The Structured Settlement Secondary Market | Let's Be Honest About Size Shall We?

by Structured Settlement Watchdog

Accurate data about structured settlement factoring would be useful for legislators to understand how big the vastly underegulated structured settlement factoring industry is. Is it as small as one funder claims, or is it something that sticks out as the trade association says? I hate to be prickly about this, but what we have is a 20 percentage point disparity that doesn't inspire much confidence. So what is the truth?

Has the amount of structured settlement factoring expanded or contracted? 

One thing we do know that there has been an expansion of consumer and investor litigation (and other questionable activity) in this area since 2013.

1. Ongoing class action against Symetra
2. Access Funding Scam with associated Consumer and CFPB litigation against its principals
3. Annuity Sold, JRR Funding and related companies fraud and 7 year ban  (Maryland)
4. The Great Texas Disabled Annuitant  Money Train "Robbery". A factoring entity in existence for 6 months, just enough to do a single massive deal with a Texas incompetent that couldn't even make change. 
5. " Synchronized sinning"? In the same 12 month period it was revealed, hundreds of forgeries of judges' signatures on structured settlement transfer documents, at the hands of a New York paralegal, and a now disbarred former member of the Florida bar in another 100 or so instances in Broward County Florida.
6. Financial exploitation of a minor's structured settlement (Pennsylvania)
7. The Advance Funding/ Dan Cevallos Ponzi scheme  (Diego, Alcantara, First Trinity cases for example)
8. "Blue Buy-You" The Houston and Louisiana lawyer who put his client into a structure and then bought his client's 'structure 1 year after at a really crappy rate through a Puerto Rico company in which he had an interest.
9. Blistering mainstream media coverage in Maryland, Virginia and recently Minnesota and South Carolina exposing the consequences of inadequate regulation.

What drives such individuals and companies to engage in the bad behaviors to induce consumers? There has to be more than the proverbial lollipop as a reward.

The National Association of Settlement Purchasers (NASP) Estimate

The National Association of Settlement Purchasers (NASP) asks "Do most people receiving structured settlement payments sell their future payments?

NASP answers  "No, most people receive payments according to the original schedule. In the estimation if the National Association of Settlement Purchasers, "less than 20% of structured settlement recipients ever complete a Secondary Market transaction".   -NASP Secondary Market FAQ retrieved from NASP website October 2, 2022.

The Member of the Trade Association Answer

But Strategic Capital, which is a member of NASP, and sponsors a number of trial lawyer associations,  published a winky dink contradiction in its website's FAQ, implying that NASP is 20X too high.

Strategic Capital, based out of Toronto Canada, says:

1. Very few people actually sell structured settlement payments

"Out of the total outstanding amount of money currently held in structured settlement annuities -more than $80 billion- less than $800 million is transferred on the secondary market each year. That means that only about 1% of structured settlement payments are sold each year."

2. Only about 1% of structured settlements are sold or traded in the marketplace.

Not a lot of people sell their structured settlement annuity payments. In fact, 99% of people do not sell structured settlement payments

"Only about 1% of structured settlements are sold or traded in the marketplace. That is still published October 2, 2022.  

The Scholar's Erstwhile Estimate

Patrick Hindert, author of the structured settlement industry's seminal text, Structured Settlements and Periodic Payment Judgments, stated in 2013 that there were $365M present value secondary market purchases. This number represented only 7.1% of new money flowing into structured settlement annuities in 2013. So we're looking at a "20 or 7 to 1".  People of a certain vintage might appreciate that it could be the " B" side to a "new release" by Chicago as a buzz cut from "25 or 6 to 4"

Stratcap's number seems a bit optimistic, er unrealistic. Prove me wrong, please. What would be nice to know is ...

• The percentage of people who've sold once, twice thrice, four times and sold it all.
• The time frame from first sale to obliteration and so on.
• The percentage of sellers who are people of color.
• The percentage of repeat sellers who are people of color

Let's hear the real numbers, warts and all.  I would think that the trial lawyer associatons whose sposnor testimonial letters have been displayed on the Strategic Capital website should be interested in these numbers.

The National Association of Settlement Purchasers holds its annual meeting in New Orleans, in early November 2022. That leaves a month to get real on the stats of structured settlement factoring.  How about it?