by John Darer CLU ChFC MSSC RSP CLTC
Settlement Capital's Matt Bracy aired the 2nd in a two part series "The Problem With Factoring" on the Legal Broadcast Network (LBN) and does an excellent job addressing the subject of servicing of structured settlement payments by factoring companies. This author, John Darer, aired a 2 part series on the subject of factoring company servicing of structured settlement payments in October 2009 on LBN.
- Servicing is a chore for factoring companies caused ostensibly by the unwillingness of SOME structured annuity insurance companies to split payments when the annuitant is not selling all of their structured settlement payment rights. The end result is that as a result of some of the annuity issuers' unwillingness to split payments, annuitants heir clients WILL NOT BE RECEIVING THEIR PAYMENTS DIRECTLY FROM THE ANNUITY COMPANY ANYMORE. They will be dealing with the factoring company.
- Many state structured settlement protection laws essentially state that the annuity issuer CANNOT be forced to split the payments.
- Bracy validates my servicing question and states that while insolvency of the factoring company may result in the annuitant ultimately getting their payments, there "surely will be a delay and there may be costs involved" to the annuitant..The same conclusion that TX lawyer Bruce Akerly and I reached in October 2009.
- Bracy states that some, but not all companies have back up servicers. His does.
- Bracy states the good news is that there has yet to be an insolvency. The same perhaps could be said of structured settlement issuing companies prior to 1991. We all now know the effect of Executive Life. Sufficed to say that many of the insurance companies issuing the annuities have billions more assets than any of the factoring companies.
- Sellers of structured settlement payment rights should be looking closely at the documents. Common sense. (1) Beware of attempts to bind you into a right of first refusal to the servicing factoring company (2) Check for any fees charged for the servicing (3) Check for back up servicing (or bonded 3rd party servicers (as suggested by Andrew Cravenho)
- In a nod to John Darer's relentless attack on what is in his opinion the questionable business practice of Structured Asset Funding, LLC suggesting in its advertising, that fancy sports cars and boats are a reason to sell structured settlement payment rights, interviewer Scott Drake questions the ethics of such practice. Bracy emphasizes that each structured settlement factoring transaction requires court approval and he doesn't believe that anyone would have the guts to seeks Court approval using a boat or fancy sports car as part of the "best interest" prove up. Coincidentally Structured Asset Funding's website has been disabled at the time of this writing. Stay tuned!
View "The Problem With Factoring 2-Servicing"
View Structured Settlement Servicing Agreements-Good Or Bad Part 1 Oct. 2009
View Structured Settlement Servicing Agreements-Good Or Bad For Annuitant? Parts 2A and 2B (with Bankruptcy Expert Bruce Akerly) October 2009
Links and Exhibits of Interest
- Wikipedia entry for Structured Settlement Factoring Transaction entitled "Controversy Concerning "Servicing" of Structured Settlement Payments By Factoring Companies"
- John Darer's August 10,2009 email to NSSTA President Dan Durbin and President Elect Mike Kelly copied to the NSSTA Board of Directors and other industry notables. Download 8-10-2009 email to NSSTA President Durbin and President elect Kelly with copies to Board members and othersThe content is self explanatory. The NSSTA has not responded to this author or addressed this issue with its membership. WHY? NSSTA members include life insurance companies, among them those who do not split structured settlement payments.
- Our August 17, 2009 post Matt Bracy Says That Structured Settlement Servicing Is The Fault of The Life Insurance Companies Issuing Structured Settlement Annuities. Only one life insurance company responded!
- Our April 23, 2008 post "Factoring Company "Servicing" of Structured Settlement Payments-Thought Leaders Butt Heads"