The Florida Structured Settlement Protection Act (Section 626.99296) of the 2007 Florida Statutes at Section (2)(h) defines "independent financial advice" in such a way that puts a crimp in practice of certain of my industry brethren who think it appropriate to take money out of the pockets of tort victims by using the factoring companies as their agents.
According to the Florida statute "Independent professional advice" means advice of an attorney, certified public accountant, actuary, or other licensed professional adviser:
1. Who is engaged by a payee to render advice concerning the legal, tax, and financial implications of a transfer of structured settlement payment rights;
2. Who is not in any manner affiliated with or compensated by the transferee of the transfer; and
3. Whose compensation for providing the advice is not affected by whether a transfer occurs or does not occur.
With respect to providing advice to consumers on structured settlement factoring transactions, regulators in Florida have clearly decided that you cannot provide independent financial advice if you are being compensated as a percentage of the factoring deal or, you are being paid a fee contingent on the factoring deal being completed.
Judges reviewing transfer applications throughout the United States are advised to be alert and, in their review process, to seek out all parties being compensated as a result of the structured settlement factoring transaction. If the buyer of the structured settlement payment rights is paying kick backs to structured settlement brokers, settlement planners, lawyers, financial planners or the like, these payments may not be disclosed. A consumer may be led to a false belief that he or she is receiving "independent financial advice" as a result.
Furthermore, such fees may make a significant difference in the "effective discount rate" that the consumer pays to effect the structured settlement factoring transaction. Consumers should be able to have the ability to negotiate those fees. Calculators are available for free, online, to help reviewing judges, consumers, lawyers, financial advisers and other interested parties to determine the effect of the added vig on the effective discount rate.
Structured Settlement Clean Vendor List
FAQ on Structured Settlement Clean Vendor List
If you are seeking advice concerning a structured settlement factoring transaction, check the structured settlement clean vendor list or, if the adviser is not on the list, ask for a written declaration from the adviser about their compensation. Such disclosure should state (1) whether or not they are receiving any compensation (2) how that compensation is determined (a % of your deal, a flat fee or other consideration (e.g. gift certificate, TV) (3) whether or not the compensation is contingent on the deal. Take that information to the judge reviewing your deal.
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