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Novation Funding Seeks Suffolk County Judge Approval To Buy $4.6MM in Structured Settlement Payments FOR $9K

by Structured Settlement Watchdog

Wow! 40 Year old New Yorker Larry W. Schel, Jr. is giving up the security of a $4.6 million tax free retirement ( enough to pay for possible long term care) for $9,000 to pay for property taxes today.  Great deal, NOT. The effective discount rate is 16.95% for which are life contingent payments.

Hindsight's a bitch when you're 78 and thinking you gave up hundreds of thousands in annual income , millions in total,  $4.6 million for $9,000.

In its disclosure pursuant to the New York Structured Settlement Protection Act Novation cited the prices of annuities from Midland National and Fidelity and Guaranty that it represents payout the same amounts and on the same schedule as the Assigned Payments (that Schel would be selling). Neither of the companies Novation cites as part of the statutory disclosure actually issue structured settlement annuities. The purported cost of Midland was $864,120.16 and $1,154,897.39 magnifies just how bad a deal that this is for Schel.  The statutory disclosure requirement is also misleading in that it focuses on word "payout".  While it may be true that the costs accurately represent the nominal payout numbers, there is a total failure to take into account that the $4.6MM in payments transferred are income tax exempt, while the two exemplars are not. Therefore one can state with confidence that the statutory requirement is far less then the real cost to Schel when one considered the loss of tax exemption.

If a natural person buys the Midland National Annuity and begins receiving $170,000, how much of that is lost to taxes, taking into account Federal, State and possibly municipal taxes?  If 30% of income is lost to taxes then the true value should be grossed up accordingly so that the seller is not victimized and the judge has a reason to contemplate the true consequences when making their best interest finding.

Brooklyn Man charged 19.04% Discount Rate!

In another deal filed in November in Kings County,  Novation Funding charged a 24 year old African American man Lakeem McCoy a 19.04% discount rate in exchange for  a portion of his payments over 15 years.  Why is Novation permitted to charge a New Yorker credit card rates to help with college tuition. In addition to the bad deal, the proceeds of a sale of structured settlement payment rights could impact financial aid.

 

Novation Funding Excessive Discount Rates to Brooklyn NY Residents Pending in Kings County 2017

by Structured Settlement Watchdog®

Hedge fund backed Novation Funding, LLC  itself, or through its various DBAs,  has continued to make false and misleading advertising claims that it gives maximum lump sum payouts, since the Cedric Martez Thomas case which Novation Funding originated in October 2015 with an estimated  $1.4M profit spread. The Thomas case is one of the worst cases of a settlement purchaser taking advantage of a young annuitant that I have ever seen.  Each and every instance of use of that baloney advertising, discredits the entire structured settlement factoring industry. Novation misdirects consumers by promoting Hector Picard the remarkable adaptive athlete. Consider that Novation Twitter account offers no news other than kvelling over the accomplishments of Mr. Picard.

Two cases just filed in Kings County New York sees Novation Funding LLC having solicited New York residents and plied them with high discount rates that further invalidate Novation's already disproved marketing claims of maximum payouts.

1. Pacific Life and Annuity  22 year old annuitant  $42,300 in payments for $10,500 in cash  [ Discount Rate 19.85% compounded monthly]   Kings County NY 5106560/2017   Judge Pamela Fisher

Monthly payments of $300.00 due on or about January 1, 2020 through and including December 1, 2027; Monthly payments of $500.00 due on or about January 1, 2028 through and including March 1, 2030  

Reason for sale : College tuition and reliable vehicle.  Sold or attempted to sell payments twice in 2016, once to Novation and once to DRB Capital

With a minimal amount of effort, on June 21, 2017 I was able to get a comparison quote from another reputable company for $28,000 for the same deal to prove yet again that Novation's advertising claims of maximum payouts are deceptive.

2. Hartford Life  25 year old annuitant  $55,000 in payments for $32,125 in cash  [Discount Rate 17.07% compounded monthly]   Kings County NY 511234/2017   Judge Steven Z. Mostofsky
Lump Sum $25,000 due on or about September 16, 2019;  Lump Sum  $30,000 due on September 16, 2021
Reason for sale : Tuition and costs to further education and invest in business.  Sold or attempted to sell payments in 2012, 2013 and 2014 to Stone Street Capital and in 2015 to Novation Funding LLC, all in Kings County, New York.

New York Judges Must Read  | Red Flag on Flaw in New York Structured Settlement Protection Act Disclosures

The statutory disclosures made by Novation Funding LLC in connection with the above two referenced legal matters include a section entitled " Price Quotes from Annuity Issuers". Novation Funding LLC represents to the New York Supreme Court in Kings County that the two quotes are the cost to buy an annuity that would payout the same amounts and on the same schedule as the Assigned Payments would be. The disclosures appears not to distinguish that structured settlement payments for payment of damages in physical injury cases income tax free, while investing in the " comparable annuities" that  used in disclosures to the Kings County court (and to these two young New Yorkers) may include surrender charges, and if distributed under age 59 1/2 (as they would be to precisely match the structured settlement payout), the young New Yorkers would be hit with IRS penalties.  For any such statutory disclosure to be accurate the potential surrender charges taxes and penalties from the so-called comparable annuities to "replicate" must be taken into the equation.  This would obviously inflate the comparable cost and make the money on offer by the buyer look worse. It is in the sellers best interest that this information be an accurate representation to the Court and it is critical that New York judges presiding over structured settlement transfers petition not issue orders based on inaccurate flawed representations.

Investors Beware

Investors in structured settlement payment rights (a/k/a structured settlement derivatives and by the scam label "secondary market annuities") from a New York origination need to be mindful of the consequences of inaccurate or the potential for inaccurate representations to the Courts and scrutinize accordingly.

Factoring Company Warning

Structured settlement factoring companies are discouraged from making superlative claims about payouts that can be easily disproved