by Structured Settlement Watchdog®
This is the first part of what will be an ongoing investigation into the inducements offered by factoring companies to their employees and consumers to consummate more deals involving the exchange structured settlement payments for cash. It is the opinion of this writer that such inducements are ultimately NOT in the public interest as they potentially cloud the objectivity of the owner of structured settlement payment rights or the employee of the factoring company. This could lead to poor financial decisions by the consumer.
A structured settlement factoring company is a company that engages in the purchase of the rights to receive future structured settlement payments. A transaction completed by such companies is known under the Internal Revenue Code Section 5891 as a 'structured settlement factoring transaction". It is sometimes referred to as a "secondary market company" "settlement purchaser" , "cash now company", "cash flow purchaser", "transfer company" or "factoring company". It is sometimes mislabeled in advertising by such settlement purchasers as a "structured settlement company".
Regulators of the insurance, securities and banking industries limit the amount one can spend on "inducements" partly to help people avoid making hasty or inappropriate critical financial decisions based on the inducement. Attorneys General have heavily fined insurance brokers for undisclosed incentives for placing business and and big press has been made about the subject. Yet there is no such regulation or enforcement of the factoring industry.
Years ago banks offered people toasters for opening up an account. Now we have discovered that one factoring company has offered its employees the opportunity to win a $26,000 car. Peachtree Settlement Funding offered a 2006 Toyota Prius automobile in a sales contest. The winner of this car is quoted as saying how opportunity for a new car spurred him to double his sales. The pres release was part of a post on the Prius owners blog entitled Cheesey(sic) Prius giveaway. Peachtree's Jason Wallace commented, ”I did everything I could to help my co-workers reach the goal set before us. I almost doubled my personal monthly purchasing goal. The incentive definitely pushed us all to do our best.”. Wallace's winning was drawn by another employee, herself a beneficiary of a Mini Cooper automobile (estimated $22,000-$25,000 value at the time) in 2004.
In a developing story we have also learned from a confidential source that one factoring company may have offered consumers the opportunity of a trip to an offshore tropical location as motivation to talk to it.
How are these incentives in the public interest? Did Peachtree Settlement Funding disclose to its customers that its employees were competing for the opportunity to win a $26,000 car?
Are factoring companies offering financial incentives to attorneys to refer clients to them? Whether or not such incentives have been offered or have in fact been received, are attorneys giving settlement documents subject to confidentiality clauses to factoring company representatives without consideration to the other settling party that they/their client are obligated to? What are their ethical obligations?
STAY TUNED!
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