by Structured Settlement Watchdog
Judging by the sheer volume of phone calls this author receives from investors, or representatives of investors, seeking to purchase structured settlement payment rights, there is a huge demand for this type of asset. This author receives a daily update from a vendor of "in force" structured settlements advertising rates of between 6 and 7.5%! There is even mention of lottery paper affording investors 5% for a duration of 18 months.
This author believes that there is even support within the structured settlement industry for the purchase of these assets by tort victims, although such support is not believed to be widespread at this time.
It has been opined that those that purchase structured settlement payment rights, whether factoring companies, or individual investors provide a valuable liquidity function for those that are in desperate need of cash. A staple of the advertised factoring company value proposition is that those in a desperate need of cash to help avoid foreclosure on a home. But are the financing methods for some of the companies in this business really serving to harm the people they allege that they are trying to "help"?
There clearly is a ready market for buying and selling/trading structured settlement payment rights in secondary and tertiary market transactions.
It seems that some individuals or factoring companies that purchase these rights do not want to hold on to the paper so they flip them on to other individual or institutional investors. Those individuals or institutional investors may in turn sell them on further. But in order to make the subsequent transactions possible, the initial effective discount rate charged to the desperate tort victim must be sufficiently high enough to allow for each investor to profit on subsequent transactions.
One investor who calls this author regularly with updates on this area, a financial adviser in the Northeastern United States who buys and sells structured settlement payment rights for his clients' and his accounts, suggests that a 13-15% interest rate charged on the underlying structured settlement factoring transaction enables the repackaging to take place at the attractive interest rate levels shown above.
One company, Peachtree Settlement Funding, long known to charge among the highest effective discount rates to desperate annuitants gives new meaning to the term "piggy bank". One industry source suggests their effective discount rates are perennially in the high teens, often approaching 19%. This author has long personally believed that only the most ignorant and unsophisticated consumers sell their structured settlement payment rights to Peachtree Settlement Funding. because shopping brings a better deal. With high discount rates to tort victims there's a whole lot of wiggle room for Peachtree , and others, to serve up an attractive meal to feed the gullets of downstream investors.
Who are the fat bastards "feasting" off desperate tort victims?
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