Matt Bracy's "Orwellian discourse" on factoring is both interesting and somewhat amusing. Matt is a gentleman and a scholar with a company that seems to be setting an example for its industry in how to do conduct business responsibly, without contribution to the mistaken identity crisis. However, like recent reports out of Baghdad, his optimism as to the end of the "war" is a little premature.
With all due respect to Associate Professor Adam Scales, I'm tired of his Patrick Hindert pimped
, overplayed 2002 law review article, "Against Factoring? The Market in Tort Claims has Arrived?" Of course it has arrived! What Hedge Fund manager or shrewd investor wouldn't want to make competitive rates on AAA rated paper? However for every company like Bracy's Settlement Capital, Prosperity Partners, Stone Street there is JG Wentworth (and its alter egos), Peachtree, Rapid, Strategic Capital and a cottage industry of splogs, affilate marketers, laughable paid reviewers. adding to the consumer confusion by using terms that don't apply to them.
The biggest fallacy going is the general marketing approach that "IRC 5891 made factoring legal". IRC 5891 merely provides a tax exclusion on structured settlement factoring transactions that meet certain criteria. If such a transaction fails to meet the criteria there is a 40% excise tax. Regrettably factoring companies are using the above fallacy in offering fees to structured settlement brokers and settlement planners (on information and belief a few ARE taking), which increase the cost to sellers of structured settlement payment rights.What is your advisor telling you?
Bracy observes that Prof. Scales notes the “generous helping of skepticism directed toward the habits of tort plaintiffs” which underlies many of these assumptions. “An essential element of the discussion has been the assumption that successful tort claimants simply cannot be trusted with large sums of money,” Bracy notes that Scales writes. Most striking for Bracy is Prof. Scales’s conclusion that these attacks against the annuitant are unfounded or, at best, not supported by any credible, relevant studies or evidence. The "great thing" about academics in this area is that they have little practical trenchline experience. As one of the most heavily vsited structured settlement websites, I have personally fielded several phone calls from parents who were concerned about a loved one' s propensity to spend everything "because it's there". Many of the payees have already blown through the proceeds of a previously obtained "cash now" deal.
Bracy points out that it is indeed difficult to imagine an “impulse buy” that involves (on average) a 3 month process, careful underwriting, a court appearance and “best interest” scrutiny. Either he's myopic or he apparently deems it worth glossing over the value proposition of certain factoring companies that suggest a reason to factor is to "redo your kichen" or "fund a retirement".
Nothing is mentioned of the company purportedly controlling 70% of the structured settlement rights purchasing segment of the factoring industry, JG Wentworth's continual false advertising about Certified Structured Settlement Consultant through one of its alter egos. Nothing is mentioned of the fact that other than the state Court approval process there is no regulatory oversight of factoring company business practices and the industry is not effectively self regulated. If you need the evidence simply click on the tab "Factoring Company Business Practices"
The primary structured settlement industry is heavily regulated by state insurance laws. There is an urgent need for parallel regulation of factoring companies, particularly their advertising practices. Perhaps Bracy fears a state of dystopia? If there is an shift in that direction it will be the fault of his company's brethren not the critics in the primary market or the attorneys.
Comments