by Structured Settlement Watchdog
Standard and Poors announced October 7, 2008 that it was "reviewing information pertaining to recent orders of the California Superior Court in Fresno County California to determine the potential impact on structured settlement transactions (sic)".
The review by Standard and Poors is and of itself significant BUT the side issue of market place confusion caused by entities (or individuals) such as 321 Henderson and other NASP members and others (such as NSSTA member Patrick Hindert's "fantasy" structured settlements 3.0), that ultimately leads a rating agency like S&P to mischaracterize the 321 Henderson transactions as "structured settlement transactions" AND is evidence of how widespread the branding problems are for the structured settlement industry.
321 Henderson is well known as one of the JG Wentworth companies. The Fresno Rulings refer to cases in which the court found that various structured settlement factoring companies (S&P mischaracterizes as structured settlement companies) failed to comply with the California Structured Settlement Protection Act and questioned the validity of numerous previously approved court -approved assignments of structured settlements to these companies. Please note that the "assignments" in the S&P report refer to "assignment of periodic payment rights" NOT "qualified assignments". The Fresno Rulings are being appealed.
"Cash Now Pusher" 321 Henderson purchases structured settlement payment rights from tort victims at a discount and then packages them together through securitizations and sells those to investors. These are what S&P is rating. The potentially finanacially devastating implication to investors buying securitizations composed of transactions later deemed to be invalid or illegal needs no further explanation.
S&P is seeking:
- The known exposure concentrations of outstanding receivables that originated out of Califiornia and Fresno County; and
- The historic performnace details of these receivables as of the most recent determination date.
S&P Reviewing Structured Settlement Transactions (sic) After Fresno Superior Court Rulings (click title to access)
With respect to the side issue here are some definitions of key terms that were mischaracterized by S&P in its October 7, 2008 report:
Structured Settlement Company
A company that engages in the marketing and placement of new structured settlement annuities, which are regulated insurance products. Included in the definition of a structured settlement company are companies that have employees or, who have independent licensed life insurance agents and brokers, whose primary business is to place structured settlements. There even once was a structured settlement annuity brokerage firm called "The Structured Settlement Company". The term "structured settlement company" is sometimes used to refer to certain life insurance companies who manufacture or issue new structured settlement annuities. Some settlement transfer companies, settlement purchasers or "cash now" companies, have tried to favorably position themselves by incorrectly using this term. However make no mistake, none of them can truly make the claim that they are a "structured settlement company."
A company that engages in the purchase of the rights to receive future structured settlement payments. A transaction completed by such companies is known under the Internal Revenue Code Section 5891 as a 'structured settlement factoring transaction". Sometimes referred to as a "secondary market company" "settlement purchaser" , "cash now company", "cash flow purchaser", "transfer company" "factoring company" or more recently by the slang "financial crack dealer". Sometimes mislabeled in advertising by such settlement purchasers as a "structured settlement company". Don't be confused!
Structured Settlement Factoring Transaction
Describes a process, defined at IRC 5891(c)(3)(A), which results in the transfer of structured settlement payment rights for a discounted amount of cash. Don't believe the marketing hype! A structured settlement factoring transaction IS NOT a structured settlement transaction.
Structured Settlement Transaction
Describes the transaction embodied in the process of how structurred settlements work, which results in a structured settlement. Part of a structured settlement transaction involves the placement of a structured settlement annuity contract or alternative periodic payment funding mechanism described under IRC 130(d).