by Structured Settlement Watchdog
What is Structured Settlement Payment Servicing?
Structured settlement servicing comes about if you are only selling part of your structured settlement payment. It is my understanding that many life
insurance companies will not split annuity payments. THIS is the reason there is a need for servicing and the scenario where servicing applies.
If, for example, you have a structured settlement that is funded with an annuity from MetLife and you're content to continue receiving payments as scheduled, there is no need for structured settlement payment servicing. But if you have a $100,000 guaranteed lump sum due from MetLife (which will not split payments) and only need to sell $30,000 of the $100,000 to raise what you need, then servicing is required.
Servicing, on its most basic level, means that the entire structured settlement payment (not just the amount sold) goes to the factoring company, its servicing arm or a third-party servicing company which splits the payment. The result is that the factoring company receives the transferred structured settlement payment rights it bought from the seller and passes the difference (the subset) on to the selling annuitant.
In ongoing Arizona litigation, Genex Capital CEO Roger Proctor pins the tail on Structured Settlement Investors for their choices (highlights added for emphasis)
"Each of the Defaulting Investors in this litigation chose payment servicing over taking a direct assignment to the payments. As such they voluntarily elected to take the lesser subset of rights associated with the Receivables with all of the corresponding benefits and restrictions associated therewith rather than choosing to become the direct designated payee in the respective court orders. By this election the Defaulting Investors avoided having to, among other things, indemnify the Annuity Issuers and Annuity Owners".
[from 1/3/2022 Decl. of Roger Proctor in Response to Seeley Defendants' Motion for Partial Summary Judgment (at #56) IN THE SUPERIOR COURT OF THE STATE OF ARIZONA IN AND FOR THE COUNTY OF MARICOPA GENEX CAPITAL CORPORATION, a Delaware corporation; Plaintiff, vs. SEELEY CAPITAL MANAGEMENT, INC., a Massachusetts corporation; et al., Defendants. AND RELATED COUNTERCLAIM; RICHARD L. KEEFER and VICKI L. KEEFER, husband and wife; et al., Plaintiffs,
vs. GENEX CAPITAL CORPORATION, a Delaware corporation; et al., Defendants. Case Nos: CV2020-004958 CV2020-013796 (Consolidated) at #1]
"The servicing of structured settlement payments occurs when an annuitant enters into a structured settlement factoring agreement in which the annuitant chooses to split one or more payments and the factoring company becomes the payee of the entire payment. Once the factoring company receives the entire payment from insurance company, they keep their agreed upon amount and pay the annuitant their portion". SSQ website owned by Genex Capital (retrieved 2/2/2022) A still published blog on SSQ, authored in 2009 (prior to the Genex Capital acquisition of the site), goes into great detail about the risks of structured settlement payment servicing to the seller.
Use of Servicing by Tertiary Market Companies Selling Factored Structured Settlement Payments to Investors
Some of the tertiary market players use a servicer to administer payments so they can "chop up" one or more larger annuity payment streams into different smaller chunks to sell to different types of investors. They may also use the servicer to provide a means for the investor to re-sell the payment rights to someone else.
A layer of complexity is clearly added to the process when you are further removed from direct contact with the annuity issuer. If you sell to multiple settlement purchasing companies, you could be dealing with multiple servicers for routine administrative tasks. And if you buy a sliver of 1/3 of a factored structured settlement payment stream you must also rely on the servicer to handle payments to your beneficiaries and to maintain your wishes even if there is a change (or multiple changes) in servicers years into the future.
Proctor states "By our count, The Defaulting Investors engaged in no fewer than 21 wrongful reassignment transactions. Genex first learned of these improper
transactions from Security Title on or about January 30, 2020. This precipitated an investigation by Genex and follow up measures including the issuance of various Default Notices". [Decl. of Roger Proctor 1/3/2022 Ibid at #2]
Proctor alleged in his Declaration that "The Defaulting Investors’ prior Receivable rights were terminated by Genex as a result of their breaches that remained uncured up to the time of termination. [Decl. of Roger Proctor 1/3/2022 Ibid at #6]
The alleged defaulting investors are primarily retirees or pension plans [Reference prior pleadings], including an 86-year-old retired Oklahoma schoolteacher Geraldine Yeisley [ Decl. of Roger Proctor 1/3/2022 Ibid at #40 line 16, and Voterrecords.com] To wit...
"Intervention in In re Petition for Approval of Transfer of Structured Settlement Payment Rights between Stratcap Investments, Inc. v. Nwannewuihe, Case No. 2012-CH-000229 (Ill. 7th Cir. Ct.) by investor Geraldine Yeisley has triggered default in payment of $551,000 due on May 15, 2021, resulting in Prudential Life Insurance Company’s withholding payment pending the outcome of the litigation. This has resulted in two of Genex’s Investors’ not receiving their respective portion of the Receivable payment. Upon information and belief, it appears that NEAA and/or other Seeley Defendants were the architect of this litigation, designed to harm Genex"
Genex’s inability to pay the two other Genex Investors as a result of the wrongful assignment of the RPAs has further damaged Genex’s goodwill and reputation with investors and brokers. And make no mistake, the $551,000.00 payment due on May 15, 2021 was due and payable to Genex and no other person as per a final and longstanding non-appealable court order". [Decl. of Roger Proctor 1/3/2022 Ibid at #79-80 p15].
But then again, Genex Capital states on the Assured Annuity website that "Each Assured Annuity™ is paid directly to you by a U.S. based Insurance Company with a credit rating that is generally AAA to A rated by Standard and Poor’s. In cases where you may want to resell the annuity in the future or in other appropriate circumstances, these payments may be paid through a third-party bonded servicing company arranged by Genex Capital. In such case, you will have a direct relationship with such servicing company".