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2019 Louisiana Structured Settlement Protection Act Beefs Up Structured Settlement Protections

by John Darer CLU ChFC MSSC CeFT RSP CLTC

On June 11 Louisiana Governor John Bel Edwards signed Louisiana Senate Bill 193, now identified as 2019 Louisiana Act 260, which will replace Louisiana’s flawed Structured Settlement Protection Act with a new statute largely conforming to the National Conference of Insurance Legislators (NCOIL) Model SSPA 

Louisiana State Capitol, Baton Rouge

The new statute, which will not take effect until July 1, 2020, also includes registration and bonding requirements for factoring companies seeking to acquire payment rights of Louisiana residents, plus prohibitions intended to curtail “poaching” of transactions by competing factoring companies

Highlights

As now enacted, SB 193/Act 260will (effective July 1, 2020):

•Replace the existing Louisiana SSPA with a statute conforming closely to the NCOIL Model, except that unlike the NCOIL Model the new Louisiana statute still will condition any transfer of structured settlement payment rights on a judicial finding (among other findings) that the payee has received independent professional advice.

•Omit the provision under which SSPA transfer orders could have been retroactively invalidated because the transferee was not registered and the...

"Blue Bye Boo Hoo" Provision

•Requires that factoring companies seeking to acquire payment rights from Louisiana residents post security and register with the Secretary of State as “structured settlement purchase companies” and comply with prohibitions on “poaching” activities, e.g., knowingly contacting“ a payee who has signed a transfer agreement and is pursuing a proposed transfer with another structured settlement purchase company for the purpose of inducing the payee into cancelling the proposed transfer or transfer agreement with the other structured settlement purchase company.”

The registration and bonding and independent professional advice provisions couldn't come soon enough.  In what is known as the " Bourque case" (which I exposed in 2017) a Houston personal injury lawyer named Patrick Daniel, a member of the Louisiana and Texas , advised his clients to accept a structured settlement on one day, while on another day, 16 months later, armed with the personal knowledge gained from 5 years of dealing with the clients, directly or indirectly enters into a contract with a client to buy their structured settlement payment rights at a grotesque discount rate of 22% (that was misrepresented to the clients and the Court as a lower rate).

Smaller structured settlement factoring companies fear that high registration fees will make it more difficult to compete, while the proponents of the anti-poaching crusade argue that they spend a lot on marketing only to be gazumped when some court scraper sees the Court filing and comes in from another source with what may be a better deal financially for the seller. While some of the bad players in the structured settlement secondary market are spin offs from larger players, some bad actors are members of the National Association of Settlement Purchasers.

Without a regulation of sales practices that can put a bad actor out of business I wonder how completely effective such laws can be

Consider that recently an NASP member CBC Settlement Funding was linked to NLRBFCU.org, that fraudulently promotes a fictional woman as its Editor in Chief. The fictional woman has fictional credentials. How does the new Louisiana law protect citizens of Louisiana from the likes of NLRBFCU and sites and companies associated or profiteering from it?

Profiles of Purveyors of Structured Settlement Misinformation 2 | Annuity Sold

by Structured Settlement Watchdog

The misinformation about structured settlement transfer laws put forward by Annuity Sold forms the basis for a shout out concerning the weakness in Louisiana's structured settlement transfer laws,  that left Bobby Bourque and Peggy Bourque, and leaves other Louisiana residents open to attempted exploitation (in the Bourque's case by their own personal injury lawyer, the lawyer who fought for their recovery and would have counseled them to accept a structured settlement in the first place 16 months earlier). 

Annuity Sold claims "These days, 48 states in the United States have their own structured settlement transfer laws. The laws vary from state to state, but all of them require that the judge rule that the sale is in the best interest of the seller taking into consideration the welfare of the dependents. The flexibility of the laws allow judges to weigh the seller’s financial conditions against the need to sell the future payments".  However what Annuity Sold says is false because Louisiana is one of the states that unfortunately does not require a judicial finding of "best interest".

In order to avoid a 40% Federal Excise Tax imposed by Internal Revenue Code IRC 5891 however,  a buyer of structured settlement payment rights, such as D&A Litigation Support LLC, in the Bourque case, would have to obtain a "qualified Order".

According to IRC 5891 (b)(2) , the term “qualified order” means a final order, judgment, or decree which—
(A) finds that the transfer described in paragraph (1)—  [There must be a finding]
(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

Without a finding by the Court that the transfer is in the seller's best interest, a 40% excise tax is payable on the factoring discount.In the Bourque case, the December 2016 Order approving transfer signed by Acadia Parish Judge  (where the petition included a fraudulent representation of discount rate to the Court),  does not have a best interest finding!   Download Bourque 12-2016 Transfer Order NO Best Interest Finding.  D&A Litigation Support, LLC, the Puerto Rico Entity which lists David P. Daniel (i.e. David Patrick Daniel) as authorized person and the Houston personal injury lawyer's phone and fax number, must've believed that the December Order signed by Acadia Parish Judge was legit because they sent this letter  to Prudential as part of an attempted closing process on the structured settlement transfer. The June 2017 amended order did, although it was defective in other ways, such as misrepresenting the discount rate to the Court.

The factoring discount is defined at IRC 5891(c)(4) as "an amount equal to the excess of—

(A)

the aggregate undiscounted amount of structured settlement payments being acquired in the structured settlement factoring transaction, over

(B)

the total amount actually paid by the acquirer to the person from whom such structured settlement payments payments are acquired.

 

The undiscounted amount of payments, in the Bourque case amount to in excess of $3.2 million

The total amount that was on the December disclosure to be paid to the Bourques was $400,000

What's 40% of $2.8 million?   Not for the faint of heart.

Annuity Sold, rated C-, still has one of the worst ratings of structured settlement cash now companies from the Better Business Bureau.

Even two Annuity Sold competitors that filed Chapter 11 the last month have better BBB ratings of A+.

 

Louisiana Cash Now Merchants Tout Bogus "Windfall" for Structured Settlement

 
by Structured Settlement Watchdog™

 

The definition of  the windfall  in 4 dictionaries is  "an unexpected, unearned, or sudden gain or advantage".  Metaire, Louisiana cash now merchant Herman Woods and Associates states in an April 22, 2014 press release QUOTE UNQUOTE, "A financial windfall awaits those fortunate enough to hold structured settlement, annuities..." (emphasis ours)

 P.T. Barnum suddenly comes to mind. At one point, Barnum, the famous circus showman noticed that people were lingering too long at his exhibits. He posted signs indicating "This Way to the Egress". Not knowing that "Egress" was another word for "Exit", people followed the signs to what they assumed was a fascinating exhibit...and ended up outside.

So let's get this "egress" straight...

You have a structured settlement that is paying you a tax free stream of income.

You sell/transfer your structured settlement payment rights to Herman Woods and Associates for a discounted sum of money, if a Louisiana judge approves, that conceivably,  could have the word "windfall" written on it in ruby red lipstick, or described as such.

Louisiana has a structured settlement protection act.  Why do you suppose that is?

In the immortal words of Jon Bon Jovi  (paraphrased of course)

Shot to the heart and you're to blame

You give "cash now" a bad name.

 

Image source: Dreamstime.com

 

 

 

Platinum Financial is Louisiana Frightening: Not "Ben Yay" About " Filet Dumbo"!

by Structured Settlement Watchdog

"Key word stuffer" Platinum Financial Strategies of Lake Charles, Louisiana is yet another example of a structured settlement factoring broker that uses insurance terms in a misleading way as a search engine optimization and solicitation strategy.

A search for active companies with insurance licenses in Louisiana on January 24, 2011 came up empty for Platinum Financial Strategies and its Principal MIchael Potthoff. There was no company domiciled in Louisiana with the word Platinum in its name that even came up in the search results!

https://www.ldi.state.la.us/ProducerAdjusterSearch/Default.aspx?type=Producer

Let's examine some of the claims and statements made by Platinum Financial Strategies and see what is really questionable about the solicitation of investors by Platinum Financial Strategies:

A. "Structured settlement annuities are sold by structured settlement annuitants to Platinum Financial Strategies at a discount in exchange for a lump sum payment, Platinum offers these annuities for resale"

B. "Platinum Financial Strategies only offers annuities paid by insurance companies with high Standard and Poor's credit ratings".

Comment

With no insurance license in Louisiana how can Platinum Financial Strategies legitimately say it "offers annuities"?

C. "What if you could invest in those companies' products that provide the same level of trust for much higher that traditional market rates on investments that have comparably low risks?"

Comment

A secondary market annuity is not an annuity. When you invest in what Platinum Financial Strategies appears to be selling, you are investing in structured settlement payment rights, you ARE NOT investing in an annuity.  A structured settlement annuity is a qualified funding asset that is owned (in the majority of cases) by a qualified assignment company and stays owned by the qualified assignment company regardless of whether or not the structured settlement payment rights are transferred by a structured settlement annuitant.

D. "Structured settlement annuity payments are made directly to the buyer by a US Based insurance company with a credit rating that is generally AAA to A by Standard and Poor's"

Comment

If you are purchasing a payment that is being serviced the payments may not come directly from a US based insurance company, they may come from a servicing company. Servicing arises where the annuitant is only selling part of their payments and the life insurance company that issues the annuity chooses not to split payments between the original annuitant and the buyer of the partial interest in payment rights (as is its option under the structured settlement protection acts).  I've previously covered the topic of structured settlement servicing (and related issues) in this forum.

E. "A structured settlement annuity has been "previously owned" "

Comment

What Platinum says is rubbish. Structured settlement annuities ARE NOT "previously owned".  As stated in C above, "a structured settlement annuity is a qualified funding asset that is owned (in the majority of cases) by a qualified assignment company and stays owned by the qualified assignment company regardless of whether or not the structured settlement payment rights are transferred by a structured settlement annuitant".

F. " Platinum Financial Strategies has a number of channels, including an extensive broker network, through which structured settlement annuities are acquired"

Comment

Total rubbish. Platinum Financial Strategies DOES NOT acquire structured settlement annuities through its "extensive network", it/they acquire structured settlement payment rights. There is a difference and it's not so subtle.

While as a foodie I'm a big fan of Louisiana cuisine, I'm not "Ben Yay" about "Filet Dumbo".  Time to "kick it up a notch!"

Financial Literacy, GET IT?!

 

Louisiana HB133 Structured Settlements for Minors Bill Signed Into Law

by John D. Darer CLU ChFC CSSC

On July 15, 2008, Louisiana Governor, Bobby Jindal signed HB133 a bill favorable to structured settlements  and judgments in favor of children. The bill provided an amendment and reenactment of  Article 4521 to Code of Civil Procedure and enacted Articles 4272(C) and 4522.

Article 4272  Court approval of payments to minor

"In approving any proposal by which money will be paid to the minor as the result of a judgment or settlement, the court may order that the money be paid under a structured settlement agreement which provides for periodic payments and is underwritten by a financially responsible entity that assumes responsibility for future payments"

Article 4522 Judgment in favor of minor: structured settlement

"Whenever the court renders monetary judgment in favor of a minor, the court may order that the money be paid under a structured settlement agreement which provides for periodic payments and is underwritten by a financially responsible entity that assumes responsibility for future payments"

In both cases the Court is required to consider the following factors in determining whether the proposed payment schedule is in the best interest of the minor:

1. Age and life expectancy
2. Current and anticipated financial needs
3. Income and Estate Tax implications
4. Impact on eligibility for government benefits
5. Present Value of proposed payment arrangement and the method by which the value is calculated.

The new laws in Louisiana represent common sense and essential knowledge in today's world. Even though not specifically required in many other states it would be a best practice to provide justification.

Lawyers bringing cases to judges need to address these issues in advance and provide justification in their petitions. Working with a qualified knowledgeable settlement planner or litigation recovery management specialist and allied professionals will be essential.

Click  Download louisiana_hb_133_re_structured_settlements_for_minors.pdf for the full text of Louisiana HB 133