Over on The Settlement Channel, Mark Wahlstrom has a podcast series on the subject of the factoring business, broken into four 15 minute segments, which is worth listening to.
People wonder what the ethical and professional obligation of the trial lawyer or structured settlement broker is in making their client aware of their option to liquidate or obtain cash from their structured settlement annuity contract
As if it were not already evident from the overwhelming saturation of television, print media, and Internet advertising! Wahlstrom suggests that is evident in the decision of whether to refer clients to a liquidity broker (another "term du jour" for the ever-adaptable companies) or a factoring firm when clients seek advice on exiting their structured annuities. Several members of the Society of Settlement Planners (SSP) have previously conveyed to me their belief that factoring is an integral component of the planning process.
Is Factoring "Settlement Planning"?
This appears to be an effort by certain individuals to justify the fact that the SSP has received tens of thousands of dollars from factoring companies. As of May 12, 2006, at 12:56 PM EDT, the SSP has yet to publicly disclose its stance on factoring on its website. Those who criticize insurance company practices while simultaneously accepting money for the aforementioned practice may want to reflect on their own actions.
Some further perpetuate the factoring equals settlement planning "fantasy" by creating a "phantom liability" fear for attorneys and structured settlement brokers for not going through the cash out features of a particular structured annuity with a client at the time you set up the structured settlement!***.
Would those proponents attempt to convince a plaintiff who doesn't want a structured settlement to take a structured settlement on the basis that he or she could cash out anytime (if Court approved and "in best interests") and then profit from a cash out a year later?
I agree with Wahlstrom that the profitability of the factoring market appears to have exploded (how can you not make money at close to 20% discount rates?), and expanded.
We have seen factoring firms soliciting structured settlement brokers, trial lawyers (yeah, trial lawyers!) and legal associations for names of annuitants in return for finders fees, commissions or other.
In my opinion, the sale of an annuitant's or plaintiff's name by a settlement broker, lawyer, or insurance company (potentially including the individual's personal and confidential protected information) in exchange for a finder's fee is unethical and should be subject to sanctions.
It may also be in violation of the law. The Gramm Leach Bliley Act. 15 USC, Subchapter I, Sec. 6801-6809, provides limits on the reuse of nonpublic personal information.
6802(c) Limits on reuse of information
Except as otherwise provided in this subchapter, a nonaffiliated third party that receives from a financial institution nonpublic personal information under this section shall not, directly or through an affiliate of such receiving third party, disclose such information to any other person that is a nonaffiliated third party of both the financial institution and such receiving third party, unless such disclosure would be lawful if made directly to such other person by the financial institution.
6802 (d) Limitations on the sharing of account number information for marketing purposes
A financial institution shall not disclose, other than to a consumer reporting agency, an account number or similar form of access number or access code for a credit card account, deposit account, or transaction account of a consumer to any nonaffiliated third party for use in telemarketing, direct mail marketing, or other marketing through electronic mail to the consumer.
***New York State General Obligations Law §5-1702 (d) requires a disclosure at the outset of a structured settlement which requires, among other things, that " where applicable, that any transfer of the periodic payments is prohibited by the terms of the structured settlement and may otherwise be prohibited or restricted under applicable law"
Leave a Reply