by Structured Settlement Watchdog
California lawyer Jovan Johnson dabbles in the sell structured settlement payment league with AnnuityFreedom.net with the mantra " Annuity Money Simple"
Here's why I think Johnson's got things a bit cockeyed:
"What percentage do structured settlement companies take?
The percentage structured settlement companies take is based upon the discount rate applied to the transaction and negotiation.
If you are considering selling your structured settlement annuity payment rights, you need to be sure that the offers you are getting are reasonable and fair as you’ll have to get the lump sum reduced by a factor of the projected interest earnings, known as the discount rate. The exact discount rate that you will need to give in order to sell your structured settlement will depend upon the total amount of your settlement payments, the number of payments you have remaining, the date those payments are due to arrive, the number of payments you wish to sell etc. The longer people have to wait to receive their payments, the greater the discount rate will need to be.
Discount rates from factoring companies to consumers can range anywhere between 8% up to over 18% but usually average somewhere in the middle. An average discount rate of 12% should be reasonable (Johnson is way too large) but some companies may want to take as much as 30% discount".
Buyer centric v Seller centric discount rates
If Johnson's putting your structured settlement on the slab for a 12% discount rate, you certainly want to go elsewhere. That's a buyer centric discount rate not a seller's. Depending on the type of payments stream being sold, you may be able to get a discount rate that is 50-60% or more less. The lower the discount rare, the higher the value to seller. It could also mean that fewer payments are sold to meet a specific financial need.
- Other websites seem to suggest that Johnson may be too big in framing an acceptable discount. For example Structuredsettlement.co says a 12% rate is not so good and a 6% rate is very good.
- Another good archaeological find. Approximately 11 years ago, Settlement Quotes wrote "Settlement Quotes has completed 6 Executive Life of New York transactions in the last seven months with an average discount rate of just under 12%. This is an increase of 3% from our average discount rate of 9.18%. This increase is due to the limited number of investors interested in these transactions. Most structured settlement factoring companies are not interested in these types of cases and end up canceling them before the court hearing". Think about it, 11 years ago their average discount rate was 9.18% and they were doing riskier Executive Life of New York transactions at just under 12%, the rate that Jovan Johnson says is the 2020 average. Genex Capital bought the structuredsettlement-quotes.com domain in or about November 2011, revamped the website in July 2012, but it still maintains the post, which was authored by Andrew Cravenho.
- CrowFly claims its average is just over 6% and advertises it has done a deal in the 4% range.
A generous donation to the misinformation highway
Johnson's company also makes a generous contribution to the misinformation highway by referring to settlement purchasers as structured settlement companies. The trade association for companies that buy structured settlement payment rights is known as the National Association of Settlement Purchasers (NASP).Settlement purchasers do not offer structured settlements to anyone. They offer to buy or sell/reassign structured settlement payment rights.
Johnson's website also falsely suggests that they buy structured settlement annuities. I will send him a case of beer if he can show absolute proof of a single structured settlement annuity that he or his company purchased as a qualified funding asset under IRC 130(d). I don't believe that he can. This is because in the United States, the only purchasers of structured settlement annuities are:
- Qualified Assignment companies
- Non Qualified Assignment companies
- Property & casualty insurers who buy and hold and do not do qualified or non-qualified assignments
- Defendants who are self-insured
- The United States of America