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Structured Settlement Payment Servicing Directory | Factoring Companies and Brokers Please Respond

Cat is Out of the Bag

by Structured Settlement Watchdog

Now that the cat is out of the bag about the reasons for structured settlement servicing, 4structures.com, LLC is compiling a list of structured servicing companies and their telephone numbers so that annuitants can have their questions answered. This author is canvassing all factoring companies and factoring brokers to provide the following:

1. Does your company service payments for annuitants who have sold only a portion of their structured settlement payment rights to you?
2. Do you use a third party servicer? Under what circumstances?
3. Your toll-free customer service phone number
4. If you use a third party servicer, what is their toll free customer service number?
5. In reference to your answers to #3 and #4, is this a dedicated line for servicing customers (who have beneficiary changes, direct deposits, change of address etc) that is separate from the call in center for responses to TV , radio and Internet ads?

Please email to John Darer at [email protected] or send via FAX to 203-969-2303

To recap, structured settlement servicing is necessary primarily because some structured annuity issuing life insurance companies choose not to split annuity payments so the annuitant must sell ALL of their structured settlement payment rights (i.e. even the unsold portion)  to a factoring company or servicing entity. Whether the reason for the choice being made by the life insurance companies is saving money or otherwise the fact is that such circumstances exist.

Assuming that the factoring company is the servicing company (our sources tell us that is the case most of the time) it has now been well established through our research that the annuitant must contact this entity, NOT the annuity issuer for questions about the payments being serviced. It is only fair in such circumstances occur that an annuitant should not have live in a state of confusion and deserves to have the most direct route to the answers to their questions and/or service needs.

It has been said that less than 5% of structured settlements are factored. This author believes that this figure represents only the sold payment structured settlement payment rights and that the volume of payments being serviced is larger.

 

 

Structured Settlement Servicing By Factoring Companies Redux

by John Darer CLU ChFC MSSC RSP CLTC

Settlement Capital's Matt Bracy aired the 2nd in a two part series "The Problem With Factoring" on the Legal Broadcast Network (LBN) and does an excellent job addressing the subject of servicing of structured settlement payments by factoring companies. This author, John Darer, aired a 2 part series on the subject of factoring company servicing of structured settlement payments in October 2009 on LBN.

Key points

1. Servicing is a chore for factoring companies caused ostensibly by the unwillingness of SOME structured annuity insurance companies to split payments when the annuitant is not selling all of their structured settlement payment rights. The end result is that as a result of some of the annuity issuers' unwillingness to split payments, annuitants heir clients WILL NOT BE RECEIVING THEIR PAYMENTS DIRECTLY FROM THE ANNUITY COMPANY ANYMORE. They will be dealing with the factoring company.
2. Many state structured settlement protection laws essentially state that the annuity issuer CANNOT be forced to split the payments.
3. Bracy validates my servicing question and states that while insolvency of the factoring company may result in the annuitant ultimately getting their payments, there "surely will be a delay and there may be costs involved" to the annuitant..The same conclusion that TX lawyer Bruce Akerly and I reached in October 2009.
4. Bracy states that some, but not all companies have back up servicers. His does.
5. Bracy states the good news is that there has yet to be an insolvency. The same perhaps could be said of structured settlement issuing companies prior to 1991. We all now know the effect of Executive Life. Sufficed to say that many of the insurance companies issuing the annuities have billions more assets than any of the factoring companies.
6. Sellers of structured settlement payment rights should be looking closely at the documents. Common sense. (1) Beware of attempts to bind you into a right of first refusal to the servicing factoring company (2) Check for any fees charged for the servicing (3) Check for back up servicing (or bonded 3rd party servicers (as suggested by Andrew Cravenho)
7. In a nod to John Darer's relentless attack on what is in his opinion the questionable business practice of Structured Asset Funding, LLC suggesting in its advertising, that fancy sports cars and boats are a reason to sell structured settlement payment rights, interviewer Scott Drake questions the ethics of such practice. Bracy emphasizes that each structured settlement factoring transaction requires court approval and he doesn't believe that anyone would have the guts to seeks Court approval using a boat or fancy sports car as part of the "best interest" prove up. Coincidentally Structured Asset Funding's website has been disabled at the time of this writing. Stay tuned!

View "The Problem With Factoring 2-Servicing"

View Structured Settlement Servicing Agreements-Good Or Bad  Part 1 Oct. 2009

View Structured Settlement Servicing Agreements-Good Or Bad For Annuitant? Parts 2A and 2B (with Bankruptcy Expert Bruce Akerly) October 2009

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Links and Exhibits of Interest

• Wikipedia entry for Structured Settlement Factoring Transaction entitled "Controversy Concerning "Servicing" of Structured Settlement Payments By Factoring Companies" 
• John Darer's August 10,2009 email to NSSTA President Dan Durbin and President Elect Mike Kelly copied to the NSSTA Board of Directors and other industry notables. Download 8-10-2009 email to NSSTA President Durbin and President elect Kelly with copies to Board members and othersThe content is self explanatory. The NSSTA has not responded to this author or addressed this issue with its membership.  WHY? NSSTA members include life insurance companies, among them those who do not split structured settlement payments.
• Our August 17, 2009 post Matt Bracy Says That Structured Settlement Servicing Is The Fault of The Life Insurance Companies Issuing Structured Settlement Annuities.  Only one life insurance company responded!
• Our April 23, 2008 post "Factoring Company "Servicing" of Structured Settlement Payments-Thought Leaders Butt Heads"

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

Bankruptcy of Structured Settlement Servicing Company

by John Darer® CLU ChFC CSSC RSP

My last post on structured settlement servicing by factoring companies and the consequences of factor bankruptcy seems to have struck a chord with Bruce W. Akerly, Esq., Bell Nunnally & Martin LLP, Dallas, Texas and I am pleased to print his thoughtful and articulate response in it's entirety. I have taken the liberty to organize his letter in bullet points to make it easier to read. I have also added emphasis that forms the basis for questions that will be raised in response.

"Mr. Darer: Your attempt to raise a red-flag of suspicion by posing the question regarding a factor/servicing company bankruptcy is unfortunate. There is nothing about the filing of bankruptcy by a factor/servicing company that should adversely impact an annuitant’s right to receive payments.

1. In a bankruptcy, whether under chapter 7 or 11, all of a factor’s right to receive property, including the right to receive money through a court approved transfer or otherwise – would become property of the bankruptcy estate consistent with 11 U.S.C. § 541.
2. The servicing agreement, which is sometimes approved as part of a state court proceeding, would also be dealt with in the bankruptcy case, either as an asset itself, to the extent it may have a fee recovery component, or as an executory agreement, which must be either assumed or rejected by the debtor.
3. If the company filed chapter 11, it would be permitted to continue its operations in the ordinary course, which would include the right to receive the annuity payment stream and comply with its servicing obligations.
4. While the annuitant will likely receive notice of the bankruptcy, there would not be any interruption or impact on either the annuity issuer or the annuitant.
5. The bankruptcy company would be entitled to either assume or reject the servicing agreement. Assumption might also include an assignment to another servicing entity. Either way, there should be no impact on the annuitant or annuity issuer.
6. While the state court order approving the servicing arrangement may need to consulted, it is also possible that the factor could reject just the servicing agreement component which would merely require that the annuity issuer remit the required payments to both the factor and the annuitant.
7. Alternatively, if necessary, the parties could return to state court to seek approval of the transaction without the servicing component or seek declaratory relief before the bankruptcy court to determine the rights and/or obligations of the parties. Again, in either scenario the annuitant’s rights should not impacted.
8. The only difference under chapter 7 would be that a trustee would be appointed to oversee the assets of the bankruptcy estate and, if necessary, be permitted to continue the business affairs of the company in an effort to preserve the value of its assets, which would include the right to continue to receive payments and/or comply with the debtor's servicing obligations. These have value to the bankruptcy estate and the annuitant.
9. The trustee would likely seek to sell these valuable contract rights to another company in a business similar to that of the debtor/factoring company in order to preserve the value and benefit of the bargain between the contracting parties, including the bankruptcy estate.
10. Depending on the terms of the state court order, the trustee might also decide to reject the servicing agreement. As above, the obligation to pay would likely revert to the annuity issuer, with no impact on the annuitant. If there is any concern or ambiguity as to how to proceed, the trustee would likely seek a declaration of rights and/or obligations from the bankruptcy court, with notice to all parties. Again, no impact on the annuitant could be envisioned in such proceedings as all right to payment would be preserved. Nothing herein is intended as legal advice to any person or entity. The posting reflects only the opinions and thoughts of the author".

Once again I would like to thank Mr. Akerly for his thoughtful and articulate response.  A few thoughts which inspire further questions and comment:

• It is clear that a servicing agreement with a factoring company that goes Chapter 7 bankruptcy may be, at best, an "inconvenience" to the structured settlement annuitant. Such inconvenience (or worse) may involve additional costs and emotional capital.
• The point highlighted in #6 above states "which would merely require that the annuity issuer remit the required payments to both the factor and the annuitant". It has been alleged by Matt Bracy of Settlement Capital Corporation that servicing agreements exist because some structured annuity issuers WILL NOT split payments to their annuitants. if they only sell part of their structured settlement payment rights. If point #6 is true what makes one think that the annuity issuer will all of a sudden agree to split payments? 
• The Structured Asset Funding case involving the "CT Woman" also illustrated the problems associated with servicing. According to the "CT Woman" the structured annuity issuer allegedly refused to deal with the "CT Woman's" questions about her structured settlement (she only sold $1,600 of $10,000 per month of structured settlement payments) and instead referred her to the servicer, Structured Asset Funding which purchased the $1,600 per month and we understand to be the servicer of the remainder).
• In my opinion, if the reason servicing payments is even necessary is the refusal to split by an annuity issuer then we need to identify which annuity issuers fall into this category and speak with them to develop an alternative solution.
• I think it is safe to assume there is a majority that would agree that there are extreme circumstances that may warrant a sale of periodic payment rights, but it may not be prudent to factor more than reasonably necessary due to the high transactional costs.Servicing is only a potential problem when there is a partial sale of structured settlement payment rights.
• It has also been alleged, by several in the factoring industry, that servicing exists to feather the factoring company "nest" for future factoring deals. If this is true, then one can hardly see the value of a structured settlement servicing agreement (to the annuitant) in the first place. It is not hard to imagine why it looks good to the factoring company's investors to have servicing agreements on the books. 
• If you are in the primary placing market for structured settlements you may emphasize, among other things, the simplicity and the "on time every time" aspect. If you are settlement consultant or plaintiff lawyer and the structure is being placed with New York Life or Met Life, are you thinking top shelf financial quality and service BY NEW YORK LIFE or METLIFE, or some entity like Structured Asset Funding that is a pimple in size by comparison? I'm not insinuating that either of these two fine companies will not split payments, but I use them to underscore my point.

 

Structured Settlement Payment Servicing | Structured Settlement and Factoring Camps Go "Ostrich"

by Structured Settlement Watchdog®

Does the silence mean that neither the structured settlement industry or factoring industry give a crap about the structured settlement "servicing" question? Or is there something to hide?

On August 12, I asked 

"Who Will Answer the Question on Structured Settlement "Servicing" by Factoring Companies?"

Also see Wikipedia entry on Controversy About Servicing of Structured Settlement Payments By Factoring Companies

How Would the Bankruptcy of a Structured Settlement Factoring Servicing Company Affect You?

For those that sell only part of their structured settlement payments to factoring companies, what needs to be addressed is what effect the bankruptcy of a factoring company "servicing company" would have on the payee, with respect to the payments being serviced. Until this issue is decided, payees who are considering partial structured settlement transfers should be wary about participating in "servicing agreements".

The National Association of Settlement Purchasers (NASP) holds their annual meeting each Fall around this time. 

Why doesn't NASP come out of the closet on this issue?

1. Confirm whether or not servicing agreements are necessary because certain life insurance companies that issue structured settlements will not split payments
2. Reveal the names of the structured annuity issuers who some of you allege will not split structured annuity payments, if this is indeed true.
3. Issue a public statement that answers the operative question of what happens in the event of bankruptcy of the servicing company.

Frankly if members of my industry are the cause of this problem I want to know about it, the majority of my industry needs to know about it, and the problem needs to be addressed.

Ostrich Gallery
   Ringing them by the neck!                            

Life Company Ostrich dancing on issue?

  NASP Board Ostrich? 

NSSTA Board of Directrich?

"Patrick Hindrich"  Inert on Servicing . 

                               

 

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.

J.G. Wentworth Bankruptcy Confirmation Hearing June 1, 2009

J.G. Wentworth announced that the confirmation hearing for the prepackaged bankruptcy plan filed May 19, 2009 for its non-operating holding company affiliates has been set for June 1, 2009.  J.G. Wentworth reports that over 90% of the term lenders (the only creditors affected by the plan) approved the plan prior to filing. The JGW cash now pushing subsidiaries continue to conduct business as usual and are said  not to be impacted by the proceedings. Approval of the pre-packaged plan at the June 1, 2009 confirmation hearing will pave the way for the injection of $100 million of new equity to support ongoing operations.

CT Woman Apology Letter From Structured Asset Funding President For Delay

by Structured Settlement Watchdog®

The saga of "the Connecticut woman" continues.

Background
The woman lost an eye just over 2 years ago and filed suit against a defendant. The matter was settled in August 2008 and a large structured settlement funding with an annuity from American international Life Assurance Company of New York was part the resolution of her case. The structure was to pay her $10,000 per month for life.

Her father was with her every step of the way through the devastation of both her injury and her law suit. Shortly thereafter due to her father's debilitating illness she decided to construct an in law suite on her home. The up front cash from the settlement was not sufficient and therefore she sought assistance from her structured settlement broker who referred her to a factoring intermediary in September 2008 for additional liquidity.

A structured settlement transfer petition was submitted on or about October 21, 2008 to transfer $1,600 per month of the CT woman's structured settlement payment rights. In prior blog posts in April 2009 we covered various issues concerning promises that were made and not delivered in timely fashion. Ironically the company makes the advertising claim "fast cash now" (and continues to do so). It also turns out that "Structured Ass" is "servicing" the other $8,400 per month of payments. The Connecticut woman was finally paid after having to hire a lawyer, several broken promises as to the timing which the woman relied upon (even talks of the deal not being able to be funded and emergency bank meetings) and 2 blog posts from this author.

As a result of the delay in funding (which meant significant construction delays and penalties) and her beloved father's worsening condition, she laments that the goal that she traded a portion of her financial future for (her father moving into the in-law suite) may never be fulfilled.

The Apology Letter
The apology letter is written on the letterhead of Structured Asset Funding and signed by Andrew Savysky, it's President. Structured Asset Funding is a settlement purchaser based in Hallandale Florida

A copy of the Structured Asset Funding Apology Letter Can Be Downloaded by clicking on this link Download Structured Asset Funding Apology Letter to CT Woman for Delay in Structured Settlement Factoring

The Epilogue

The story does not end with the apology letter.

"Please let us know if there is anything we can do to assist you in solving any financial problems this delay in funding has caused you."

The Connecticut woman apparently spoke to Andrew Savysky whose actions suggest that such an offer was merely gratuitous purportedly denying that the aforementioned line meant any financial compensation. What Savysky did apparently do is offer to do another structured settlement factoring transaction with the victim!

One lesson learned from this story is that making a partial sale to a factoring company may result in the rest of the payments are being servived by the same company because the life insurer issuing the structured annuity will not split annuity payments. Queries by your client about the remaining structured settlement payments addressed to the annuity issuer may instead be referred to the cash now pusher. Lovely!

At the time this post was written the Structured Asset Funding website seemed to advise annuitants to sell their structures for luxury cars and boats and whether that is in your business interest.

Settlement planners must be careful to not over structure.

The issue of "servicing" of structured settlement payments by factoring companies is an industry issue that must be addressed promptly by structured settlement industry leadership. This author believes most people are in the dark on this one, which represents "a herd of pachyderms" in the room

.

This author has written to the leadership at the National Structured Settlement Trade Association and requested a written response.

 

JG Wentwolves Courting Red Riding Hood

Hey there Little Red Riding Hood
You sure are looking good
You're everything that a big bad wolf could want.
Owoooooooo! I mean baaaaaa! Baaa? 

The closing lyrics of Sam the Sham and Pharoahs 1966 classic gold hit "Little Red Riding Hood" provide a delicious opening for my report of JG Wentworth's latest attempt to snare structured settlement annuitants "a fronte praecipitium a tergo lupi".

J.G. Wentworth now claims that it "specializes in servicing the structured settlements from personal injury annuities".  Sure they'll "service your annuity" and then "tell you what big eyes you have" and "maybe you’ll see things my (their) way before we get to grandma’s place" (i.e. get you to sell your structured settlement payments rights for a deep discount.

The only real servicing is a change of beneficiary or bank account. You might need some financial advice which you can get by contacting a structured settlement broker, expert consultant, settlement planner or adviser holding a valid license in you state. It might be worth speaking to the original structured settlement broker (keep his/her card!)

Beware of wolf!