by John Darer CLU ChFC MSSC CeFT RSP CLTC
The well publicized troubles of 777 Partners, which counts Sutton Park, one of the largest (if not the largest) servicers of structured settlement receivables, among its portfolio companies, raises an issue that should be addresed by current and former structured settlement annuiy issuers
Read more about 777 Partners’ troubles here When Insurers Fail. – by Mary Walsh – News Items (news-items.com).The Mary Walsh substack is a good read.
“It was confirmed on Saturday (June 1, 2024) that we can finally add the likelihood of 777 Partners completing its takeover of Everton to what bears do in the woods” The Athletic June 3, 2024
What is Structured Settlement Payment Servicing?
Servicing of structured settlement payments occurs when a structured settlement payee sells only a portion of their future structured settlement payment rights, yet concurrent with the transfer, the factoring company also enters into an agreement to “service” the structured settlement payments that have not been sold.
Servicing is necessary where the structured settlement annuity issuer chooses not to split annuity payments when an annuitant chooses to sell structured settlement payment rights to a structured settlement factoring company
In “servicing” practice, one check is made payable to the factoring company instead of one to the factoring company and one to the payee. The factoring company receives the entire structured settlement payment, when due from the annuity issuer, takes what is owed to it and “passes through” the balance to the payee. This involves issuing a separate check to the payee issued off the factoring company account.
John Darer, as Structured Settlement Watchdog, first Raised Questions about the Bankruptcy of Payment Servicing Company in 2009
I’ve been writing extensively about servicing for over 15 years. In an October 2009 video podcast, published on the old Legal Broadcast Network, a video interview with a Texas bankruptcy attorney who I peppered with questions about what would happen to structured settlement annuity payments in the event of bankruptcy of the company servicing structured settlement payments.
For more than a decade I have had, written about, and still have the following long term concerns re-stated here:
- Loss of Branding by structured settlement annuity issuers by the de facto ceding of control to a factoring company’s servicing subsidiary, or an independent payment servicer, with the first factoring deal in some cases; or
- Loss of Servicing Control reduces the number of touches that the annuity issuing life insurance company gets with the customer, foments confusion and the incrementally increases the possibility of reputational damage if things go wrong. I have fielded calls from confused displeased annuitants, who sold a small amount of payments and when they face a “can’t help ya” from the annuity issuer and a referral back to the servicer, that is a missed opportunity. Moreover, loss of servicing control has fomented fraudulent approach by imposters impersonating insurers and could confuse vulnerable stakeholders.
Annuity issuers have an additional cost component to consider of course, but allowing it to be pushed out to a servicing company, is it worth it?
Now the largest structured settlement factoring company in the USA is cross-“selling” Insurance | Compare Free Quotes in Minutes (jgwentworth.com)