John Darer and Mark Wahlstrom discuss marketing abuse by factoring companies.

In the third and final installment of their conversation on marketing abuses by the factoring industry Mark Wahlstrom and John Darer turn their attention to what the major stakeholders can be doing to reclaim the term "structured settlements" from the factoring industry's worst players.The efforts, on in some cases the non-efforts, of the respective trade associations that are interested in promoting structured settlements, are discussed as well as the subtly corrupting influence of allowing the companies that are in the business of undoing structured annuities to be a factor in the underwriting of the respective trade associations.

As every industry insider is aware, there are life markets that have entered the factoring industry through subsidiary operations, thus selling structures on one hand, and then cashing them out on the other. There is also the issue of the primary plaintiff planner associations embrace of settlement factoring companies as a major source of funding and income. These are issues our profession needs to discuss openly and with out hostility, as factoring companies are here to stay and will continue to market their services to the claimants who take their settlements in periodic payments. The question is going to be what is the best way for the respective markets to coexist and protect the interests of the end user, the personal injury victim.

Through our first series with Matt Bracy, counsel for Settlement Capital, and now these programs with John Darer and his blog at structuredsettlements.typepad.com, we have tried to frame the respective sides of the issue, and in the next year will expand the debate to discuss the life company role in providing liquidity, conflicts of interest of brokers by accepting payment from factoring companies when annuitants cash out, the methods of calculating present value on the contracts and most importantly, who do you trust if you are someone looking to sell part of your payments. By bringing this issue to the forefront we hope to give both sides of the debate plenty of opportunity to discuss their positions, while educating the various stakeholders on the costs and benefits of the decisions they make in this process.

Comments

[Michael Kaplen, Esq.]

Mark:

You might also want to focus some attention on the disturbing practice of some life companies to be writing directly to our clients informing them of their right to sell their structures back to them.

What is particularly irritating to a me as an attorney who frequently recommends structures to my clients is that this is being done behind my back without giving me any notice on the offer. I truly resent these companies taking this road.

Additionally, I really wonder about the legalities involved since when you read their settlement documents they talk about the irrevocability of the structure and here they go offering to buy it back.

It doesn't only smell rotten, it is rotten.

Michael V. Kaplen, Esq.
DeCaro & Kaplen, LLP
20 Vesey Street
New York, NY 10007
212 732 2262
President, Brain Injury Association, New York State
Past chairs, ATLA Motor Vehicle & Accident Section; Traumatic Brain Injury Litigation Group
Co-Chair, Tort Section, New York County Lawyers Association
Certified, Civil Trial Advocate, National Board of Trial Advocacy
www.braininjury.blogs.com
www.brainlaw.com

[The Settlement Channel]

Michael, I always appreciate your thoughts and input. You are correct that one of the primary life markets that underwrites structures, Symetra, is in fact now running a factoring, or liquidity, market under a different marketing name.In addition some of the other life markets are examining their responsibilities to notify annuitants about their liquidity options under section 5891 of the code.

I totally agree that their contacting people about this option, with no notification to either the writing agent/broker, trial lawyer, of defendant purchaser is a questionable practice at best. In particular when you realize these are the very same companies who claim the annuitant has no standing in commission sharing schemes because "they aren't the owner or applicant of the annuity", but apparently they have enough standing to be induced to cash in their annuity contract.

Like many other practices in our industry this could use some sunlight to help clarify what practices are allowable and ethical, and which business models injure the victim again. I personally can't think of a senario where a life market could convince me of a reason why they should be marketing factoring services to annuitants. I just see it as too large a conflict of interest and subject to tremendous abuse.

[John Darer]

Michael, appreciate your comments. We need more attorneys like you speaking up about this.