ADVERTISEMENTS

The following letter has been sent to NSSTA leadership by this author:

"As you may be aware a number of annuity issuers/assignees are permitting factoring companies to "service" the annuity issuer/assignee's structured settlement obligations. The arrangement starts off with the first factoring deal, which is for a portion of the payments and the factoring company ends up with all the payments paid to them (not just the factored payments) with the "balance"  to be "passed through" to the annuitant. We believe that life insurers may agree to this to save administrative costs [on "split annuity payments" when a factoring request comes in (see footnote)]. This has apparently been going on since before the financial crisis. But what are the ramifications? Has anyone considered them?

 

The following needs to be addressed promptly:

 

As a result of the "servicing" annuitants apparently no longer interface with the annuity issuer and instead must interface with the factoring company on the non factored payments being serviced. GET THIS! Upon calling the annuity issuer the annuitants are purportedly being told to call the "servicing" factoring company by the annuity issuer!  This is nuts! Why would an annuity issuer give up face time with its own customer and a potential prospect for other services?

 

I am aware of an annuitant who has been solicited for the second time by a factoring company that is "servicing her payments". This is all within a year of annuity issue.  The factoring deal was referred by an NSSTA member (who swears to me that he/she did not take any compensation on the liquidity scheme).

 

What happens if the factoring company (doing the) "servicing" goes belly up?

In permitting the payments to be "serviced" by a factoring company are some NSSTA member life companies wittingly, or unwittingly complicit in facilitating the next factoring deal? What is the perception?  How many members are marketing the spendthrift protection of structures and are unaware of these issues?

 

Here is what one factoring broker says about servicing.

 

 

NSSTA must take a position on this practice and inform its members and the general public through a white paper that goes through the Who What and Why"

Furthermore:

The Society of Settlement Planners is also called upon to publicly do so inasmuch as its longstanding membership chairwoman is a factoring broker who primarily deals with a cash now pushing factoring funding source that "services" structured settlements.

The 2008 SSP Annual meeting had a whole panel on factoring.  It's may very well be the case of "what did they know and when did they know it?" But I certainly hope not! To what extent have attorneys who are clients of SSP members been informed of "servicing"? How many of the factoring deals that its members have referred to Bentzen Funding Solutions end up having the entire structured settlement (not just the factored piece) being "serviced" by Structured Asset Funding? Is servicing simply "the QSF of the factoring world"?

Those settlement planners who have held themselves out as fiduciaries to the trial bar ought to think hard and clear about the answer to these questions. It is hard to see how "servicing" benefits the annuitant.

Perhaps Rhonda Bentzen can address the truth about her relationship with Structured Asset Funding AND the issue of structured settlement payment "servicing" on her blog and thereby do more for the industry than provide an out of date gossip column and a 5 month old post whose mixed metaphors demonstrate a poor grasp of political history while seeking to thwart an attempt to provide transparency that appears to be lacking in her own business dealings with the industry.

Footnote
Factoring Company Servicing of Structured Settlement Payments-Thought Leaders Butt Heads April 2008  (see comment of Matt Bracy, General Counsel of Settlement Capital Corporation

Bloggers, promote your law blog by nominating your blog for inclusion in USLaw.com's Law Blog Directory and RSS Reader. Benefits described.