I was pleased to obtain a copy of a September 13, 2011 approach letter that the loquacious President of the Society of Settlement Planners sent to a plaintiff lawyer in which he stated:
" After much discussion on the topic, we decided that we did not want our feelings about the factoring industry to deprive our clients from an income replacement option that could pay them as much as 50% more than the current interest rates available from traditional structured settlement annuities. We now have a way to go into the secondary marketplace to "recapture" these previously-owned investment-grade settlement streams for new clients who will gladly give those payment streams a new, loving home".
When you're down and troubled
And you need some loving care
And nothing, nothing is going right
Close your eyes and think of me
And soon I will be there
To brighten up even your darkest night
cue James Taylor "You've Got a Friend"
Whether you call them recaptured investment-grade settlement streams, in-force annuities, structured settlement retreads or recycled structured annuities, in my opinion the concept of using secondary market cash flows to finance a portion of a plaintiff's future needs is a valid one in some circumstances. The strategy can be used on a stand-alone basis or in conjunction with traditional structured settlements. Yet because that segment of the industry is unregulated (there is no license requirement for the factoring company that arranges the deal or the brokers or advisers it deals with and for the most part, no regulatory oversight to protect investors) its use should be evaluated carefully.
Furthermore, it is critical to understand that because there is a finite supply of structured settlement payment rights on the "used car lot" because less than 10% of the holders are selling, it may not be possible to immediately fill a specific need using this strategy.
It also appears that holders of transferred structured settlement payment rights do not enjoy the same consumer protections as the original payees.
In my opinion, the structured settlement industry would be wise to embrace this concept and to air out and set standards of ethics regarding its practice.