by John Darer CLU ChFC CSSC RSP CLTC
Patrick Hindert's latest series on growing the primary structured settlement market smacks of sour grapes.
Patrick Hindert is a former President of the National Structured Settlements Trade Association, although no longer a member (purportedly over a dispute over how much he should pay in dues). Predictably he trashes NSSTA, although now he no longer has the opportunity to draw on material he was exposed to from sitting on NSSTA committees such as its legal committee.
Hindert's criticism centers on the same old story : single claimant qualified settlement funds and the structured settlement transfers.
The single claimant qualified settlement fund "ship" has sailed. Get over it.
It is worthy to note that a single claimant qualified settlement fund, if it were ever ruled on favorably by Treasury, would increase opportunities to sell recycled structured settlements to personal injury claimants and structured attorney fees backed by those cash flows.
Coincidentally the primary market panel at the 2013 NASP annual meeting features a discussion about recycled structured settlements.
Regarding structured settlement transfers, Hindert states
"IRC 5891 and the state structured settlement protection statutes have solidified structured settlement transfers (i.e. factoring transactions) into a growing market that complements and potentially expands the traditional primary market. The ability of structured settlement recipients to sell their payment rights subject to judicial oversight and approval arguably improves the structured settlement product by adding a liquidity feature in the event of "over structuring" or unanticipated cash requirements. Instead of capitalizing on settlement transfers to improve and expand its market, NSSTA (through bylaw amendments) has threatened its members with suspension or expulsion if they sollicit(sic) or promote secondary market transactions. By continuing to criticize "structured settlement factoring", without participating in the secondary market, NSSTA and its members undermine their own product".
The structured settlement secondary market provides a valuable service to structured settlement annuitants and other payees of periodic payments such as lottery recipients.
The good that the structured settlement secondary market does however, is undermined by bad business practices such as forum shopping, examples of which you can read about in my recent posts. Note that our information is that the practice is not confined to an isolated company.
Forum shopping mocks the law, mocks Congress and state legislatures that respectively, passed VTTRA 2001 and state structured settlement protection acts and, if left unchecked, deprives the United States Treasury of tax revenue from the 40% excise tax that should be levied on those that violate the federal law.
Is it Hindert's opinion that these practices should not be criticized?
Furthermore, and unrelated to forum shopping, the June 28, 2013 deposition of David Springer of Sovereign Funding Group in the Woodbridge case portrays a stunning example of deceptive business practices of some in structured settlement secondary market that are even tolerated by the Better Business Bureau of Greater Maryland!
Springer is a guy who admitted under oath
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to making up stuff on his LinkedIn profile
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to creating false LinkedIn profiles, false Google+ profiles,
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who endorsed himself via his fake personae in public facing social media,
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to submitting false information to the Better Business Bureau and
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to impersonating his wife because he was not legally permitted to work in the United States at the time he did it. Many factoring companies highlight their BBB records as something that consumers should rely on. That's unfortunately very Pollyanna.
Is it Hindert's opinion that these practices should not be criticized?
Then you have companies that are not registered to do business in the states in which they solicit business. One company that is a member of NASP that for years has listed a corporate headquarters in Maryland, with the Better Business Bureau, but the State of Maryland provided us with a certification that the company, was never registered in Maryland (using either of the two business names contained in its BBB report). Nevertheless the company has an accredited A+ from the Better Business Bureau of Greater Maryland. Other companies operate out of mailboxes or virtual offices so the consumer or investor never really knows where they really are.
Is it Hindert's opinion that these practices should not be criticized?
Still other companies rely on lead generation websites, financially incentivizing poorly supervised search engine optimization folks who have little to no financial background, or licensing. The unfortunate "sprouts"are numerous sites with bogus testimonials, bogus review sites, financially illiterate blog posts and spam. Who is supervising these companies?
Is it Hindert's opinion that these practices should not be criticized?
Why is it that Hindert has not discussed ways to improve the regulation of the structured settlement secondary market to help consumers and individual investors?
On the subject of recycled structured settlements, what industry standards are put in place to avoid conflicts of interest?
For an investor, including a primary market claimant, an attorney structuring their fees, or a retiree to get a better return, the discount rate to the seller must be higher meaning less cash or more periodic payments sold to raise what the seller needs. The best cash flow for an investor may be from the factor that charges a 16% discount rate to the seller as opposed to a 7% or 8% rate.
I'm skeptical that Hindert is blind to the fact that NSSTA members are knowledgeable about and, DO in fact have long standing relationships and open dialogue with members of the structured settlement secondary market and refer business.
Hindert's commentary often engenders a narrow focus on growth of the personal injury market, but fails to recognize other products and solutions offered by NSSTA members, both within and outside of the personal injury space, both within and outside of litigation solutions, a fact that would be underscored by simply scanning a few industry websites instead of trading on old information in his noggin.
Is it the job of NSSTA to be the"ginsu"of trade associations, to teach its members how to sell life insurance and long term care?
These are solutions that I offer my clients, but frankly, as someone who is certified in long term care (CLTC), I obtain my long term care information from the AALTCi, FMOs, American College courses and external sources.
Does NASP lead the structured settlement secondary market, or is it led by its members? What influence does a single company that controls over 70% of the secondary market have over NASP?
What business is NSSTA in?
On October 14, 2013 Hindert recognized that "the United States structured settlement industry" , played an important historical role influencing the development of risk based capital (RBC) requirements for insurance companies". There's a start. And in 1993 there was only NSSTA. Read more about RBC in Hindert's text book.
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