Factoring companies offering referral fees to structured settlement consultants may not be violating any state insurance laws. But whether or not the practice is ethical is an argument that has divided the structured settlements community."
This is a very important topic that is being not dealt with adequately, if at all, by the leaders of the structured settlement industry trade associations. The "turd in the middle of the room" is getting larger and more putrid by the day.
Rhonda Bentzen has publicly declared that 90% of her clientele is taking structured settlement factoring vig that she offers and pays. Rhonda Bentzen has admitted in writing that "she relies only (and makes her living) on referrals from her structured settlement broker peers".
In addition to Bentzen, this author has learned that a significant number of structured settlement brokers and settlement planners are referring business to other factoring companies or brokers and asking for and getting really outrageous fees ("super vig", that apparently disgusts even the factoring companies and full time factoring brokers), the amount of which (if disclosed) would likely end those brokers viability as credible advisors in the structured settlement business. The fall out might not end there. The percentages charged may even exceed the amount the broker would receive in placing the structured settlement in the first place.
Some who refuse to work "pro bono" have argued that they deserve to be paid for their time. Yet the focus of any attorney general investigation should be (1) on whether full disclosure was made during the solicitation which in many cases it isn't (2) whether the itemized amounts paid to the brokers are disclosed in the disclosure supplied to the Court for its evaluation (3) "are their fees reasonable in relation to the time spent"? It is critical to remember that the people being harmed by the "bad apples" are some of the most vulnerable members of our society, including young adults, seniors, many of whom are profoundly injured people.
The identities of these "bad apple" brokers must be revealed in the interests of the preserving industry integrity. It is believed that these "bad apples" are running a covert operation, running scared and they should be! Factoring companies and factoring brokers need to have the integrity to refuse to pay high percentages on such deals.
The State of Florida factoring paragraph E requires an itemized listing of all brokers' commissions, service charges, application fees, processing fees, closing costs, filing fees, referral fees, administrative fees, legal fees, and notary fees and other commissions, fees, costs, expenses, and charges payable by the Payee or deductible from the gross amount otherwise payable to the Payee.
What constitutes an itemized listing? What should constitute an itemized listing?
Judges enforcing the disclosure rule should insist that such itemization include the identification of anyone who is taking a fee, directly or indirectly on the transaction and the amount of that fee. That would reveal the structured settlement factoring vig takers who are competing with the tort victim for a share of the money from the factoring company. This is the same theory that Eliot Spitzer used to go after Coventry Financial. Attorneys General take note!
The leaders of the American Association for Justice should consider sharing this blog with their peers and consider refusing to do business with any structured settlement broker or settlement planner who does not sign an affidavit concerning factoring business practices compensation. If it's not your clients getting screwed it is the clients of one of your peers! And it could be by a representative of one of your own vendors or association's business partners? What are YOU doing to protect them?
Attorneys and consumers with structured settlements, who have reached the "point of no return" on the need to factor, are reminded that the Structured Settlement Clean Vendor List contains the names and copies of affidavits of those in the structured settlement industry who have sworn under penalty of perjury that they DO NOT take fees for structured settlement factoring transactions. If the quote is shopped from the same competitive funding source, and there is no broker taking the vig, the quote will be better.
If you are a structured settlement broker and not taking any fees for structured settlement factoring transactions you are encouraged to sign up for the Structured Settlement Clean Vendor List. You do not want to be off the list when the names start being revealed about the eye popping "super vig". The numbers are really shocking. Here's the FAQ for those who have any questions.
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