I have always abhorred the factoring industry’s scouring of court records for profit.  It’s a perversion of the intent of open court records.  These firms search for past factoring transactions as well as every personal injury suit that may have settled with a structure.  Combined with sophisticated skip-tracing tools, today’s legal databases allow factoring companies to compile massive lists of potential sellers.  It wouldn’t be such an issue if they just sent annoying junk mail like the mortgage and real estate companies who also scour public records.  Instead, they also bombard annuitants with unending phone calls, stalking on social media and even in-person sales visits.  Worse yet, the factoring industry uses these records to purposely target the poor and unsophisticated with endless temptations of “cash now”.  The Baltimore lead paint scandal targeting cognitively challenged inner city annuitants is my case in point.  Then there are the horrific number of cases where court records are used to coerce annuitants into multiple transactions until they are penniless and destitute.

Fifteen years in the factoring business has shown me that most of the egregious behavior can be directly tied to court record scraping.  It’s been an issue since I started in this business in 2002, however, the increased sophistication of online databases in recent years has compounded the scraping problem exponentially.  Today, these searches are cheap, easy and profitable. Curtailing online access could completely change the cost-benefit rationale.  The added work and complexity of using court runners would drive up costs, making scraping far less lucrative.  More importantly, it could drive the worst actors out of the business altogether: the small, scamming, castoffs of the big firms whose entire business model revolves around online record searches combined with unending, coercive sales calls.

Despite the recent reports of factoring industry shenanigans, the search engine companies still seem to turn a blind eye. I can’t say for certain which services the factoring industry uses since I don’t engage in court record scraping, but I can state that Westlaw has been a premier sponsor of NASP’s annual meeting for years. I reviewed the terms of service for some the larger legal search firms and found the following related to commercial use:


 

LexisNexis

You and your Authorized Users (defined below in Section 2.1) are granted a nonexclusive, nontransferable, limited right to access and use for research purposes the Online Services and Materials made available to you. 

Bloomberg

You may not use the Service for any illegal purpose, for the facilitation of the violation of any law or regulation, or in any manner inconsistent with the TOS. You agree to use the Service solely for your own noncommercial use and benefit, and not for resale or other transfer or disposition to, or use by or for the benefit of, any other person or entity. 

Westlaw

you will not use, intentionally or unintentionally any of the content, information, or services on this website in a manner contrary to or in violation of any applicable international, national, federal, state, or local law, rule, or regulation having the force of law.

… you will not reproduce, duplicate, copy, download, store, further transmit, disseminate, transfer, or otherwise exploit this website, or any portion hereof without Thomson Reuters’ prior written consent…


 

The above excerpts seem to suggest that these firms are concerned with the legal, non-commercial and ethical use of their services.  That said, the ones that do allow factoring industry access clearly don’t seem too concerned with enforcement.  Regarding legal use, the reality is that the information scraped from these databases is used to continually violate the Telephone Consumer Protection Act (TCPA) with incessant calls to annuitants.  Our survey of past clients confirmed the never-ending calls and the industry’s refusal to follow the law by not honoring do-not-call requests.  For some, it was so bad that they no longer answered their phones and couple even changed phone numbers, to no avail.  Rampant industry violation of the TCPA is also suggested by an ongoing potential class action suit against a large NASP-affiliated firm for their alleged failure to honor do-not-call requests.  When it comes to derivative works violations, I have also seen several Craigslist ads offering the contact information for thousands of annuitants, all likely gleaned from these court record services.

Court record scraping has been a longstanding issue that seems to be getting worse by the day as more factoring companies become increasingly aggressive and underhanded in their pursuit of unsuspecting annuitants.  Ideally, some regulations restricting the commercial use of court records would be more beneficial to annuitants, but I don’t see that happening.  However, anything that can be done to limit the ease of access can’t hurt.  The question becomes, how does one get these legal database firms to actually enforce their terms of service?

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Have you been approached by a factoring company to sell your client list?  There is no denying that it has value and I assume that they’ll pay handsomely to get their hands on it.  To them, your list is guaranteed fresh meat.  That’s a welcome change to their usual court scraping endeavors, where the status quo involves daily battles with the numerous other hyenas circling the same carcasses.  These similes may seem overly dramatic; however, I’ve been in this business 15 years and naively worked for a couple of these firms early on, so I can definitively state that they’re entirely accurate.  It’s all about the hunt, the kill, and the feasting, not about integrity and compassion.


I can also categorically state that you can’t trust these people regardless of contracts and non-disclosure agreements.  I know first-hand that neither promise or contract mean anything to them.  They are smooth, fast-talking snake oil salesmen who will tell you what you want to hear but rarely deliver on those promises and guarantees.  After all, these sleazy “cash now” hucksters are the ones who routinely deceive, harass and coerce annuitants through every unethical scheme imaginable.  It’s a stretch to believe that they will treat you with any more integrity.

You also need to know that factoring is a small, competitive and downright vindictive industry.  You have no way of controlling how widely your name will be disseminated within the organization.  Partners and employees are forever parting and forming new firms, usually with great animosity.  There is so much bad blood between most firms that they routinely rat each other out to colleagues and industry bloggers.  That’s how I was made aware of one broker who sold a list.  I don’t intend to gossip but it’s only a matter of time until this tidbit of news crosses over to the primary side, if it hasn’t done so already.  

Furthermore, regardless of promises to the contrary, I guarantee that these factoring companies will hound your unwitting clients to the ends of the earth to get a return on their investment.  Your clients will not simply receive harmless mailers extolling the services they offer, but instead, they will be marketed the same way they do annuitants scraped from court records: with incessant phone calls in violation of the Telephone Consumer Protection Act (TCPA), stalking on social media, or worse, sales reps at their front doors.  One big “cash now” firm is currently being sued for alleged TCPA violations, with a pending motion before the court to compel client lists and phone records.  Confidentiality agreements offer little protection in deposition, so what happens if the purchasing company gets sued for TCPA violations, or worse, for the victimization of vulnerable annuitants like the Baltimore lead paint fiasco?  Either way, there’s a chance that your name could become public record if plaintiff’s counsel digs into the firm’s annuitant prospecting methods. 

There is no denying that easy money can be made by capitalizing on the hard work you’ve already done, but if ever there was a time to be cautious of the people you do business with, this is it.  Ultimately, is it worth the risk to your reputation, let alone the harm and aggravation to your clients?

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