by Structured Settlement Watchdog®
Matt Bracy of Settlement Capital Corporation and Andrew Cravenho of the Settlement Quotes Factoring Exchange are at odds
on the issue of "servicing" structured settlement payments by factoring companies.
Bracy does not appear to completely address the entire issue in his recent post (linked below). Agreed that some life insurers will not agree to "split" the settlement payment and make payment to multiple payees and instead send the entire payment to the factoring company. The factoring company sends the unpurchased half of the settlement payment to the payee and that this is the initial premise of “servicing".
Cravenho says "The REAL issue is when a factoring company purchases xx amount of payment rights, but has ALL of the remaining settlement payments assigned to them (the factoring company) during the process. The factoring company now owns all of the payment rights to the policy (payments) and makes the appropriate payments when they are due to the payee. The problem with this scenario is if this annuitant wants to factor the remaining payments, the present value of the annuity is worth far less because the payee does not have the ability to shop around for a better quote. Now, the factoring company that owns the payment rights to the policy can offer the annuitant an unfair market value price. The annuitant is at the mercy of the factoring company".
Cravenho goes onto give a chilling real life example in a case involving "cash now pusher" Peachtree Settlement Funding.
If the "servicing" is a means for the factoring company to control or have de facto control of subsequent transfers at a price that is unreasonable and competitive how does that benefit consumers? Peachtree has the reputation of charging discount rates in the high teens which are nowhere near competitive with the marketplace. When such rates are charged on the transfer of rights to structured settlement payments backed by AAA rated paper (New York Life annuity) it's an outrage.