Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and John Darer Reviews

Structured Settlement Protection Acts Being Rendered Meaningless?

by Structured Settlement Watchdog

Structured settlement protection acts are supposed to protect structured settlement annuitants.  There are serious questions being asked in litigation in multiple states, one where Florida judges approved 4 transactions from the same 19 year old annuitant over 6 months and in one case, another where a Virginia judge approved 11 in 2 years [for an annuitant with a dependent child ] , that could not possibly have ALL satisfied the best interest test under any reasonable standard.  In each of these cases the entire structured settlement was stripped. In each of these transactions, the annuitant did not appear in court and in each of these case there are allegations that the annuitant was coached against seeking independent professional advice.

These case raise serious questions about the viability of the structured settlement secondary market.

While court scraping and forum shopping are important issues of varying severity in need of a solution, lax enforcement of "best interest" is FAR more damaging than court scraping.

Structured settlement brokers and settlement planners have been marketing their core product telling lawyers and annuitants that the structured settlement protection acts mean something. From 2002 on settlement planners  began to insist that certain language appear in releases pertaining to Internal Revenue Code Section 5891.  The allegations in these cases suggest that where there is lax enforcement of the SSPA it renders the protections meaningless. 

What is the "best interest" test?

IRC 5891 (c)(2) Qualified order

For purposes of this section, the term “qualified order” means a final order, judgment, or decree which—

(A) finds that the transfer described in paragraph (1)—

(i) does not contravene any Federal or State statute or the order of any court or responsible administrative authority, and

(ii) is in the best interest of the payee, taking into account the welfare and support of the payee’s dependents, and

(B) is issued—

(i) under the authority of an applicable State statute by an applicable State court, or

(ii) by the responsible administrative authority (if any) which has exclusive jurisdiction over the underlying action or proceeding which was resolved by means of the structured settlement.

 

In past years there have been excessive efforts focused on discount rate caps. The rate cap in North Carolina may have increased forum shopping from that state to Florida, desperate annuitants being tempted in unsavory ways to commit fraud so they can get cash. Market forces deal with rate caps. What I've outlined above is the evidence of far more fundamental problems that, in my opinion, undermine the integrity of the law.

 

Later this month I will be publishing a presentation that identifies and outlines each of the harmful business practices in the structured settlement secondary market sales cycle. The presentation entitled

 

"Beyond The Platitudes | The A to Z on Factoring Business Practices You Need To Know About" will  "simplify, tear away the unrelated, and pluck out the weeds that are smothering the product message" and will be a helpful reference designed to assist participants in the structured settlement primary and secondary market, members of Congress and state legislators in their efforts to improve the industry and serve as a warning beacon to consumers, investors and their lawyers who may be subjected to the unsavory activity.

 

 

No direct or indirect transfer of structured settlement payment rights shall be effective and no structured settlement obligor or annuity issuer shall be required to make any payment directly or indirectly to any transferee of structured settlement payment rights unless the transfer has been authorized in advance in a final order of a court of competent jurisdiction based upon express findings by such court that: (a) the transfer complies with the requirements of this title; (b) the transfer is in the best interest of the payee, taking into account the welfare and support of the payee's dependants; - See more at: http://codes.lp.findlaw.com/nycode/GOB/5/17/5-1706#sthash.YqOEnLTD.dpuf

No direct or indirect transfer of structured settlement payment rights shall be effective and no structured settlement obligor or annuity issuer shall be required to make any payment directly or indirectly to any transferee of structured settlement payment rights unless the transfer has been authorized in advance in a final order of a court of competent jurisdiction based upon express findings by such court that: (a) the transfer complies with the requirements of this title; (b) the transfer is in the best interest of the payee, taking into account the welfare and support of the payee's dependants; and whether the transaction, including the discount rate used to determine the gross advance amount and the fees and expenses used to determine the net advance amount, are fair and reasonable - See more at: http://codes.lp.findlaw.com/nycode/GOB/5/17/5-1706#sthash.2FmJ4JYd.dpuf

No direct or indirect transfer of structured settlement payment rights shall be effective and no structured settlement obligor or annuity issuer shall be required to make any payment directly or indirectly to any transferee of structured settlement payment rights unless the transfer has been authorized in advance in a final order of a court of competent jurisdiction based upon express findings by such court that: (a) the transfer complies with the requirements of this title; (b) the transfer is in the best interest of the payee, taking into account the welfare and support of the payee's dependants; and whether the transaction, including the discount rate used to determine the gross advance amount and the fees and expenses used to determine the net advance amount, are fair and reasonable - See more at: http://codes.lp.findlaw.com/nycode/GOB/5/17/5-1706#sthash.2FmJ4JYd.dpuf

No direct or indirect transfer of structured settlement payment rights shall be effective and no structured settlement obligor or annuity issuer shall be required to make any payment directly or indirectly to any transferee of structured settlement payment rights unless the transfer has been authorized in advance in a final order of a court of competent jurisdiction based upon express findings by such court that: (a) the transfer complies with the requirements of this title; (b) the transfer is in the best interest of the payee, taking into account the welfare and support of the payee's dependants; and whether the transaction, including the discount rate used to determine the gross advance amount and the fees and expenses used to determine the net advance amount, are fair and reasonable - See more at: http://codes.lp.findlaw.com/nycode/GOB/5/17/5-1706#sthash.2FmJ4JYd.dpuf

Structured Settlement Factoring | Failure to Adhere to Best Interest Standard

by Structured Settlement Watchdog

Failure to comply with the best interest standard in the state's structured settlement protection act is unfortunately more than just a rare occurrence in some places.  The results are tragic.

 I have learned of  multiple annuitants who have been approved for as many as 5-6 structured settlement factoring transactions in a single year.  In two cases two deals were approved a month apart!    That's nuts.

This is not a failure of structured settlements, it is failure to enforce the structured settlement protection act by judges who are tasked with doing so.  

It is also highlights that there is more work to do with state legislatures in protecting structured settlement annuitants. 

In many of these cases the annuitant did not appear in court. The best interest standard requires that a judge must determine that the structured settlement transfer is in the best interest of the structured settlement annuitant and the interest of any applicable dependents.   

Adding to the financial devastation, there are transactional fees embedded into each transfer so multiple transfers mean a significant erosion of financial security.

I will be bringing you more of this story over the coming months,

 

 

 

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Annuity Transfers Education Series on Selling Structured Settlement Payments

by John Darer CLU ChFC CSSC RSP

I continue to be pleased to see more settlement purchasers cleaning up the industry image by educating the public instead of extolling the virtues of "cash now". One such example is Annuity Transfers Ltd's 4 part series educating the public on what is involved in Selling Structured Settlement Payments by its CEO, Robert Thompson.

Here is an excerpt from part 3 of the "selling structured settlement payments" education series.

"It is understood that a purchaser pays for something today, but must wait until some future date to receive payment. Unlike the purchase of a car or a house, this transaction is scrutinized by a third party, and is not approved in court unless it represents a real “win-win” situation. Purchasers cannot assume that courts will approve all structured settlement transactions, just as sellers should not assume that all offers to purchase payments are constrained by the legal process.

No one involved in the structured settlement transfer process should assume anything. Sellers use the requirement for court approval to their advantage, while accepting the reality that no sale is possible without a fair price. The market would not exist and will not exist in the future unless the purchaser is willing to take on some level of risk — but all risk comes at some cost.

One of our sources tells us that Annuity Transfers, Ltd tends to be one of the more competitive and ethical factoring companies out there.  Nevertheless we caution sellers to not rely on the Court's approval as being the benchmark indication of the deal being a "win-win" for you and the buyer. The Court IS NOT duty bound to find you the best deal. The Court must only determine if the price is fair and that a proposed sale, or transfer, of structured settlement payment rights is in your best interest and the best interest of your dependents (f you have any)

Kansas Man Alleges J.G. Wentworth Pterodactyl "Takes Him For a Ride"

by Structured Settlement Watchdog®

Structured Settlement "Science Fiction" Day

Yet another story of a structured settlement annuitant who has decided to sell structured settlement payment rights and lived to regret it.  In this case a Hiawatha Kansas man blames it on a mythical prehistoric bird and drugs.

On ComplaintsBoard.Com the Hiawatha Kansas man states  "Due to my Disability I am on very strong medication for Depression and Pain. I hardly remember doing so called business with JG Wentworth back in 2008. I can just remember being swooped on like a Giant bird had gotten a hold of me and took 3/4 of my Annuity from my 4 year old and my self (sic) " January 19, 2011

Judge "I guess we're really not in Kansas anymore"

He goes on to say "We are struggling! That money was fought for by myself and my son when my wife died unexpectedly in a Doctor's Care (sic). I just now have a question. Can you legally sign a Contract (sic) while being under the influence? Is the Contract Binding(sic)? Please email me at [email protected]. Thank you!?" (email sanitized)

Courts are usually not very sympathetic to people who claim they were intoxicated when they signed a contract

According to FindLaw, "if a person signs a contract while drunk or under the influence of drugs, can that contract be enforced?  Courts are usually not very sympathetic to people who claim they were intoxicated when they signed a contract.  Generally a court will only allow the contract to be avoided (sic) if the other party to the contract knew about the intoxication and took advantage of the intoxicated person, or if the person was somehow involuntarily intoxicated (e.g. someone spiked the punch)". 

At the Very Least a Kansas State Court Judge Believed He Was Competent

Taking that into account and setting aside all due sympathy for the tragedy of this man's loss (of his spouse and his son's mother) and the financial predicament he finds himself in now, if the man transferred his and his son's structured settlement payment rights in 2008, then the transfer will have had to have been approved by a Court as being in the best interest of the man and his dependents. The fact that the man claims that he cannot now remember the transaction with J.G. Wentworth 3 years ago, does not mean he was not competent to make a regretful decision then. At the very least a state judge believed he was.

Moreover, depending on the state the structured settlement transfer is to take place, there is a mandatory statutory "cooling off period "of between 3 to 10 days during which time the transaction must not proceed. As expressly set forth in Section 2(h) of the Kansas structured settlement protection act, the payee has the right to cancel the transfer agreement, without penalty or further obligation, not later than the third business day after the date the agreement is signed by the payee.

A 75% discount to future value would likely have meant that a long term cash flow was sacrificed. It is not  
clear whether the man sought independent financial advice and/or shopped around for the best deal (although it is doubtful), or whether the sight of a zaftig Viking (in an non authentic hat), crooning on TV provided sufficient "stimulus" to trigger an impulsive decision to sell structured settlement payment rights to J.G. Wentworth.

Judges Ruling on Structured Settlement Transfers Not Seeking Best Discount Rate 

A judge reviewing a structured settlement transfer is most likely looking for reasonable discount rate, as opposed to the best discount rate. If every judge was charged with looking for the best effective discount rates the high discounting factoring companies like Imperial Structured Settlements, Peachtree Settlement Funding and others would not be in business or would be much less profitable. However, this is not the law.

If you need cash now, but don't shop around,  you can ride the J.G. Wentworth bus with this dude, at your own peril!

Selling A Structured Settlement in 2024? Get The 411 on Cash Now. Don't Be a Victim (4structures.com)