Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and John Darer Reviews

"My Structured Settlement Payments Are Late' What Happened?

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Structured settlement payments should not be late, "for their very important date", with you.

 

If payments are sent by mail, the annuity issuer will usually mail the payments to your address of record 5-10 days prior to the due date. 

• It is important and a requirement of most settlement agreements that the structured settlement payee is responsible for notifying the annuity issuer or qualified assignment company of any change of address.
• If your structured settlement was set up when you were a child and you've moved, be sure to confirm that the annuity issuer or assignee has your current mailing address.

Telephone numbers of current and former structured settlement annuity issuers

• If payments are made by direct deposit, which is the preferred and most reliable method of receiving your structured settlement payments, your payments are made directly into your bank account on record on the date payments are due. The funds should be available on the date of deposit, depending on your bank's polices.  
• If you have previously sold some of your structured settlement payments and your payments are being serviced (subject to a servicing agreement) then you may need to contact the servicing company to make such changes. 
• If you have multiple structured settlement annuities review the paperwork associated with your structured settlement transfer carefully.  It is possible that you sold payments from one annuity and not the other so more than one of the above options may apply.

"Servicing" of Structured Settlements Results in 15 Day Plus Payment Delay

by Structured Settlement Watchdog ®

A structured settlement annuitant who sold half his structured settlement payments to a South Florida cash now pusher, was subject to a payment servicing agreement that has unfortunately resulted in a payment delay of 15 days and counting.

What is Structured Settlement Payment Servicing? When is Payment Servicing Necessary?

A payment servicing agreement is only necessary when a person sells part of their structured settlement payment rights, and the structured settlement annuity issuer will not "dice" payments. For example, the annuitant contracted to receive $1,000 per month when he settled his personal injury case . The structured settlement was funded with an annuity issued by a life insurer that will not "dice payments. Some years down the road, the annuitant sold $500 per month of his $1,000 per month payments, but since the insurer would not dice payments, the  full $1,000 per month had to go to the servicing company, each month, where it would be "diced" and then each month distributed $500 to the annuitant and $500 to the investor in the structured settlement payment rights to the sold $500 per month.

Sometimes the settlement purchaser is the servicer. But things may get more complicated if the structured settlement payment rights are securitized or sold on.  It is then possible yet another company could be the servicer!

I received a call today from the annuitant whose first call was to the life insurance company that issued the structured settlement annuity. He was told by the insurance company that they could not help him because the payments were being paid to company in New York.  That company was splitting the payments and then making a direct deposit into the annuitants account using a code name.

This annuitant did not have a contact. The annuity issuer would/could not help him because a servicing agreement was in place. 

Again payments were 15 days late as of this morning!  Fortunately for him I asked him which company he sold to and although he couldn't remember the name he knew the geography. So we played "name that cash now pusher" until something seemed familiar.  In the meantime I contacted a representative from the servicing company that was

Payment Servicing Dilutes Insurer Branding and "Cedes" the Messaging to the Payment Servicer

Life insurance companies surrender their brand to the settlement purchaser or its servicer when they don't dice payments.  Consider that a monthly structured settlement annuity with 20 years remaining equals 240 more opportunities to get your brand in front of the customer. How about a lifetime annuity?  Even if the payments are made by direct deposit your brand is on the payment advice, even if abbreviated.   The annuitant in question receives a payment from the servicer with a meaningless 4 letter code followed by a 4 number code.

I have spoken to a manager at the annuity issuer in question to make them aware of the consequences of a servicing agreement. The name is not important to this discussion, since a number of annuity issuers will not dice payments.

Isn't there an efficient way for non-dicing annuity issuers to service customers who need partial liquidity, who may be prospects for other products or services offered by the insurer?

Important Tips for Sellers and Investors

1. Partial sellers should keep the contact information for the servicing company with their important papers.
2. Investors in structured settlement payment rights should determine before making a purchase whether or not payments are being serviced and if so, obtain direct contact information. 

 

 

 

"My Structured Settlement Payments Are Late' What Happened?

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Structured settlement payments should not be late, "for their very important date", with you.

In an effort to keep you from "Wonder-land" over your payments, following is some important information about structured settlement payments:

If structured settlement payments are sent by mail  

the annuity issuer will usually mail the payments to your address of record 5-7 days prior to the due date.  It is important and a requirement of most settlement agreements that the structured settlement payee is responsible for notifying the annuity issuer or qualified assignment company of  any change of address.  If your structured settlement was set up when you were  a child and you've moved, be sure to confirm that the annuity issuer or assignee has your current mailing address.

If structured settlement payments are made by direct deposit

 which is the preferred and most reliable method of receiving your structured settlement payments, your payments are made directly into your bank account of record with the annuity issuer,  on the date payments are due. The funds should be available on the date of deposit, but you should check your bank's policies. Be sure not to close an account if  you have a structured settlement payment pending and allow at least 30 days for an account switch.

If you have previously sold some of your structured settlement payments and your payments are being serviced

If your structured settlement payments are subject to a payment servicing agreement, then you may need to contact the servicing company to make such changes.  If you have multiple structured settlement annuities,  review the paperwork associated with your structured settlement transfer carefully.  It is possible that you sold payments from one annuity and not the other so more than one of  the above options may apply.

 

 

Structured Settlement Payment "Servicing" When Selling Your Structured Settlement

If you are selling your structured settlement in September 2012, can a settlement purchasing company prevent structured settlement servicing?

In discussing important consumer criteria, one settlement purchaser says when selling your structured settlement

"it isn't all about the price either. It's about:

• knowing you will be guided through the process in an easy and comfortable manner.
• not having your payment stream 'serviced' and payments you don't
  wish to sell put under a company's control, because maybe you will find
  a better offer down the road if you wish to sell again"

What is Structured Settlement Servicing?

Structured settlement servicing comes about if you are only selling part of your structured settlement payment. It is my understanding that most 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 New York Life Insurance Company and you're content to continue receiving payments as scheduled, there is no need for structured settlement servicing. 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 on to the selling annuitant.

The settlement purchaser who published the above cited text about servicing insinuates that some factoring companies who act as servicers block the implementation of competing offers to purchase if a selling annuitants wishes to sell additional structured settlement payment rights at a later time. This is not a unique issue and one that the settlement purchasing company's competitor, RSL Funding,  has raised in litigation against another competitor. The settlement purchaser insinuates that doing business with the settlement purchaser will prevent such servicing. How can this be?

The fact remains that as long as the status quo remains, a factoring company cannot control whether there is servicing or not if there is a partial "dice" of structured settlement payment rights.

The Structured Settlement Watchdog™ John Darer™ has written extensively on issues related to servicing, including questions about the rights of structured settlement annuitants to remaining payments if the servicer were to go bankrupt. His two part video podcast series here and here on the topic on LBN, which included an interview with Dallas bankruptcy attorney Bruce Akerly, was followed by a white paper and presentation on the topic by the same attorney at the National Association of Purchasers annual meeting in November 2009.  I understand that it is common practice for there to be a back up server as well, but partial sellers should ask the question.

Here's a selection of some of John Darer's blogs on structured settlement servicing.

Structured Settlement Servicing By Factoring Companies Redux

Sell Structured Settlement Payments More than Once | May Need to Deal with MULTIPLE Companies For 'Simple" Administrative Requests

Sell Structured Settlement Payments More Than Once: Need To Deal With MULTIPLE Companies for "Simple" Administrative Requests

by John Darer® CLU ChFC CSSC RSP

A new issue about "servicing" of structured settlement payments has presented itself.

Previously published blogs and podcasts have addressed structured settlement servicing agreements which only come into play when:

(1) A structured settlement annuitant sells only part of their structured settlement payment rights to a factoring company or "cash now pusher"; AND

(2) The life insurance company issuing the structured annuity chooses not to split payments

A servicing agreement means that the entire annuity payment (NOT JUST THE PORTION BEING SOLD) is paid to the servicing company which then skims off what is due the factoring company and then pays the annuitant the difference, possibly with associated fees. A servicing company MAY be the factoring company purchasing the payments or it may be a 3rd party company that specializes in servicing.

I've also discussed the negative consequences of entering into a servicing agreement:

(1) Potential exposure to additional costs and delays to protect and/or recover based on your rights in the event of Chapter 7 bankruptcy of the servicing entity.

(2) No longer able to contact the life insurance company that issues your structured settlement to change address, change beneficiary, change bank or answer even the simplest administrative  questions. As a positive aside,  I want to remind readers that 4structures.com, LLC is in the process of compiling a list of and names and phone numbers of servicing entities for the benefit of consumers and the profession.

NEW ISSUE

• Now suppose the annuitant sells a portion of the structured settlement payments (from an insurance company that won't split payments) to factoring company A, which is also the servicing entity.
• Several years later the annuitant sells some more to factoring company B that either services itself or uses a third party servicer.
• Now the additional layer requires that even the simplest administrative change requires notification to two separate entities, none of which is the annuity issuing insurance company that you set up your structured settlement with, The more times you sell and the more times you use different entities the worse it gets.

FURTHER COMMENTARY

Learn all you can and recognize what you are getting into if you need cash and are thinking about selling structured settlement payment rights.

What are the primary market and secondary markets going to do to solve this problem which in reality is insurance company driven NOT factoring company driven? 

While the percentage the burden of the extra costs is passed on to the consumer one way or another, perhaps these companies will realize the lost branding opportunity and consider an alternate solution.

JG Wentworth indicates that life insurance companies ARE purchasing their securitzations (asset backed securities backed by factored structured settlement payments) for their own portfolios, although does not distinguish which ones are buying, or if those insurers are concurrently issuing structured annuities. There is nothing illegal about buying the securitizations. If one really wanted to know, one could probably find this information through an examination of publicly available corporate filings of such insurers. My point being, if a company is insisting on servicing agreements to save money and they are in turn making money on the securitizations, perhaps some consideration for "the little guy" is in order.

  

Structured Settlements Industry 2009 | A Review of the Year's Impactful Stories

by John Darer CLU ChFC CSSC RSP

The Doom and Gloom concerning structured settlement annuity issuers of late 2008 has abated somewhat. At this time last year our industry was in the throes of significant     uncertainty created by the government bailout of AIG. the sudden withdrawal of Aviva from the structured settlement market and the media reports creating jitters about The Hartford and others and which weighed heavily on our minds. Other stories (not necessarily in chronological order)

1. From what we've been hearing, 2009 saw a number of industry producers taking meaningful hits to their production, particular in the early part of the year.Others saw flat to slight increases in production. Perhaps my experience is an anomaly, but I've noticed a meaningful increase in activity since July 2009.
2. Following the Madoff fraud exposed in late 2008 which had nothing to do with structured settlements, 2009 brought us $16.5B in fresh exposed frauds including two purportedly about structured settlements that weren't. Media characterization of Scott Rothstein as a "mini Madoff" added to the stigma.  The cherubic Rothstein didn't even come close. Credit to Mark Wahlstrom, Jan Schlictmann, Roger Bernstein, Peter Arnold. Bruce DeBacher, Matt Bracy and this author John Darer for their considerable collective efforts to diffuse and undo any damage done when former Elian Gonzalez' and U.S. attorney Kendall Coffey mislabeled structured settlements in a complaint against Rothstein which sparked a media mislabeling frenzy.
3. The "Connecticut Woman" factoring saga gave us a live case which underscored (1) the need for structured settlement consultants, settlement planners and plaintiff lawyers to ask more questions about, and do a better job of addressing plaintiffs' immediate liquidity needs; (2) the fact that fast cash now (for structured settlements) is a load io B.S.; (3) the need for regulation of the advertising practices of factoring companies; (4) the potential exposure to the settlement consultant and attorney for failing to address the aforementioned need that resulted in a loss of principal in line with stock market losses, from a safe investment. To remind everyone the woman took an estimated 30% hit to principal to sell the payment rights and had to wait 6 months to get the money to address her immediate cash needs.
4. The issue of Structured Settlement Servicing was brought to the forefront. Allegations that certain structured settlement annuity issuers were not slicing or dicing structured settlement payments to multiple payees when an annuitant only wanted to sell part of their structured settlements to meet emergency liquidity needs. The result is a structured settlement servicing agreement in which all of the payments, not just the sold payments, are paid to the servicing company (the factoring company, Structured Asset Funding in the CT Woman case), which then takes its cut and passes the balance of the payment to the annuitant. This raised the issue of what happens to the annuitant's payments in the event of Chapter 7 bankruptcy of the servicing factoring company? In a series of pod casts John Darer addressed the structured settlement servicing issue together with guest, Houston attorney Bruce Akerly.
5. The issue of credential puffery in the structured settlement industry was brought to the forefront and substantially improved. Through the considerable public efforts of this author NSSTA has now published guidelines on promoting the Certified Structured Settlement Consultant certification. It's only too bad it took so long and required extreme peer pressure to get it right.
6. Prudential's decision to withdraw from the non qualified structured settlement market was a biggy. The market has not quite filled the void.  As other industry commentators have noted, there are considerable opportunities in this area for insurers and settlement professionals.
7. JG Wentworth Chapter 11 Bankruptcy.  Call it shadenfreude, but I consider this one of the best things to happen for the industry in 2009. (1) These guys really needed some humility; (2) The bankruptcy disclosure made by JG Wentworth coughed up some useful information supplying proof that the size of factored structured settlements does not match up against the perception by plaintiff attorneys created by the advertising noise;  (3)The continuous bombardment of false advertising "cash now" that $40 million will buy you was tempered dramatically.
8. The withdrawal of Hartford from the structured settlement market place was not unexpected. The parent company suffered jitters for almost 12 month before the life company withdrawal,  due to fears over its exposure to credit default swaps and variable annuity guarantees. During those months the companies structured annuity rates were rarely competitive. Hartford Financial services Group, Inc. stock has rebounded from its 52 week lows of 3.33 over 7 fold.  It was sad to see some long time industry colleagues lose their jobs but many of them have landed on their feet. Industry veteran Mal Deener has landed at Symetra and John Meaney is trying his hand at settlement planning with Delta.
9. In a number of published legal decisions, the United States continued to render useless, the attempts to factor annuities placed as part of Federal Tort Claims Act settlements. 
10. One can observe that more settlement firms are making an Investment in websites and other web 2.0 technology. This blog has highlighted the information on static content websites are boring, neither attract or retain traffic and sometimes embarrassing when failure to update outdated information comes to light. Industry members caught in the headlights have simply had to put up with the minor annoyance of peer pressure for the greater good.
11. The nation's first Registered Settlement Planners (RSP) rolled off the assembly line. This author was among the first in the United States to earn the designation. Kudos to the leadership of the Society of Settlement Planners for laying the foundation, and to Joe Tombs and his crew at Texas Tech for the delivery. The RSP designation has a lot of promise, yet it faces significant challenges to become a force which will be covered in a separate post. 
12. Priority guidance for single claimant qualified settlement funds has been removed from the 2009-2010 United States Treasury Priority guidance list
13. Jeremy Babener, a 3rd year law student at NYU challenged a statistic that alleged basis of the structured settlement tax subsidy in a white paper. Babener was "pimped" all over by Patrick Hindert as if he was the "Elvis Presley of structured settlements".  The "Dissipation Myth Bab-oon" road show hit a new low at the annual meeting of the National Association of Settlement Purchasers in November.
14. While Hindert, in his annual summary, places the take over of The Settlement Services Group by Forge as a seminal event, we simply see it as a way for Forge to justify having defense brokers in an organization that markets itself as plaintiff exclusive. The timing of the announcement suspiciously followed our September post about an anonymous plaintiff exclusive organization that had defense brokers.
15. In 2009 the industry lost some good people due to cancer, Mary Lynn Izzo and Richard G. Halpern. Most people loved Mary Lynn. While the brilliant and innovative Richard Halpern was not universally loved by the industry, he was an important force in the history of the structured settlement industry,  who challenged the status quo and succeeded (by a wide margin). I was sad to lose both of these friends this year. 
16. After extended period of reductions, the 10 year bond is again approaching 4% and the 30 year bond approaching 5% as I type. It is my prediction and others that by end of 2010 we may see 10 year bonds in the 5.5% range with a meaningful increase in the long bond. 
17. As an aside and some industry news just "sliding in the door" at year's end, the popular Jeanne Ragusa, formerly at Aviva, has joined John Hancock as Internal Sale Manager.

Concluding with a light hearted summary of the events of 2009, courtesy of JIb Jab...

Try JibJab Sendables® eCards today!

 

 

 

 

 

 

 

 

 

Structured Settlement Payment Servicing From The Factoring Insider Perspective

by John Darer® CLU ChFC MSSC RSP CLTC

Andrew Cravenho of the Settlement Quotes, LLC, a structured settlement factoring intermediary, shares his thoughts on structured settlement payment servicing in his post dated November 9, 2009.

Cravenho said:

"The process of servicing payments for structured settlement recipients after completing a structured settlement factoring transaction is not a new practice and is a common occurrence in the industry".

"The issue is caused when an annuitant decides to sell only a portion of their payment. Rather than selling an entire payment, they decide to keep a portion of that payment and dice the payment in half or as they see fit. Most insurance companies will accommodate this process and send the appropriate portions to both parties, the tort victim and the investor. The problem arises when a structured settlement factoring company does a transaction with an annuitant who decides that they want to dice payments and the issuer is 1 of the 3 companies who will not dice the payments".  WHO ARE THESE INSURANCE COMPANIES?.

Cravenho sees the following problems:

• Certain structured settlement factoring companies were using this scenario as an excuse to service annuities that did not need to be serviced
• The annuitant no longer owns the rights to their future payments
• If the annuitant was ever in a situation where they needed to sell more payments, the structured settlement factoring company who completed their last transaction is the only company that is able to complete any  future transactions for that individual. Cravenho says this raises the potential for price gouging

Cravenho suggests the following possible solutions:

1. The first solution would be to have the insurance companies who currently won’t dice payments, start dicing payments. This would eliminate any and all need for any structured settlement factoring company to service payments.
2. Companies who may need to service payments should use a third party bonded, insured, and licensed company to handle their servicing.

Watch John Darer's Legal Broadcast Network video podcasts on Structured Settlement Payment Servicing

Six months ago I wrote this email Download John Darer email re servicing question to NSSTA Executives 5-15-2009 to NSSTA executives and structured settlement market leaders and outlined the issues. While I did receive an email acknowledgment of the receipt of the aforementioned email from an NSSTA executive the day it was sent , there has been no further NSSTA response to this author or to the general NSSTA membership.

Structured Settlement Servicing Agreements-Chapter 7 Ramifications

by John Darer® CLU ChFC MSSC RSP CLTC

My two part video commentary on Structured settlement servicing agreements by factoring companies which appeared on Legal Broadcast Network channels Speaking of Justice and Speaking of Settlements. Part 2 includes my interview of Dallas bankruptcy attorney, Bruce Akerly on the possible ramifications to the annuitant of a Chapter 7 bankruptcy of the servicing company. This  two part piece is essential stuff for life insurers in the structured settlement industry, plaintiff attorneys, plaintiffs, family members of structured settlement annuitants, judges and all structured settlement experts.

Part 1 (introduces and discusses the issue of structured settlement servicing)

Part 2 (includes interview with Dallas bankruptcy attorney Bruce Akerly and wrap up)

Selected posts written by John Darer on the subject of servicing

Structured Settlement and Factoring Camps Go Ostrich on Structured Settlement Servicing

Hindert Inert on Structured Settlement Servicing by Factoring Companies

  Patrick Hindert has variously commented on JG Wentworth as "structured settlement thought leaders", "focusing on the needs and best interests of consumers". What Hindert has never discussed, however, is what our sources tell us is the business practice of structured settlement "servicing" that JG Wentworth was engaging in "on virtually every deal" involving a partial transfer, concurrent with the time Hindert was promoting them.

I have scoured Patrick Hindert's posts on factoring going back 4 years. If someone can show me one post, or page  of the text Structured Settlements and Periodic Payment Judgments ("S2P2J") where Hindert and/or his co-authors addressed the subject of servicing PLEASE HELP me find it.

1. Is it that Patrick Hindert thinks that servicing is not an issue? If so, why has he not moved to address this very important issue?
2. By his silence is Patrick Hindert denying that servicing of structured settlement payments goes on?
3. Does Patrick Hindert believe that the an annuitant who sells $2,000 per month of structured settlement payment rights from AAA rated New York Life to a factoring company, while entering into a "service agreement" for the $8,000 per month balance, has the same level of financial security as without the servicing agreement?

In the opinion of this author, HIndert has missed the boat.

• Instead of a topic of significant importance, Hindert made 5 pedantic "expulsions" on an unscientific JG Wentworth Survey that was treated by him as if it was.
• On December 6, 2008 and December 23, 2008 Hindert discussed the JG Wentworth credit downgrades yet no comments were made about how such downgrades might affect those who had already made partial transfers to JG Wentworth but who were subject to servicing agreements for the non-transferred  payments.

Servicing agreements come into play when a structured settlement payee initiates a transfer of some, but not all, of their structured settlement payment rights, but the factoring company enters into an agreement to service the rest of the payment rights. Servicing in theory is simple; the annuity issuer makes payments to the factoring company instead of the annuitant; the factoring company skims what's owed to it from the partial transfer off the top; then issues a new check drawn on its own account and "passes through" the "non transferred payments" to the payee.

The big question that nobody has come out to answer is what happens if the "servicing company" goes belly up? Downgrades of the credit of JG Wentworth and Peach Holdings within the last year give plenty of reason for pause.

Matt Bracy Says Structured Settlement Servicing Is The Fault of Life Insurance Companies Issuing Structured Annuities

by John Darer CLU ChFC CSSC RSP

In response to our open market letter concerning structured settlement servicing I  received a response from Matt Bracy, General Counsel of Settlement Capital Corporation whose finger points squarely at the structured settlement annuity issuers, although he does not name names.

Structured settlement servicing ONLY affects those annuitants who chose to sell a part of their structured settlement payment rights. Even if it's only small part of thestructured settlement payment rights.

Bracy states that the root cause of servicing is the unnamed structured settlement annuity issuers who do not want to split payments.

This means that even if the tort victim does not want to sell all payments they must give up their abilty to deal directly with the annuity issuer and must instead deal with a third party. Moreover, it is unclear what happens if the servicer goes belly up.

It follows that the resulting savings in administrative cost is allegedly at the expense of the tort victim who was sold on the qualities of the structured annuity issuer by the settlement planner or structured settlement broker. WHY?

The issue of structured settlement servicing is particularly disturbing because I have the sickening feeling from several conversations with some people whose competency I respect, that this critical issue may be lost on the majority of the structured settlement industry

So I am going to continue pounding the table on this issue until it is solved. I ask any life insurance companies that are currently issuing structured settlement annuities to come out and let the industry know what their business practice is with respect to splitting annuity payments.

As an aside, the need for such practices would be mitigated if the structured annuity issuers handled commutation internally.