by John Darer® CLU ChFC CSSC RSP CLTC
Missing from the NSSTA commentary of the excellent job that New York judges are doing in enforcing the New York Structured Settlement Protection Act, in Washington Square Financial, LLC v. Allstate Assignment Co., No. 9605/2010, 29 Misc.3d 1204(A), 2010 WL 3834000 (N.Y. Sup. Ct. Oct. 1, 2010), is one of the possible reasons that deal was even brought to the table with that horrific discount rate from Washington Square Financial. This was a follow on attempted transfer. A previous request involving the same factoring company was rejected in 2009.
Structured Settlement Brokers Pressured Allstate to Stop Sending Notices Out To Annuitants
One reason why this was even possible, in my opinion, is the ENORMOUS pressure certain structured settlement brokers put on Allstate in 2006-2008 to stop sending notices out concerning its Advanced Funding Exchange Notice (AFEN), which Allstate eventually stopped doing in the first quarter of 2008.
Through its AFEN, Allstate Life (and its New York company) offer what I refer to as a "pick" discount rate to its own annuitants which, if understood, and used in a "pick and roll" negotiation with competing factoring companies may result in a better discount rate (than the reasonably competitve discount rate that Allstate offers on AFEN commutations).
Had Allstate Sent out AFEN Notice, Annuitant Might Have Had a Better Rate to Compare to Washington Square Rate and Forced the Deal Rate Down
I submit to you that IF the annuitant in the case that NSSTA is highlighting, an annuitant of Allstate Life Insurance Company of New York, had continued to receive an annual notice of his rights under the AFEN, he never would have done business with Washington Square Financial (a name change to Imperial Structured Settlements was published in Investment Weekly News on October 11, 2008) because he would have laughed at their discount rate. Would the annuitant's deal have gone through if either the 2009 or 2010 petitions had been submitted with the AFEN discount rate? Had the annuitant received the notices that Allstate stopped sending due to the pressure put on it by its own agents would he have been able to negotiate a better deal for himself?
I hate to say "I told you so", but I DID tell you so, starting 4 1/2 frickin' years ago.
- The Water Buffaloes or Oz June 23, 2006
- Important Notice on the Allstate Advanced Funding Exchange Notice (AFEN) February 22, 2008
- Allstate Structured Settlement Annuity...Why Get Shafted If You have One ? March 3, 2009
I can appreciate that NSSTA disclosed that Allstate Life Insurance Company was an NSSTA member to disclose a bias, but how about the line "NSSTA remains profoundly concerned about some actions of companies outside this industry that encourage accident survivors to sell their future structure payment rights"?
If that is indeed the case:
- WHY are some NSSTA member life companies not splitting payments when an annuitant only wants to sell a small amount of their payments, thus forcing the annuitant into a servicing agreement, barring contact with such annuitants as to the serviced payments and ultimately exposing their annuitants to Chapter 7 bankruptcy of the servicer? The structured settlement protection acts that NSSTA negotiated with the factoring industry explicitly state that the insurer cannnot be forced to split payments.
- Surely the NSSTA membership (and on a wider level the SSP members who do not have dual memberships) agree that a claimant in need, who has exhausted other options, should sell as little as possible to preserve as much long term fianncial security as they can.
- What responsibilities do factoring companies seeking to provide liquidity to Allstate annuitants have, to disclose the existence of the AFEN? Here is where the lack of regulation has the potential to screw the consumer. For regulated life insurance products, state replacement statutes protect consumers from unwarranted replacement. Part of that mandatory disclosure is often a notification by the replacing agent of the features of the existing coverage. Although liquidation of structured settlement payment rights is not EXACTLY the same thing, the idea is worthwhile. If Washington Square/Imperial Structured settlements had a legal obligation to disclose the AFEN, it would have had to beat 11% to earn the business, and perhaps the judge's approval.
- In the absence of such a law, is it unethical for Washington Square/ Imperial Structured Settlements to put forth a proposed structured settlement factoring transaction involving an Allstate annuitant with a discount rate that far exceeds 11%?
- In the absence of such a law, is it unethical for an attorney representing Washington Square/ Imperial Structured Settlements, or any other factoring company , to put forth a proposed structured settlement factoring transaction involving an Allstate annuitant with a discount rate that exceeds 11%.
- If one were to conduct discovery to examine ALL judicially approved (and rejected) third party structured settlement factoring transactions involving Allstate structured settlement annuitants for all the years that Allstate has been offering the AFEN, would we find a "pattern and practice" that many were submitted or concluded with discount rates that exceeded the Allstate AFEN rate? Were disclosures about the AFEN given to the annuitants in ALL of those cases? It would be worth separating those that occurred prior to early 2008 (when Allstate stopped sending AFEN notices) and those that occurred after.
Judges, you represent the last clear chance to prevent Allstate annuitants from getting "hoodwinked" into selling their stuctured settlement payment rights for a discount rate that is greater than the Allstate AFEN rate. Please make note of the fact that ALL Allstate structured settlement annuitants have an Advanced Funding Exchange Notice. When examining the discount rate for fairness, first require that the AFEN rate be determined and verified. Then reject any case where the discount rate exceeds AFEN.
What will NSSTA and its members do to encourage Allstate to reinstate the AFEN notifications or come up with some solution so that Allstate Life annuitants are not victimized?
If you have a structured settlement with Allstate Life Insurance Company or Allstate Life Insurance Company of New York and find yourself with no other alternative to raise cash make sure you go to Allstate to get an AFEN quote. Many cash now pushers will not even tell you about this. Don't be a victim!