by John Darer CLU ChFC CSSC RSP
In response to our open market letter concerning structured settlement servicing I received a response from Matt Bracy, General Counsel of Settlement Capital Corporation whose finger points squarely at the structured settlement annuity issuers, although he does not name names.
Structured settlement servicing ONLY affects those annuitants who chose to sell a part of their structured settlement payment rights. Even if it's only small part of thestructured settlement payment rights.
Bracy states that the root cause of servicing is the unnamed structured settlement annuity issuers who do not want to split payments.
This means that even if the tort victim does not want to sell all payments they must give up their abilty to deal directly with the annuity issuer and must instead deal with a third party. Moreover, it is unclear what happens if the servicer goes belly up.
It follows that the resulting savings in administrative cost is allegedly at the expense of the tort victim who was sold on the qualities of the structured annuity issuer by the settlement planner or structured settlement broker. WHY?
The issue of structured settlement servicing is particularly disturbing because I have the sickening feeling from several conversations with some people whose competency I respect, that this critical issue may be lost on the majority of the structured settlement industry
So I am going to continue pounding the table on this issue until it is solved. I ask any life insurance companies that are currently issuing structured settlement annuities to come out and let the industry know what their business practice is with respect to splitting annuity payments.
As an aside, the need for such practices would be mitigated if the structured annuity issuers handled commutation internally.
John,
I commend you on proactive concerns regarding the servicing of "partial factoring transactions", especially with regard to potential bankruptcy proceedings affecting said factoring purchasers. Even though I am one of the first 50 or so structured settlement professionals in our industry, I was blindsided by the statistics you quoted with regard to the frequency with which structured settlement recipients factor their payments. While I have no knowledge of the life companies' policies regarding the servicing and/or "split-servicing" of periodic payments, it causes me deep concern to wonder whether the injury victims whom I have counseled will lose the ability to be in direct contact with either myself and/or the annuity carriers with which I have placed their settlement recoveries.
As you know, I am not an expert in bankruptcy laws but I am very much interested in learning what my clients' rights will be should a factoring company which assumes servicing responsibilities file for any form of "bankruptcy".
Again, I commend you for your proactive concerns with regard to this issue and I hope all stakeholders give this matter their most serious and immediate attention.
Posted by: Chuck Derenne | August 14, 2009 at 09:56 PM