As noted in our preliminary findings report, the original intent of the investigation was purely to look into harassing phone calls; it was too limited in scope and therefore the investigation was adjusted appropriately.  Annuitants’ testimonials are clear: they believe they are being ruthlessly and systematically being targeted for someone else’s profit.  But how are these people being reached?  What makes contact harassment?  Let’s explore this in more depth.  All clients and companies exposed by these clients have been made anonymous for these posts.

The standard and most frequent forms of contact are direct mailings and phone calls.  For many, though not all, direct mailings are the most annoying simply due to the volume of mail received on a weekly basis; for those annuitants who have only just left the courtrooms the mailings are on a daily basis for months on end.  These mailings are the “Gotcha!” checks that look and are occasionally perceived as free money.  We in the industry know this isn’t the case, and our company has taken steps to warn annuitants to be careful with these mailings – but as previously mentioned, some annuitants don’t understand this.  Some, either due to misunderstanding the mail or out of sheer desperation, will cash these checks.  The results for these people are disastrous; not just in terms of getting money or expecting to receive more afterwards – even when they don’t end up getting any at all – but psychologically.  We work in the industry and understand all of the jargon; many of these annuitants – these people – don’t.  The mailings, despite being effective sales tools, are too much for many annuitants.  Beyond the harmful effects for those who end up cashing in the checks they’re getting in the mail, from a practical standpoint they are largely ineffective.  Nearly all testimonials from clients note that whenever they see mail that seems like it might be about a structured settlement or annuity, they simply make a bee-line for the garbage can and toss it in.  It seems about as effective as the political mailings we are all being inundated with during the mid-term election season.

Phone calls are troublesome territory for annuitants.  For many, they take the appropriate approach to unwanted solicitations and request to be removed from the calling list for the respective company.  At this point, the Telephone Consumer Protection Act is clear that the person shouldn’t be contacted again for at least a period of five years.  Do the phone calls stop?  For the vast majority of the time, absolutely not.  Testimonials frequently cite that despite repeatedly telling companies to stop calling, they do anyway.  The salesman might change, but the companies don’t.  This is textbook corporate harassment.  If this wasn’t troublesome enough, clients have gone on at length regarding the kinds of tactics employed by these various representatives.  This ranges from a typical sales pitch of feigned familiarity and friendliness to shouting that they’re being ripped off and should do business with them.  For the friendlier pitch, one client testified that she repeatedly received a call from a man at company X.  He was told not to call back and respected this for about a month.  The next month he called and claimed that when they had spoken the month prior he was given an indication that she may be interested in their company’s services.  She explained that this wasn’t the case and to stop calling, that she wasn’t interested in selling her annuity to them.  Calls of this type occurred once a month for several months until the representative finally stopped.  Despite the friendliness of these solicitations, it must be remembered that it is still harassment since she repeatedly told this person, and the company he represented, that contact was not desired.  Beyond the legality of the situation, it is simply unethical and has effects beyond the immediate offender.  If our industry continues with these practices then it is our entire industry that will ultimately suffer, and it begins with those that continue to conduct themselves exclusively in legitimate business practices.  Here is another example, far less friendly, than the first:  another annuitant, one from years past, still to this day receives calls and mail.  When he does receive calls, he states that many of the sales reps are “borderline belligerent” and just won’t get off the phone.  He has resorted to threats of suing them for harassment since they have kept calling for so long.  These sorts of measures should not have to be taken by any annuitant anywhere.  This same annuitant went on at length about how “no means no” and that he isn’t in the habit of changing his mind, no matter how much harassment he suffers as a result.  We at Bentzen Financial agree.  No does mean no.

Other tactics reported to us include the following, which we have come to expect as standard fare per testimonial:

  • Forcefully coercive tactics, misinformation included.  This includes pretending to be a representative of our own company to set the annuitant at ease before claiming that no, in fact the person is from another company and apologizes for the (consistent) misunderstanding.
  • Contacting with equal vigor the family of the annuitant; minors and out-of-state relatives included.  Some, especially children, more apt than others to be fooled by the “Gotcha!” checks.
  • Contacting the legal representatives of annuitants to the point of harassment as well.
  • Claims that Bentzen Financial is ripping annuitant off, and therefore the soliciting salesman’s company should naturally be selected as replacement, despite contractual obligations with us.
  • Physically showing up at an annuitant’s, annuitant’s family member’s, or annuitant’s legal representative’s home or place of business with an aggressive, in-person sales pitch.
  • Using dialing machines and automated messages to contact annuitants despite not being legally permitted; the indicated use of dialing machines is based upon time lags during the answering of phone calls.
  • Even if the annuitant does business with a company, which is to say that he or she gave in to the constant contact, the contact doesn’t stop – not even from the company that he or she gave in to.  This includes annuitants who don’t even have any money left to do business with.  Harassment continues despite this logical disconnect.

The standard fare is unacceptable and unfair not just to the annuitants, but to the businesses that are not otherwise engaged in these practices.  How is legitimate business expected to flourish if such a practice like scraping is allowed to continue?  The short answer is that it can’t.  The only logical conclusion is that if one is to try and compete with the dark side, one must join it.  Thus we come to a case mentioned in the preliminary findings report: where an annuitant was harassed not just by phone and mail, but also directly from a representative on Facebook.

This is easily one of the most astounding cases that we have come across.  Her testimony is standard, otherwise: constant mailings and phone calls.  Representatives are told to leave her alone but they refuse to do so; warnings and demands to stop are frequent.  The most persistent representative admitted to searching through all of Facebook for the annuitant by last name until he found her.  He then attempted his pitch again.  The annuitant was so disturbed by this man’s refusal to take the hint that she took a photo of her desktop, including the Facebook message, and forwarded it to us – after promptly refusing him once again.  The representative, the company he worked for, and the contents of the message were plain to see without any attempt at veiling it.  So brazen was this particular attempt that it is difficult to do this story justice without attaching the picture submitted to us; for privacy reasons, however, this is withheld.

These are the tactics employed by the scraping pariahs of our industry.  Part two of these investigation results will be released soon and will delve into what the annuitants themselves have to say about their experiences; what they think, feel, and want to see happen in the industry given their experiences.  Check back soon.

Bentzen Financial has, for some time now, received reports from former annuitants that have done business with us that they feel they are being harassed by others in the industry.  Once the liquidation of their structured settlements or annuities are approved, annuitants are immediately contacted to try and squeeze more business out of them – at least, with regards to factoring.  Unfortunately this also occurs once an annuitant has put together a structured settlement.  This is the scraping phenomenon that has overrun the entire industry.  Due to the reports of harassment of our former clients, we felt it necessary to conduct a formal investigation.  To that end, we have tasked an independent academic to conduct the investigation and produce a report of findings.  Preliminary findings have been produced and already further serve to demonstrate the deleterious effect that scraping has on the industry.

The original focus of the investigation was specifically on harassing phone calls, but after speaking with many on (just!) the Bentzen Financial client list, it seems as though this was too limited in scope.  Nearly every annuitant who has completed a testimonial reports the extraordinary degrees that several companies in the industry – several names come up constantly – have gone to try and secure their business.  Representatives of these companies are frequently referred to as “sharks,” “vultures,” and “predators” of one kind or another.  It is clear that the annuitants feel as though they are being further victimized by unscrupulous businesses with unethical practices, commonly asking why these solicitations don’t stop despite repeated confrontations and, in some cases, pleadings.

Many of these annuitants note that there tends to be a time lag between when they pick up the phone and when a person on the other line responds; this is typically indicative of the use of auto-dialing machines which are strictly regulated by the Telephone Consumer Protection Act (1991).  Calls to cell phones, for example, are strictly prohibited – and are frequently done anyway.  More troublesome, however, is the fact that all affected annuitants report telling solicitors to stop calling – and none complied for the mandatory five (5) years as stipulated by the TCPA.  Adding insult to injury, the solicitors often do not identify themselves or their organizations, preferring to rely upon salesman tricks and faux friendliness, with some even going so far as to state or imply that they work for Bentzen Financial.  There are numerous reports of overreach, such as by relentlessly contacting spouses, children, and other relatives using whatever means possible.  Unfortunately this is just the tip of the proverbial iceberg; some reports include harassment by salesmen on Facebook, misleading sellers into believing they represent another company that may have a better working relationship with them, or even going to their homes and places of business seeking them and their families in person.  The general consensus is that annuitants should not be contacted by anyone they have not sought out themselves.  Even companies that have done business with annuitants in the past are often reported as carrying out harassment after initial business is concluded.  This is how the industry’s reputation takes a hit: even those companies whom clients decided to deal with are engaging in actions that many annuitants feel as though are predatory.

A final and consistent complaint that annuitants report is that the sheer amount and frequency of direct mailings with “Gotcha!” checks being sent to them is overwhelming.  While most annuitants know that these checks are essentially traps for companies to try and get more money out of them, some lack sufficient understanding of how the industry works and get caught up in what seems like a blessing of free money.  There is no free money and there is no such thing as a free lunch.  It is simply unacceptable that some annuitants, many of whom are struggling financially, are further victimized in this manner – be it due to their own ignorance or desperation.

The preliminary findings do not paint the industry in a positive light.  Scraping, now associated with harassment, is dangerous to the industry and legitimate business.  For the industry to survive and flourish it cannot continue such an unethical practice.  The complete report is being put together.  Its findings will be noted in a future post.

There are limited statistics relating to the factoring industry and the numbers of transactions being done.  That being said, some of the largest companies are public and/or securitize so we can extrapolate from that information that roughly 1,000 cases per month are being factored.  If you are only receiving an inquiry or two from past clients a year, how can this be?

A part of the reason is “scraping,” which is an industry term that refers to searching court records for annuitants.  With every factoring transaction, there is a corresponding court record in the public domain that has all the particulars of the case.  The factoring companies then use sophisticated search engine tools to find these cases and locate the annuitant.  They then bombard them with solicitations to sell any remaining payments.  We’re not talking about junk mail like you get from mortgage companies promising to lower your payments, but incessant phone calls and even cases of sales associates arriving at the annuitant’s doorstep with contracts in hand.  To come out on top in this game you have to be aggressive and persistent.  Each new case is like a gazelle carcass on the Serengeti with hyenas circling.  The aggressive eat while the timid go hungry.

We’ve always encouraged our clients to add their phone numbers to the Federal “Do Not Call” registry but recently discovered from a competitor that the list is ignored by scrapers.  I was told that annuitants are harassed so frequently that they do not write down who is calling and from where so they will never be able to recognize repeat offenders.  Additionally, most of these repetitive callers have several different company names that they use.  These companies, some who exclusively scrape, all attend NASP meetings and, in fact, some of the worst offenders are longtime members of NASP and are serving or have served as president.

At Bentzen Financial, we do not scrape court records, nor do we actively solicit past clients into repeat transactions.  To the contrary, we always warn clients that these hyenas will be calling and give them suggestions on ways to make them stop.

Considering the entire buzz around a new bank-funded structured settlement loan and all the subsequent questions I have gotten about it, I thought it appropriate to give this product an initial review even though I don’t yet have an actual contract to examine.  So far, what stood out to me most in the bank’s promotional material was the great lengths they went to differentiate themselves from conventional factoring companies.  They really go all out in selling their product as a bank loan and not a factoring transaction, making it appear that getting liquidity out of a structured settlement is as simple as applying for a car loan.  They even suggest that you promote this product to your attorney clients as the solution to their concerns about factoring. So is this product as innovative and revolutionary as they claim or mostly semantics and marketing spin?  To start, I have a hard time believing that this loan process is as simple and straightforward as they suggest.   Foremost is the fact that a structured settlement annuity cannot be used as collateral for a loan.  That begs the question as to whether a five-star rated bank would provide large, unsecured loans to annuitants?   That’s highly unlikely, especially in light of the fact that most annuitants come to us with significant debts and less-than-stellar credit.  These two statements in their advertisement reveal the bigger picture to me:

  • “Costs to your client include: Bank costs for establishing the loan including attorney fees and court costs.”
  • “Loan payments made directly by the insurance carrier so your client doesn’t have to worry about making the payments”

Based on my knowledge of factoring, I immediately thought: if it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck.  Here’s why:

  1. They are charging the client for attorney’s fees and court costs.  Why is this required for a simple loan?   These are costs associated with every factoring transaction.
  2. The only way an insurance company will redirect payments to another payee (the bank in this case) is with a court order, just like that required for all factoring transactions.
  3. To recover principal and interest for the term of the loan, the bank then collects the monthly factored payments from the insurer directly and not from the annuitant, just like a factoring transaction.

This leads me to believe that what they’re actually doing is factoring the annuitant’s payments as both collateral and payment for a so-called loan.  How is that a radical departure from the status quo?  To me, it all sounds like just another duck… perhaps a slightly different species of duck, but still a duck nonetheless.

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The promotional material for this new structured settlement loan product left me with several nagging questions and concerns, as follows:

  • How much of the structured settlement does the annuitant have to factor as collateral for the loan?  Perhaps all of it?  We encourage partial liquidations to preserve as much of the annuity as possible.
  • If they are factoring the entire annuity as collateral, what’s to stop the bank from marketing that client for more loans, lines of credit or other banking products afterwards?
  • This bank is also engaged in the structured settlement trust business.  Many trust clients also have structured settlements.  What’s to stop this bank from marketing the trust clients for structured settlement loans?
  • Does the annuitant have to pay the bank origination fees up front?  Attorney and court costs add up to thousands, not to mention other bank fees.  We always incorporate these costs into our fixed transaction.
  • What happens if the transaction is denied?  Does the annuitant still owe the origination fee to the bank?  Denials occasionally happen at the whim of a judge and we absorb these losses as a cost of doing business.
  • Simple loans, like those for a car, tend to have short durations. Is there a maximum annuity term that the bank will lend against?  We don’t have one.
  • Will the bank accept deferred annuities and lump sums like us?  If so, and this is a simple loan, how can the insurance company be paying the monthly principal and interest owed on the loan, as stated in the advertisement?
  • Can annuitants get their funds within a couple days like a car loan or do they have to wait weeks for court approval like every other factoring transaction?
  • If the annuitants do have to wait weeks to get funded, will the bank provide unsecured advances in the interim like we often do?
  • What if the annuitant dies or enters bankruptcy during the loan term?  How will that affect the structured settlement that is used as collateral?
  • The traditional factoring transfer process is tried and true for over a decade.  How will the bank address the new loan provision in the court pleadings?   If something goes wrong, it can be difficult to have an order amended down the road.

I will update this post with a detailed analysis after I review an actual contract document.  Stay tuned.

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If you look past all the marketing hype, I believe that you will also see that this new structured settlement loan product appears to be little more than a modified factoring transaction.  I suspect that the main feature that differentiates this so-called loan from the status quo is some provision in the transfer agreement that allows the annuitant to repay the bank prior to maturity, restoring the remaining portion of the factored structured settlement used as collateral and payment for the loan.  An early repayment option sounds compelling and revolutionary; however, experience tells me it’s all just window dressing, whereby, the reality is that very few to none will exercise this option.  I say this because in my twelve years as a factoring broker, I have worked with hundreds of annuitants and not done a single transaction with one annuitant that I believe would have had the will, resources or ability to repay one of these loans.    

Another concern is that they glossed over the fact that this transaction will probably be an expensive and time consuming undertaking, even if it can technically be called a loan.  Legal fees, insurer transfer fees, and court costs add up to thousands, not to mention any additional bank origination fees.  That’s why I always counsel credit worthy annuitants with more liquid collateral to first look to conventional funding sources for short term loans due to the transaction cost savings.  That leaves those with few other means to consider these new factoring-backed loans as a viable liquidity option.  The irony is that these same annuitants likely have little ability to repay any loans taken out on their structured settlements. It follows that all these loans become nothing more than standard factoring transactions if nobody exercises the early payment option and the factored annuity covers the loan obligations until maturity.

The reality is that there is no real disadvantage to a traditional factoring transaction when done correctly by an experienced and reputable firm.  The vast majority of our clients are just trying to keep their heads above water and I just can’t see any being interested in more loan debt.  Our policy is to work with annuitants to gain just enough liquidity from their structured settlements to pay their obligations and move forward, not lending them money that they likely can’t repay.  

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