It is common knowledge that a number of structured settlement brokers and settlement planners refer business to factoring ("Cash now") companies. Factoring is a source of cash of last resort which requires the transfer of structured settlement payment rights for a discounted amount of cash. The formula generally involves determining the present value being transferred and then building in a profit margin. Built into that margin is the brokers fee. This fee is NOT contractual but one that is demanded by some brokers and settlement planners. Sometimes its a percentage, sometimes it's a flat fee. Either way it takes money out of a presumably desperate annuitant's pocket. There is a dearth of disclosure of this activity on the websites of structured settlement brokers and settlement planners. Is it ethical? Is this activity hypocritical?

Mark,

Any comments on John Darer's "Structured Settlement Clean Vendor List?" This has seemed to strike a nerve with many settlement brokers and factoring companies. What is your take on this?

Mark, I don't know about you, but I'm coming across some plaintiff attorneys who are turned off of structures because of all of the factoring company adds. None of the life companies or NSSTA seems to think the factoring companies are still a problem. What can we do? Other than John Darer, no one seems to be doing anything.

If you note the attached Florida disclosure from the Patricia Chambers case dated March 16, 2007. Download floridatransfer_disclosure.pdf, you can see how one factoring deal is broken down. The calculation in D (gross amount) applies the factoring company's discount factor to determine a gross amount. It is from this amount that charges are to be deducted and disclosed. But is it possible (and I'll need a factoring company to comment on this) that the broker/referral fees are built into the factoring company's discount rate? If so, then it would appear to be a disclosure loophole that needs closing.