by John Darer CLU ChFC MSSC CeFT RSP CLTC
When a structured settlement is factored to raise cash for a structured settlement payee, no annuity policy changes hands
As set forth in Subparagraph (A) of paragraph 3 of
subsection (c) of 26 U.S.C. 5891 The term “structured settlement factoring transaction” means a transfer of structured settlement payment rights (including portions of structured settlement payments) made for consideration by means of sale, assignment, pledge, or other form of encumbrance or alienation for consideration. It’s a very basic fundamental. However it has not stopped structured settlement secondary and tertiary market actors from making misleading statements.
“With zero regulatory oversight, the factoring industry (or secondary market industry) flourished by ripping off annuitants and paying pennies on the dollar for what is considered to be a very valuable investment asset. The annuity policies that changed hands were the guaranteed annuity policies from major insurers like New York Life, Metropolitan, Prudential, MassMutual, John Hancock and others. ” John Bair Milestone Consulting and Director of factoring originator CrowFly, LLC March 5, 2018.
In a structured settlement exchange, no annuity policy changes hands, just the rights to payments. The individual receiving structured settlement payments representing his or her damages is no more the owner of an annuity contract than the investor.
The 4 BIGGEST LIES told to investors in Structured Settlement Receivables are Secondary Market Annuity, Secondary Market Annuities, SMA and SMIA
Given that the annuity do not transfer in structured sett;ement factoring transactions, it would be a lie to call it an annuity when selling payment rights to an investor.
With continuing commentary, some actors in the tertiary market remain militant in their use of the deceptful terms of misrepresenation, while some have backed off a little by admitting the usage was simply engineered for marketing purposes.