Important Sell Structured Settlements Facts

What’s involved when you sell a structured settlement?

If you want to get cash cash for structured settlements, there are some important matters that you should be concerned with. The long term cost of selling your structured settlements for a lump sum payout are substantial. Most people don’t take these costs into consideration and only focus on the immediate impact of a large cash windfall.

What structured settlements mean to most people is that you can get the best possible settlement for everything you might experience — whether it be a slip and fall case to a lifelong injury that’s going to have serious and long lasting consequences. However, structured settlements aren’t just limited to catastrophic injury. In other words, structured settlements don’t just involve lifelong disabilities.

If you’re in a lawsuit, some services “offer” you the ability to “sell” your structured settlements to them. In exchange, they provide you with a lump sum of cash in the event you need this type of financial resource.

There are laws that protect the consumer from unscrupulous brokerage companies. Many times, the settlement agreement contains a nonassignability clause which is basically unenforceable.

Some of the purchase agreements require the consumer to stipulate to a host of provisions which severely restricts consumers rights and raises questions as to their basic fairness. To forestall suit, however, the contracts often require the consumer to defend and hold harmless the purchasing party in any lawsuit.

Price terms as well are usually pretty unfair to the consumer. In fact, some sales have been shown to be completed with a 12% or 15.8% discount rate, but oftentimes, the rate is as high as 55, 65, or even 75%. The discount rate is calculated on what the purchase price is going to be as well, meaning fees such as brokerage expenses that the seller of the contract agrees to. That means that the real cost and rate of the transaction is much lower than the company states it is once everything is said and done. The seller does also not have to be informed of the total cost of the transaction — at least in terms that are understandable. And because some of the transfer agreements are so unfair, it would appear that there needs to be something put in place whereby consumers are protected from factoring companies that take unfair advantage of them.

Some say that structured settlements give financial protection that’s sorely needed to severely injured victims, so that they are protected from having their benefits prematurely dissipated; periodic payments are tailored to the medical and living expenses of the victim and the victim’s family, and it avoids shifting the responsibility for the victim’s care to the social safety net financed by taxpayers. These same people say that factoring companies that purchase future structure payments for sharply discounted lump sum payments are dramatically on the rise. This means that the structure is taken out of the structured settlements, in that the injured victim enters into this with a third party, thus going completely outside of the structured settlement without knowledge of any other parties involved in the structured settlement itself.

According to industry watchdogs, the shady side of the structured settlement factoring business is rapidly growing. One company announced that it has undertaken more than 7,700 structured settlement purchase transactions with a total value of $370 million. During the first nine months of 1997, the same company undertook more than 3,700 structured settlement purchases paying $74 million for $163 million of structured settlement payments.

The National Association of Settlement Purchasers (NASP) is composed of companies that purchase deferred payment obligations, including structured settlements. It is a nonprofit. It was formed in July of 1996, and this organization, along with its member companies, support reasonable regulation whereby the rights of consumers who want to sell structured settlement payment rights are still protected. Because of this, the organization has adopted a code of ethics, including consumer suitability of protection standards. It has also implemented a fraud alert system. The organization seeks to provide claimant representatives and claimants themselves with legal, ethical and efficient means by which to obtain liquid funds from inflexible structured settlement schedules. NASP is active in a number of states, and is currently working to pass comprehensive legislation in those states that would protect the interests of personal-injury victims both when the settlement agreement is reached, and in the event the individual or his/her representatives seek to liquidate a portion or all of the structured settlement in the future.



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