by John Darer® CLU ChFC MSSC RSP CLTC
What should be the standard for independent professional advice for those providing such advice to people selling structured settlement payments?
- Is it enough to simply examine the paperwork for the transaction to make sure that the person understands what they have been sold, or should the IPA engagement require more?
- How do you determine if a person understands what they are doing?
- What if the individual providing independent professional advice asks a question that leads him or her to believe that the transaction is not in the seller's best interest?
I submit to you that the recently filed Lafontant case against Imperial Structured Settlements (now DRB Capital) provides an example of what should give you pause.
Accordng to the Complaint filed against Imperial Structured Settlement and Andrew Levine, Lafontant was encouraged by Defendants to waive independent professional advice.
In each of the 4 transactions approved in 6 months by Florida Courts in Sumter and Broward counties, in the alleged forum shopping case, Lafontant did not appear in court.
Shouldn't independent professional advice include, among other things,
- Determining if the prospective seller had sold payments before and when.
- Getting an understanding of the seller's cash flow situation, including fixed and variable expenses and sources of income independent of the structure. Would there be enough to live on post sale?
- Getting a clear understanding of whether the prospective seller can articulate his or her needs and plans for the proceeds.
- Determining to what extent the seller had explored other alternatives.
- Determining the extent to which the seller had shopped around prior to the engagement.
- Asking Lafontant if any contact was made with Allsate Life Insurance Company of New York for a competing quote under the terms of the Allstate Advanced Funding Exchange Notice.
- Attempting to determine if there was any undue influence being exerted on the seller by anyone.
The form IPAs are useless and leave a seller open to abuse. I also think it leaves the person providing the IPA exposed.
Structured settlement protection acts, if properly enforced provide a measure of protection to structured settlement annuitants who seek to raise cash. Sellers should not waive their right to independent professional advice even if their state is not one that requires it. When corners get cut by settlement purchasers in an industry in which predatory sale practices are unregulated people can get seriously hurt financially.