Factoring Company

Needs

Have you ever needed money?  I mean really needed money.  Most of you who read this probably have not.  For better or worse, I can tell you that growing up in a single-parent home (yes, I was a “latch-key” kid) there were plenty of times we needed money.  And despite careful planning and cutting corners, plenty of times it was just not there. 

Unexpected financial crises happen for everyone.  My wife and I just found out that we need to have some serious repairs done to our bathroom at home, and the bill will run into the several thousands of dollars.  Thankfully, we can afford it – not that it won’t sting.  But there’s a difference between a sting and a bite.  For many people, as for me growing up, thousands of dollars may as well have been millions.  It would just not have been there. 

Maybe this is why I’m sympathetic to the structured settlement factoring customers.  They remind me of my late mom.  To be sure, not all of them are worthy of admiration, and not all of them have great reasons for selling payments.  But, most of them share in common the fact that this is their only option for money.  Most are not as well off as you.  And they think, often correctly, that they need the money.

Articulated reasons for selling structured settlement payments range widely, but most often it is to pay debt.  Anyone who has needed money understands the burden and slavery of debt.  Dave Ramsey says, “If you're in debt, then you're a slave.”  The poor feel the impact of this servitude more than others, and the ramifications are often more pronounced.  For the better off, the impact of debt may be you need to purchase a less-nice car, or not take a vacation this year.  For the poor, it can and does mean the difference between food or medicine, electric bill or gas money – which do I pay and which do I try to stave off for a bit?      

There’s a somewhat famous transfer story about a guy trying to sell payments in order to get his electricity or gas turned back on at home, and the judge denied the sale.  “I was cold last night in my house judge, were you?” said the seller on his way out of the courtroom.   

Selling structured settlement payments to pay off debt may be a great way out.  Hopefully people who get out will stay out, but the lure of debt is strong.  Nonetheless, a factoring transaction can help, and does not involve the stain and difficulty of bankruptcy or incurring more debt. 

Sometimes I am disheartened by stories of judges who do not give due respect and consideration to structured settlement sellers.  Factoring companies surely also are disrespected, but that is a cost of doing business for us.  It’s not right, but we can put up with it.  Sympathy should be reserved for the seller – the structured settlement payee.  For them, a factoring transaction is likely their last hope.  They are probably not very familiar with the court process and judicial system.  They are nervous, scared, apprehensive. 

Put yourself in their shoes for a moment.  You need money.  You must go to court and talk about personal and embarrassing financial matters in front of strangers.  Now consider this:

       The judge and court staff openly snicker at the transaction and your situation.

The judge refuses to hear the transfer application and throws you and the factoring company attorney out of the courtroom, accusing the attorney of “trying to steal money.”

You are treated like an imbecile, not able to make choices for yourself.

The vast majority of transfer cases are handled respectfully and accord proper dignity to all parties.   But, the above are examples of things that have really occurred.  Rare, but shocking and unacceptable nonetheless. 

Not all factoring transactions should be approved.  Not all sellers are upstanding members of society, capable of handing finances, etc.  Not all structured settlement factoring companies are good corporate citizens doing the right thing.  But, I encourage judges, court staff, politicians and those who ponder these matters to consider these transfers individually, with respect for the individual seller.  They need that, and deserve no less.   

Debate on Factoring, Part 1

Representatives from the structured settlement "primary" and "secondary" markets met in the Legal Broadcast Network studios last month to discuss some of the issues that seperate the two sides of the structured settlement world.  

John Darer, structured settlement consultant and frequent commentator on the industry, and Matt Bracy, general counsel of Settlement Capital Corporation and president of the National Association of Settlement Purchasers, have a detailed and sometimes heated discussion of thorny issues like advertising, licensing and factoring industry practices.  

We welcome your comments on this or any other issue relating to structured settlements or factoring.  You may leave your comments here, or contact Matt Bracy at mbracy@setcap.com.  

Debate on Factoring, Part 2

Below is the conclusion of the video debate between Matt Bracy and John Darer.  

"Continued open and honest dialogue is the only way the primary and secondary industries can work together for the greater good of the structured settlement marketplace and injury claimants," said Matt.  

"I don't always agree with John Darer, but I respect him and deeply appreciate his willingness to engage with me on these issues.  I look forward to more dialogue in the future with John and all the leaders of the structured settlement industry."

We welcome comments on this or any other structured settlement issue.  Please leave a comment here, or contact Matt Bracy at mbracy@setcap.com.

Where do we go from here?

Scott Drake of the Legal Broadcast Network interviews Matt Bracy, General Counsel of Settlement Capital Corporation, as a follow up on the 2010 Annual NASP Conference.  Can the primary and secondary structured settlement industries come together?

Your comments, either here or directly to Matt Bracy, as welcomed.  You may contact Matt at MBracy@setcap.com. 

2010 NASP Conference – Is this Détente?

The annual structured settlement factoring industry (NASP) conference will be held next week.  There will be historic discussions on the “primary market” (those who work to set up structured settlements) and “secondary market” (those who work to help people sell some or all of their future payments), featuring some very prominent speakers:

• John Darer, well-known structured settlement broker, prolific writer on structured settlements and critic of settlement factoring
• Peter Vodola, attorney for many structured settlement annuity issuers
• Pat Hindert, long-time structured settlement broker and commentator
• Dick Risk, attorney and structured settlement broker

In an unstructured discussion, these well known primary market leaders are expected to discuss the status of the primary market, problems they see with the factoring market and business practices, and hopefully, how the two industries can work together to improve “both sides of the coin.”

There is one aspect of the relationship between the primary and secondary markets I would like to focus on. 

The above list includes two outspoken critics of factoring – John Darer and Pete Vodola.  I know and respect both of these men, but over the years they have both fought hard against what they perceive to be factoring abuses, bad practices, etc.  We have not always agreed with each other, and some of the fights have been heated.  Nonetheless, they have been invited to this factoring conference to speak openly and share ideas. 

I’m proud of my industry’s willingness to include these gentlemen and their divergent points of view.  When will the primary market do likewise?  Should we expect an invitation from the NSSTA to attend their conference?*

Once upon a time, at least one factoring company representative was a member of the NSSTA.  However, as the factoring business grew, it drew the ire of the structured settlement brokers and annuity issuers.  Perhaps this anger was justified, and perhaps it was overblown.  Nonetheless, the primary market made a crucial decision at that juncture – cut them out.  This decision effectively meant no chance for dialogue, and no chance for them to influence the development of the secondary market.  Discussion and cooperation were traded for many years of bitter and costly litigation and fights in various legislatures.  The warfare has now largely subsided and the bitterness is cooling.  Is it time for us to come full circle, back to dialogue and cooperation, back to where we should have been all along? 

As I participate in this conference and eagerly engage with our respected guests from the primary market, I will keep my eyes open for that reciprocal invitation.  Is this détente, or just a break in the internecine warfare?  Any enduring peace requires commitment by both sides, which I hope is the dawning era.  

*To be clear, to my knowledge none of the listed speakers are appearing on behalf of or with any endorsement by the NSSTA, their respective law firms or companies, or any other group.  They are all presumed to be appearing as individuals. 



Why Sell Your Structured Settlement Payments?

If you want to sell your structured settlement payments, do you need a good reason? Who decides if your reason is good enough? Matt Bracy explores the "reason for the reasons" in this video interview.

If you have questions about this article or about structured settlement factoring in general, you can post comments here or contact Matt Bracy at mbracy@setcap.com.

The Problem With Factoring, Part 5 -- "The Bottom Line"

This is the final segment in the series on common misconceptions and complaints about structured settlement factoring.  Previously posted videos were:

Part 1:  Advertising

Part 2:  Servicing

Part 3:  Discount Rates

Part 4:  Preying on the Weak

This final video is entitled "The Bottom Line" and gives an overview of factoring.  Is it for everyone?  Is it a "ripoff"?  Why all the hatred for factoring?  Watch Matt Bracy of Settlement Capital Corporation discuss these topics and more.

As always we welcome questions or comments about this video or anything related to structured settlement factoring.  You may comment here, or contact Matt Bracy at mbracy@setcap.com.   

The Problem with Factoring, Part 4 -- "Preying on the Weak"

In part 4 of this series on common complaints about structured settlement factoring, Matt Bracy and Scott Drake discuss the frequent charge that factoring companies "take advantage of" consumers.  Matt and Scott discuss:

• Do factoring companies charge sharp discounts to payees who are ill equipped to appreciate the value of their future payments
• Do factoring companies give sellers pennies on the dollar to buy payments
• Are factoring companies taking advantage of people?
• Do structured settlement payees require some sort of special protection?
• Why all the negativity when talking about factoring?

As always, we welcome your comments or questions about this issue or anything concerning structured settlement factoring.  You may comment here, or contact Matt Bracy directly at mbracy@setcap.com.

The Problem with Factoring, Part 3 - Discount Rates

In this continuing series on common complaints, problems and misconceptions with structured settlement factoring, Part 3 addresses "discount rates".  In short, discount rates are numbers expressed as a percentage used to calculate net present value of future cash flows (Investopedia). 

These are likened to percentage rates used to calculate loans (although factoring transactions are usually assignments or sales, not loans). 

Matt Bracy, General Counsel of Settlement Capital Corporation, discussed discount rates, the "real" value of payments, and how discount rates are calculated with Scott Drake of the Legal Broadcast Network in this two segment video interview. 

Segment One:

Segment Two:

We welcome your comments, questions or suggestions for future articles or videos.  You may comment here, or contact Matt Bracy via email at mbracy@setcap.com. 

The Problem with Factoring -- Part 2: "Servicing"

In part 2 of our series on common complaints and issues with structured settlement factoring,  The Problem with Factoring, we cover "servicing."

What is servicing?  Is it really a problem?  What is Factoring? Watch this video for Scott Drake's interview of Matt Bracy on this timely topic. 

We encourage your comments, questions and suggestions.  Contact Matt Bracy at mbracy@setcap.com.  

The Problem with Factoring - Part 1: Advertising

In this first part of the Legal Broadcast Network's newest series, The Problem with Factoring, Scott Drake interviews Matt Bracy, General Counsel of Settlement Capital Corporation, about factoring advertising.  Why does factoring advertising upset so many people?  Are these ads over the top, or do they perform a needed educational service?  Click the video below to find out. 

The Problem with Factoring series will be broadcast every 2 weeks, and we encourage your comments and questions.  Submit comments either here or via email to mbracy@setcap.com, and Matt will respond on the next episode.

Coming up next on The Problem with Factoring:  Servicing.  What is it, why does it happen, and is it a problem?

The opinions expressed herein are solely the opinions of the speaker or author, and do not necessarily reflect the opinions of either Settlement Capital Corporation or the Legal Broadcast Network.  Contact Matt Bracy at mbracy@setcap.com, or by phone at 800-959-0006. 

Rothstein's Alleged Scheme Not About Structured Settlements

Scott Rothstein, a Florida lawyer, has been implicated in a federal investigation concerning allegedly fraudulent investments.  Due to some early erroneous reporting of this story, some thought this investigation concerned investments in structured settlement payments.  Scott Drake of the Legal Broadcast Network interviewed Matt Bracy, General Counsel of Settlement Capital Corporation on this matter.

We welcome comments or questions about this story or any other issue concerning structured settlement factoring.  You may comment here, or send an email to mbracy@setcap.com. 

California Enacts Major Structured Settlement Transfer Law Changes

On October 11, 2009, Governor Schwarzenegger signed into law major changes to the California structured settlement transfer, or "factoring", statute.  Senate Bill 510, co-sponsored by the Chair of the Senate Judiciary (Senator Corbett, a Democrat) and Assemblyman Tran (a Republican), becomes law on January 1, 2010.

Federal law (IRC 5891) mandates that all transfers of structured settlement payment rights be approved by a state court, or face a stiff punitive excise tax.  California and 46 other states have laws that regulate structured settlement factoring.  California first passed a structured settlement transfer law in 1999.

In addition to many minor "clean up" provisions, these revisions to California's transfer law also add for the first time certain factors that the court must consider when determining whether a transfer should be approved.  These 15 factors include the "reasonable preference and desire" of the seller, any existing child support obligations, whether the future payments were intended for medical care, and whether there have been previous sales or attempted sales.

Another nuance of the revised California transfer law is the requirement under certain circumstances to notify the seller's former personal injury lawyer that they are trying to sell payments.  This requirement only applies to fairly recent settlements in California.  The former attorney is invited to contact the seller if desired, but is not required to do so.  Of course, the seller can elect not to speak with his or her former counsel as well. 

Politically this bill was a compromise between various interest groups, including the Consumer Attorneys of California (CAOC, formerly known as the California Trial Lawyers) and the National Association of Structured Settlement Purchasers (NASP).  As one of the participants in this process on behalf of my company and NASP, I am grateful to the CAOC for their work on this bill and for the collegial atmosphere that prevailed.

For more information, watch the below video interview I did with Scott Drake of the Legal Broadcast Network.  The text of SB 510 is here. 

By Matt Bracy, General Counsel, Settlement Capital Corporation.  We welcome your comments and questions on this article or any topic related to structured settlements.  You may post comments here, or email them to me directly at mbracy@setcap.com.   

Federal Court Limits Use of Arbitration and Rights of First Refusal In Structured Settlement Factoring

In an opinion issued on July 28th, Judge Rosenthal of the United States District Court for the Southern District of Texas (Houston) has enjoined factoring company Rapid Settlements, Ltd. from using contractual arbitration clauses or rights of first refusal to circumvent the state structured settlement protection laws. 

This injunction, which is still subject to a motion for clarification and possible appeal, would effectively end Rapid's unusual and controversial business practices.  As alleged in the injunction order, Rapid has used arbitration clauses in its contracts with sellers as a means to effectively complete a transfer, even if a court has denied the transfer under the state structured settlement protection laws.  Further, the order prohibits Rapid from continuing to use "rights of first refusal" in its contracts to encumber future payments, when the grant of such first refusal rights had not been approved by a court. 

The injunction was obtained by the National Association of Settlement Purchasers (NASP), the trade association for the secondary or factoring industry.  Rapid Settlements is not a member of NASP.

A copy of the injunction order is here. 

For more information on this injunction, watch the Legal Broadcast Network's Scott Drake interview Matt Bracy, General Counsel of Settlement Capital Corporation. 

I welcome your comments on this article or any other structured settlement factoring issue.  You may leave a comment here, or email me at mbracy@setcap.com.