An Injury Board article titled “Abuses by Aggressive Factoring Companies,” attributed to Hank Didier, Jr., a practicing plaintiff’s trial lawyer from Orlando, Florida, with ties to the factoring company Vantage Capital Consultants, was posted on Injuryboard.com on June 24, 2011. Vantage Capital Consultants is portrayed as a purchaser of structured settlements and annuities, aiming to offer sellers a consultative, fair, and transparent experience in a marketplace often criticized for being predatory and lacking sufficient protections.
The structured settlement watchdog dispenses a “yellow card” to Mr. Didier for promoting his services by taking advantage of inaccuracies of others (that detracts from an otherwise well written article). Didier uses two invalid examples for predatory factoring discount rates at the expense of his competitors, Imperial Holdings and Peachtree. While i have been highly critical of discount rates employed by these two companies, I am interested in credible information. One would assume that as a trial lawyer representing injured parties, Mr. Didier should too.
First, Didier states “in one reported case of such abuse, it was observed that “in what appears to be a record high discount rate charged for structured settlement transactions, Imperial Structured Settlements, LLC tried to charge its customer an interest rate of 82%”. Yet a June 25, 2011 Google search for “Imperial Structured Settlements 82% rate” comes up with press releases of RSL Funding, a competitor of Imperial and Didier. Download Imperial structured settlements 82% rate – Google Search
When I placed a call to Didier’s office yesterday the individual I spoke to suggested the cite was really a cite of a cite (apparently a “cite of a press release by RSL Funding, a competitor of Imperial and Vantage) but not a “reported case in the “legal court proceeding” sense of the word. The RSL press release provides not a shred of evidence to support its statement about the purported “82% rate”. The case linked to its press release has a 16.56% annual discount rate! In Imperial Holding’s S-1 filing with the Securities Exchange Commission prior to its Initial Public Offering, it was represented that the range of discount rates were in the high teens. Indeed on October 2, 2010 RSL Funding issued a press release in which it wrote that Deborah Benaim, then an executive of Imperial, testified that discount rates were “averaging 18-20%”. (See : Imperial Factoring Exec Testified Discount Rates “Averaging 18-20%”, Report, October 3, 2010). I also contacted a senior Imperial Holdings executive after reading Didier’s post and he had no knowledge of an 82% discount rate, citing to the S-1 disclosure.
Last fall, RSL Funding launched what we called a “bitch slap” campaign against Imperial Structured Settlements, using “do-it-yourself press releases.” Therefore, the 82% allegation should be understood in context.
Unless Didier and RSL can provide a recent example demonstrating that the “effective annual discount rate” was truly 82%, it can only be assumed that this is a misunderstanding of what a discount rate represents. Both should avoid relying on such misinterpretations.
Moving on to the Didier cite of the “71.4% discount rate referred to by Bronx, New York Supreme Court Judge Norma Ruiz. Had the full text of the Feliciano decision (Ruiz’s case) been read, I doubt Didier would have posted what he did, because it makes him look less credible. Anyone with a basic knowledge of present value should know that Ruiz 71.4% number was bogus due the misinterpretation reflected in the decision that conflicted with what she said earlier in the decision. He certainly would not want to rest his closing argument on that one.
This may be helpful
New York General Obligations Law Section 5-1703 (e) through (g) Required Disclosures to Payee
(e) the gross advance amount and the annual discount rate, compounded monthly, used to determine such figure;
(f) an itemized listing of commissions, fees, costs, expenses and charges payable by the payee or deducted from the gross amount otherwise payable to teh payee and the total amount of such fees;
(g) the net advance amount including the statement: “The net cash payment you receive in this transaction from the buyer was determined by applying the specified discount rate to the amount of future payments received by the buyer, less the total amount of commissions, fees , costs, expenses and cahrges payable by you”
All the numbers corresponding to these statutory requirements were set out very clearly in the Feliciano decision, before the Judge’s misinterpretation.
In my November 6, 2010 criticism of the bogus use of the bogus “71.4%” by the NSSTA (see below for the full post) I wrote, citing the Feliciano decision and including a copy of the Feliciano decision:
“If the Judge admits that the discount rate of 14.99% equals (the gross advance)
of $19,540 and $17,340 (the net advance amount after expenses) is 88.74% of the
present value with a 14.99% discount rate then logically, the (effective annual discount)
rate CANNOT be 71.4%!”
Following are links to my reporting of the Feliciano decision and the rampant abuse of “judicial misinterpretation” by some, to meet the end of marketing against a competitor and public relations.
All in the Factoring: A “Bunker” Mentality, Starring the NSSTA Blog November 19, 2010
NSSTA Seeks to “Wiggle It” Just a Little Bit (with its “Added Groove” November 17, 2010
“Ruiz The Day” Did NSSTA Embellish the Judge’s Words, Why? To What End? November 13, 2010
What is Present Value and How Does It Apply to Structured Settlements? November 8, 2010
NSSTA’s Structured Settlement Factoring: The 71% Non Solution is Wide of The Mark November 6, 2010
Judge Norma Ruiz Gives Peachtree Settlement Funding the “Bronx Cheer” July 28, 2010
I know a big fat misinterpreted discount rate LOOKS juicy, but it’s no more real than one of those fake soup bones that “the dog” gets tossed every now and again that do nothing but squeak),
So let’s educate the public with reality. OK?
Post Script: Received a call at 11:12 Sunday morning from a phone with “Henry Didier” in the Caller ID. No message was left, just static. I called back the number and the same static. Hank, I’m always happy to chat about anything that keeps structured settlement stakeholders informed and helps curb abusive business practices in either the primary or secondary structured settlement market.
** subsequent to the posting of this blog, the 82% and 71.4% references were removed from Didier’s post to Injuryboard.com June 27, 2011 1:50pm
Leave a Reply