Settlement Quotes has compiled a list of every company that purchases structured settlement payment rights. Throughout the next 3 weeks we will be writing an article on every company in the industry, providing facts about each company including their Better Business Bureau record, number of years in business, number of employees, and many other pertinent information.
Settlement Quotes has received several inquiries regarding structured settlement factoring companies delaying their obligation to pay annuitants.
Here are a few of the blog comments that Settlement Quotes has received in the past few months:
Settlement Quotes has received several inquiries for an explanation on why there is such a large difference between the present value and future value of a cash flow. We will use as an example the highly publicized Ciemielewski case to show our readers how the time value of money effects the lump sum payment an annuitant receives when factoring a structured settlement.
Mr. Ciemielewski was receiving two lump sum payments in 2019 and 2024. Settlement Quotes offered this individual $32,000, which is an 8.5% discount rate. To make this equation easier for our readers, we will say that Mr. Ciemielewski was only receiving one payment of $100,000 in 2024. The $100,000 figure would be the future value of the cash flow, while the $32,000 figure would be the present value of the cash flow.
Here are the formulas for Present Value and Future Value of a lump sum:
Why can you only offer $32,000 for the $100,000 payment?
Because of the time value of money. Is $100,000 today the same as it will be in 2024? Actually, it is not. $100,000 can do far greater things now, than it will be able to do in 2024. This is the reason we can only offer $32,000 for the future payment of $100,000.
Lets take a look at what Mr. Ciemielewski can do with the $32,000 for the next 16 years.
This illustration shows how the time value of money effects the present value from the future value. If Mr. Ciemielewski saves the entire $32,000 at a decent interest rate, he can result in the same amount of money he would have previously received if he did not factor the payment.
Now lets compare our $32,000 offer to Sececaone’s $10,000 offer.
This illustration shows how miserable Senecaone’s offer to Mr. Ciemielewski really was. After 16 years at a 7% interest rate, he would not accumulate enough money to match our initial offer of $32,000.
We will continue with more examples and tools at a later date to help our readers better understand how the structured settlement factoring industry works. If you have any questions please comment and let us know.
A New York Judge denied one of Senecaone’s affiliate companies from completing a structured settlement factoring transaction where Brian K. Ciemielewski was trying to sell a $100,000 payment paid out in 2024 for the amount of $10,000.
“Quite frankly, this purported deal speaks for itself,” Judge Lebous wrote in his ruling. “This court will not approve a payment of $10,000 in exchange for 10 times that amount in future payments of $100,000. Based on the foregoing, the court finds said transaction is not fair and reasonable….Quite simply, this court finds the transaction is not in Mr. Ciemielewski’s best interest.”
This proposed deal put forth by Senecaone is an example of a factoring company preying on a tort victim. Cases like this give the factoring industry a bad reputation.
What makes an individual sell future payments of $100,000 for $10,000?
Desperate times call for desperate measures, but what Mr. Ciemielewski failed to realize is that there are better offers than that of Senecaone’s offer. Mr.Ciemielewski had previously sold $75,000 worth of settlement payments in two separate factoring transactions for the amount of $36,400 to JG Wentworth and Symetra Assigned Benefits.
Without knowing the details of the transaction, it is hard to say the reasoning behind Mr. Ciemielewski’s decision.