the book for Meligan and Co.as well as the rest of you lot:

"In Great Britain and many of its former colonies, “judgement” is still the correct spelling; but ever since Noah Webster decreed the first E superfluous, Americans have omitted it. Many of Webster’s crotchets have faded away (each year fewer people use the spelling “theater,” for instance); but even the producers of Terminator 2: Judgment Day chose the traditional American spelling. If you write “judgement” you should also write “colour.”

Help is at hand for $18.  If you wish, here is a Link to the helpful online resource.

Paul Brians is an Emeritus Professor of English at Washington State University. 

** as of March 27, 2010 1:45pm EST

 

 

 

 

 

 

Rhonda Bentzen in "Cash-Now" Compensation "Frying Pan"

John Darer sent the email below to factoring broker and Society of Settlement Planners membership chairperson Rhonda Bentzen today as part of the unending effort to seek the truth about compensation of settlement professionals on structured settlement factoring referrals.

For the attorneys, judges, new readers and other interested parties reading this blog, Rhonda Bentzen is a former structured settlement broker who became a factoring ("cash for structured settlement") broker in or about 2002. She is believed to be popular with many structured settlement professionals, including some that you attorneys and judges may already be working with. In December 2007 Ms. Bentzen disclosed that 90% of her clientele (composed primarily of structured settlement brokers) took fees she offered.  In a June 2008 Legal Broadcast Network video interview with Mark Wahlstrom, she stated that many of the fees were paid for doing little more than making a referral.

The sellers of structured settlement payment rights typically face foreclosures on their homes and increased financial pressure. We have testimony of at least two other factoring experts that such compensation has the effect of a reduced amount paid to the tort victim at a time of heightened financial stress.

Whether such compensation is ethical or unscrupulous is a matter of opinion. Yet most would agree that failure to disclose this compensation and its effect on the bottom line- up front and at the time a quote is delivered- is particularly troubling. This author has seen few if any such settlement professionals who disclose such fees in the list of services posted on their websites, and less than 5% of the industry was willing to attest that they did not take such compensation in a grass roots transparency initiative.

The email March 26, 2010

"Dear Ms. Bentzen:

 

How about you post the truth about the percentage of people taking referral fees from you, today?

 

You have stated in writing that the number is outdated even though you had the 90% on your web site until March 2009.  We seek to know: (1) What the percentage is now?  (2) Your opinion why it is lower than 90%, if  it is indeed true.

 

Please confirm the name of the company that has walked away from hundreds of Court Orders as you alleged in July 28, 2009.

 

You can choose to put this on your blog where you control the media or you can respond via email. The industry and the public can then judge for themselves what the merit of the information is.

 

You can thank me for your increased web traffic later.

 

Very truly yours...."

Ms. Bentzen's revelation about 90% of the structured settlement industry working with her in December 2007 was a major industry negative. Alternative product providers advertise the non factorability of their product as a reason to do business.

She would be doing her own clients and the industry a favor by being specific about the state of affairs today (i.e the"percentage" taking fees, instead of simply stating that it was lower) without superfluous commentary so that the issue may be laid to rest.

This author hopes (and HAS BEEN hoping for well over a year) that Rhonda Bentzen will simply respond to the questions to back up what she has said or stated in writing.

POSTCARDS from Insurance Company Solicit Cash Now

It is well known that Symetra solicits its own annuitants to sell their structured settlement payment rights through its Clearscape Funding Corporation subsidiary. This author has now learned that Symetra is now notifying annuitants by postcard.

This author learned this from a Symetra annuitant who expressed concerns about the privacy implications of this means of correspondence. Surely Symetra can afford to spend the extra few cents to send the solicitation in an envelope so that the mailman, the paper boy and the nosy neighbor don't know the annuitant's business.

How about it Symetra?

Tulsa Settlement Planner Promotes Financial Illiteracy by Doing Nothing

I've said time and time sgain that here is no excuse for the inability of any settlement professional to articulate the BASICS. So Robert Risk and Structured Settlement Services are the target of this blast, AGAIN. Please note that I write this article out of sense of embarrassment for my industry not schadenfreude.

How badly does Risk misinform? Let us count the ways!

"Structured Settlement Services Misinformation-1"

Still confuses the financial concept of basis, and basics

"Structured Settlement Services Misinformation-2"

Answering the question "What is a structured settlement? ", Risk states "The term ‘structured settlement,’ according to new section 5891 of the Internal Revenue Code, means an arrangement....

Facts:

1. The definition found at IRC 5891 only applies to that code section as is expressly stated in the regulations.
2. IRC 5891 has solely to do with the imposition of an excise tax on the factoring discount embodied in structured settlement factoring transactions.
3. IRC 5891 was a creation of the Victims of Terrorism Tax Relief Act of 2001, effective January 2002.  Should one consider something that is 8-9 years old as "new"?

" Structured Settlement Services Misinformation--3"

In trying to overcome the disadvantages of an structured settlement Risk states:

"...Others, who have a tolerance for market risk, believe they can do better by taking a cash settlement and investing in potentially higher yielding equities. The recent IRS approval of the variable annuity as a qualified funding asset negates that argument.

Facts: 

1. IRC 130 governs qualified assignments. Part of the requirements to achieve the tax result under IRC 130 for the assignee,  states that payments must be "fixed and determinable". In  IRS Private Letter Ruling 199942001, issued in 1999, the IRS considered whether a qualified assignment with a variable annuity payment component, that was calculated pursuant to a specific investment formula, met the "fixed and determinable" requirement of IRC 130(C)(2)(A). The conclusion of the IRS was that "fixed" meant that the assignee's obligation to pay was fixed by the settlement agreement and that "determinable"  meant that there was an objective basis for calculating the amount and timing of the structured settlement payments.
2. In addition to the above there have been published articles on the subject such as David Cordell's  "Structured Settlements Meet the Modern Portfolio Theory", which appeared in the Journal of Financial Planning in May 2003.

Comments

1. In a world as dynamic as the financial services industry one has to be well read.
2. Should one seriously question how "well read" an individual is that refers to events in 1999 and  2001 as "recent" ? Or should we say that blindly slapping up what Daddy wrote 10 years ago and not reading before posting it is downright irresponsible.
3. This author has observed that the "look and feel" of the Structured Settlement Services website has changed more than 3 times in the last 5 years.

" Structured Settlement Services Misinformation--4"

In discussing who is allowed to make a qualified assignment, Risk implies that IRC 130 permits a qualified settlement fund to make a qualified assignment. It doesn't

Fact

The ability of a "QSF" to make a qualified assignment is set forth in Revenue Procedure 93-34

Comment

Risk's Daddy supports this author's comment in a 2003 newsletter "Two Former Tax Policy Chiefs Endorse Single Claimant QSF" (see post on Risk Law Firm website page 3)

" Structured Settlement Services Misinformation--5"

In an article called general advantages of structure posted on articlesbase.com, Robert Risk's statement that (structured settlement) "payments do not affect Social Security and other entitlement programs, where cash settlements might offset benefits" is misleading.

"Dumb Move-1"   *

Risk states that structured settlements are the "MOST EFFICIENT WAY TO PURCHASE A HOME OR TO START A BUSINESS. Payments are made with tax-free dollars, while maintaining a tax write-off ( Risk calls this "double-dipping Uncle Sam"). In an economic context, "double dipping" means "to be illegitimately compensated a second time for the same activity".  Thus one naturally wonders where else Robert Risk recommends his clients "double dip"?  At best, Risk's wordsmith skills need serious work.

This is not a one off problem! Our Robert Risk archive includes a number of previous stories about Risk website postings that are/were not technically correct.

FINANCIAL LITERACY, GET IT!

* in the personal opinion of this author