Expose The Vicious Settlement Buyers
A little-known area of financial abuse involves “structured settlement” annuities.
A structured settlement is often used in compensation for injuries or accidents – i.e. car crashes, medical malpractice, and class-action lawsuits.
The victim is set up to receive their money through periodic payments –this is the ‘structure’. For example, the recipient might get $2,000 a month to age 65, and $1,000 a month thereafter.
There is not a lump sum cash advance –which is a good thing. There are many stories of lump sums being dissipated all too fast, with huge resulting debts.
Most attorneys and judges advocate for structured payments. The payor – often a hospital, a construction company, or a railroad – usually funds an annuity where an insurance company makes the payments.
The annuities themselves are not the problem. The insurance companies are not the problem either.
The issue is this: once the injured recipients are on their own, they are targeted by “viatical settlement buyers.”
These vultures employ an army of researchers to plow through court records, looking for settlement beneficiaries. These companies are formed like hedge funds and attract wealthy investors.
With slogans like “It’s your money!”, they try to persuade the former plaintiffs to sell their income stream at a deep discount.
The settlement company and its greedy investors then get the regular income at bargain rates. The accident victims get a much smaller lump sum in exchange.
If the settlement recipients fall for this, they do get cash today. That is the selling point. It can give them quick relief from any debts that they have.
Don’t Sell That Structured Annuity!
A sale means giving up years, even decades, of financial security — sometimes for pennies on the dollar.
For example — in a recent Minnesota case, the annuitant was scheduled to receive “structured future periodic payment” totaling $191,608.
But all they got in a lump sum was $12,001 from Catalina Structured Funding of California. This represented just 6.3% of the value.
(Even so, the annuitant’s husband tried to convince her that the deal would help them dig out of current debt.)
In another case, the annuitant agreed to sell $90,000 worth of monthly payments he was scheduled to collect if he lived to age 59. All he received was $20,000.
Records show that nearly 13% of people who sold their payments in Minnesota later filed for bankruptcy or were even evicted from their homes.
J. G. Wentworth, in a 2014 filing with regulators, said its database of 122,000 current and prospective customers represented “$32 billion of unpurchased structured settlement payment streams.”
Chris Milton, president of Catalina Structured Funding, said his company sends out thousands of fliers to settlement prospects each week.
In 2021, prospects received three realistic-looking checks totaling $4,500 in so-called “90-day Covid-19 Assistance”. On the back of the checks, Catalina noted that the funds were actually an “advance” — that would be released only if the recipient signed a contract selling his future payments to the firm.
John Darer is an excellent resource on all this. This blog is called The Structured Settlement Watchdog®. His basic advice to annuitants is this:
“If you have current debts and the lump sum looks good to you, then get a job to make the debts go away….don’t touch the structured settlement.”