Outrageous Structured Settlement Transfer Rate
by Jeff S
It is shocking that some structured settlement factoring companies are exploiting in a shameless way the hopelessness and ignorance of claimants who are despaired for a lump sum on the moment, handing them out trivial amounts in exchange for fat annuity payments they are going to enjoy in the future. It isn't that rare that structured settlement buyers are offering discounting rates as high as 30%.
For those who don't know, the higher the discount rate, the less money you're going to get in a structured settlement cash out. It is a scandalous phenomenon, and unfortunately, some judges approve these transactions when payees assure them they understand what they do and what they get, and it is supposed to be considered something in their "best interest."
One such incidence has taken place in Taxes in 2005, when a workers' compensation claimant was offered to sell a structured settlement with future value of 96,000 dollars and present value of close to 65,000 -- a lump sum in the amount of - 9,000! Thus, 14,000 minus 5,000 in the factoring company's "attorney fees." The story is reported here.
Testifying in court, the payee confirmed his awareness of the huge discrepancy between present value and the amount he's about to get. He was satisfied with the 9,000, being despaired for the money allegedly needed to pay for expenses of a special need family member.
This is purely outrageous. How can you fool a person to this extent? This poor man probably didn't' know he can shop around and find other structured settlement buyers to buy his payments for a much lower discount rate and he would get far more in the transaction should it be approved in court.
I'm not sure the buy out would get court approval in any case because of many issues involved, and I didn't read through the whole report in depth, but the very idea that someone wanted to offer him 9,000 in exchange for buying payments from him in the amount of 96,000 is simply incomprehensible. According to the report, that man claimed that he didn't have any other sources to get the needed money from. But did he try to find other structured settlement buyers at all? I would be curious what the factory company told him so that he believe they are the only one he get his money from, and only that ridiculous amount.
Gladly, the court denied the transaction as not being in the best interest of the payee. I think tactics like this by factoring companies should be scrutinized. After all, this was the very reason why the Structured Settlement Protection Act was enforced many years ago precisely to protect the interests of structured settlement holders against companies attempting to manipulate them and get the better part of their money.