The Structured Settlement Authority blog is lacking authority! The Structured Settlement Authority represents in its post " Reasons Not to Sell Your settlement"
"There are many companies who will encourage you to sell structured settlements for cash lump sum payments. These companies offer their clients liquidity and immediate access to a discounted portion of their money. There is nothing wrong with this and these factoring companies operate under the authority of federal and state regulations, which were put into place to protect the sellers. It is understandable that there are times when it might make good sense for an individual to sell their annuity but it is not automatically the best decision and there are times when it is probably not the right decision."
The fact is that factoring companies do not operate under any authority and that is a major problem that state and federal regulators need to become aware of.
Consider the following:
1. Insurance agents must comply with state insurance laws and best practices in those states where they conduct business, including, among other things, prohibited advertising practices.
2. Viatical sales agents must comply with state insurance laws in those states that require the viatical representatives to be licensed, including, among other things, prohibited advertising practices
3. Registered representatives of broker dealers, which might include #1 and #2 above must comply with federal and state securities regulations promulgated by the SEC, NASD, state securities regulators and their own broker dealer’s compliance department. This includes, among other things, prohibited advertising practices.
4. Banks are regulated!
5. Lawyers are regulated!
6. Other professions are regulated!
The introduction of Internal Revenue Code Section 5891 as part of The Victims of Terrorism Compensation Act of 2001 simply created or clarified some definitions and clarified the tax consequence of selling an annuitant’s rights to receive periodic payments from a structured settlement. It also provided a 40% excise tax on these so-called structured settlement factoring transactions (or transfers) if a transfer was completed without a "qualified order".
This was in response to what was perceived as predatory business practices of those companies engaged in the purchase of annuitants’ rights to receive payments from a structured settlement. Subsequently various states have created their own rules and enacted structured settlement protection acts but nothing to do with licensing of those engaging in the business of purchasing annuitant’s rights to receive periodic payments from structured settlements. However neither of the Federal or State rules give any of these companies the authority to do business in any particular state and indeed my research suggests that most of the companies engaging in the business of purchasing the rights of annuitants to receive periodic payments from a structured settlement are operating without a certificate of authority to transact business in the states I checked.
How is this possible I ask my Secretary of State Susan Bysiewicz, my Senators , Christopher Dodd and Joseph Lieberman, my Representatives, Chris Shays, Nancy L. Johnson, John B. Larson, Rob Simmons, Rosa L. DeLauro, my Governor Jodi Rell, my Insurance Commissioner Susan Cogswell and my Attorney General Richard Blumenthal and State of Connecticut Commissioner of Consumer Affairs, Edwin R. Rodriguez? Why is one group regulated and the other not? Are businesses engaging in factoring perceived as so ethical that they are beyond regulation? How can the State of Connecticut require licensing of viaticals and not put similar safeguards in place on factoring companies to protect its constituents?
This is an election year for some and one hopes that some visible change is possible for the sake of Connecticut consumers. The problem is not unique to Connecticut. It is a national problem and in future posts I will be examining the same issues in other states.
Leave a Reply