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.
Mike Green, an attorney based out of Philadelphia who represents several structured settlement factoring companies published an informative article on the Settlement Capital blog late last week. There are a couple of points that were mentioned in the article that I would like to discuss.
In the article published by Mr. Green, he explained the concept of an annuity’s present value. I would like to provide a few examples on the concept.
Matt Bracy of Settlement Capital was interviewed by Jan Schlichtmann in a recent Settlement Capital video series. There are a few points this author would like to open up for conversation.
It was stated in the interview by Mr. Schlichtmann that annuitants should stay away from factoring brokers due to a lack of skill sets. Mr. Bracy follows up by stating that you want to talk to a direct funder when factoring settlement payments.
Who is a legitimate direct funder in the structured settlement factoring industry?
There is not 1 company that funds their own accounts. Every company in the industry that calls itself a direct funder uses outside investors, equity firms, or sovereign accounts to fund their transactions (i.e. Credit Suisse or DZ Bank). How can a company call itself a direct funder when they don’t use their own money to fund their transactions? The so called direct funders of the industry are nothing more than glorified processing companies.
While Settlement Capital is a cash now pusher (http://settlementpurchasers.com) and apparently services payments needlessly, they are one of the more respectable companies in the industry. I would recommend this company over many others, but what is the difference between Settlement Capital and Settlement Quotes?
Funding Sources
Experience
Skill sets and expertise
Pricing
The question was then asked by Mr. Schlichtmann, how an attorney should find an appropriate company to factor a client’s structured settlement payments. Mr. Bracy responded by stating that an attorney should shop around for the best price for their client’s settlement payments. Mr. Bracy continues on to separate the direct funders from the factoring brokers. “Sometimes they will in fact shop around and find you the best price, you can do that yourself.”
Settlement Quotes recommends to everyone to shop around for the best price, but there are a few problems with doing this process on your own. If you initially contact 5 or 6 companies to provide quotes on factoring your structured settlement payments, you will receive multiple calls from each one of these companies everyday. These calls will continue for several months. Feel free to test this out on your own. Click here to take out a free phone number and voice mail service. Fill out 5 or 6 quotes online and let us know how many messages you receive for the first couple of days and weeks.
Why not let Settlement Quotes do the work for you? Settlement Quotes has the expertise, knowledge, and pricing to complete your transaction.
I apologize for not responding yesterday to the comment made by Mr. Bracy. Settlement Quotes is working on several new projects to be released late next week, to help both clients and other structured settlement professionals understand discount rates and present value.
Here is the comment made by Mr. Bracy of Settlement Capital:
“I read Mr. Cravenho’s article this morning, and I think our disagreement, if it really exists, is based on some misunderstandings and imprecise uses of terminology. In the example Mr. Cravenho uses he says that “Peachtree was able to assign the rest of Sarah’s remaining payments to themselves [sic].” First, any assignment of rights would have been from Sarah to Peachtree – Peachtree could not “assign” anything to itself, it being a tried and true maxim of the law that one can only assign what one owns. Second, although I do not know of this transaction specifically, if there was an “assignment” then Peachtree bought all the payments (assignment = purchase). Indeed, Mr. Cravenho refers to factoring companies “owning” all the payment rights pursuant to a servicing agreement. We are clearly not talking about the same thing. If Peachtree owns the rights to the payments, then they cannot be sold again. Instead, I suspect Peachtree did exactly what I described in my article and agreed to service the payments. The abundant use of inaccurate terminology may also explain why New York Life in the example told Sarah (with Mr. Cravenho listening in) that she “no longer owned the (annuity) policy.” As you well know John, she NEVER owned the policy.
Although I am loath to defend a competitor on a specific transaction when I don’t know the details, I think Mr. Cravenho’s indefensible position is best exposed when you ask this question: What was Peachtree supposed to do? Sarah apparently contacted them and had a desire to sell some of her structured settlement payments (not all). The insurance company that issues the payments apparently refused to split them. What financially reasonable course should Peachtree have taken? Some insurers have “suggested” (demanded, actually) in these circumstances that the factoring company buy all the payments. Is that the best answer? How does that relate to meeting the statutorily mandated “best interests” standard? Should Peachtree now, when a subsequent purchasers comes along, take an inferior position? Maybe the best answer, and one we should all advocate, is for insurance companies to agree to split payments.
Although Mr. Cravenho calls my article “uninformative,” perhaps a little more time on the basics and lexicon of structured settlement factoring would be advised. I will continue to try to write more informative articles in the future.”
Here is the response from Sovereign Funding Group
1. “No annuity issuer in the structured settlement writing business has ever refused to permit an annuitant to sell only a portion of periodic payments (ie 100 of 250 payments) or sell just lump sums or periodic payments in a mixed payment scenario.”
2. “To our knowledge, only one annuity issuer out of approximately 39 issuers who write structured settlements refuses to “split” individual payments (ie refuses to cut two checks if the annuitant wishes to sell only $400.00 of a series of $1,000 monthly payments.) The other 38 annuity issuers permit such splitting.”
Settlement Quotes Comments-
After reading the Sovereign Funding Group’s blog post, there isn’t much to be said. Why hasn’t Mr. Bracy responded to SFG’s comments?
A comment was left here on the Structured Settlements 4 Real blog yesterday afternoon by Matt Bracy. Settlement Quotes will reply to this comment later this evening.
Here is another company’s perspective on the servicing issue. Interesting…hmmmm
Matt Bracy of Settlement Capital wrote in this blog post, an uninformative post about servicing of structured settlement payments by factoring companies. Before I get into a rant about why Mr. Bracy did not get down to the real issues in his blog post, I would like to first say that I do respect Mr. Bracy and the work he does for the structured settlement factoring industry.
The issue revolving around the servicing of structured settlement payments has nothing to do with the split payment scenario. In Mr Bracy’s blog post, he used an example of a payee (receiving structured settlement payments) who is receiving $1000 per month and needs to purchase a new car to get back and forth to work on a daily basis. In his scenario the payee (now “seller”—selling the rights to their structured settlement payments) chooses to split their $1000 payments in half and sell the rights to enough payments to purchase the new car.
Many times the insurance company will not agree to split the settlement payment and instead sends the entire payment to the factoring company, where in turn the factoring company sends the unpurchased half of the settlement payment to the payee. Yes, this is a form of “servicing,” but this is not the real issue.
The REAL issue is when a factoring company purchases xx amount of payment rights, but has all of the remaining settlement payments assigned to them during the process. The factoring company now owns all of the payment rights to the policy and makes the appropriate payments when they are due to the payee. The problem with this scenario is if this annuitant wants to factor the remaining payments, the present value of the annuity is worth far less because the payee does not have the ability to shop around for a better quote. Now, the factoring company that owns the payment rights to the policy can offer the annuitant an unfair market value price. The annuitant is at the mercy of the factoring company.
Real Example (we will keep this client’s last name conceiled to protect her privacy)
Sarah, came to Settlement Quotes 2 weeks ago interested in factoring her remaining structured settlement payments. She had previously factored 100 payments with Peachtree Settlement Funding, but during that transaction Peachtree was able to assign the rest of Sarah’s remaining payments to themselves. Sarah was unaware that she no longer owned her structured settlement. She first approached Peachtree asking for a quote on the remaining payments, Peachtree quoted her $9000 for the remaining 120 payments. She decided to go elsewhere to receive quotes. To make a long story short, we ended up quoting her $34,000 for her remaining 120 payments, but we were unaware the Peachtree was “servicing” all of her remaining payments.
To put this in perspective I had Sarah call New York Life (the issuing insurance company) with myself on the telephone. New York Life told Sarah that she no longer owned the policy, and although she is the measuring life, they refused to speak to her, she needs to contact Peachtree in order to obtain how many payments are remaining.
The value of this annuity is significantly reduced because of the following factors:
At this point the only way we could purchase Sarah’s structured settlement payment rights is to first, payoff Peachtree, second, subtract a substantial amount of money due to the risk of accepting payments from another factoring company. We ended up offering Sarah $21,000 compared to the $34,000 she would have received if New York Life was still making the payments.
In Mr. Bracy’s post he stated the following, “Such servicing arrangements should be reflected in the transfer order. Payees/sellers who later elect to sell more payments should be free to do so.”
“Should be free to do so,” is not a reality and unfortunately is not regulated within this industry. I feel that Mr. Bracy is skirting around the real issues.
Settlement factoring contracts need to be clarified in order for annuitants to be aware of the true facts behind the legal documentation. The real issue is that these annuitants no longer own there own structured settlement.