Lead Paint Victims, Court Scraping, & the “Netherworld” of Factoring Companies
Aug 26, 2015

It’s a sad day when victims of lead paint exposure are targeted for sales.  No matter the justification for giving these victims money, especially when most are cognitively impaired, a person really has to suspend good judgment to think, “Sure, Joe can’t read or write well, and doesn’t have a driver’s license… but hey, he wants a car and he has a structured settlement… who am I to say no?  Big money!”

The average annuitant has a hard enough time making ends meet when faced with the arduous task of dealing with the constant barrage of sales solicitations.  The flagrant violations of the Telephone Consumer Protection Act (TCPA), meant to prevent this sort of thing from happening, add insult to eventual injury when an annuitant finally breaks down and signs on the dotted line.  That is to say, they’ve signed a bad deal that’s probably ill advised to begin with.  Why?  To pad the line of an aggressive factoring company.

Factoring a structured settlement has a time and place.  For some, it’s a genuinely good option, especially if the structured payment stream isn’t the sole income of a person or family.  For others, however, cashing out a structured settlement is not just ill advised – but disastrous.  The Washington Post article exemplifies the latter, and we’re sick to our stomachs having read it.  Nothing like that should ever happen in this industry.

How can business go on when actors like this are effectively defecating on our industry?  Take the reason for why Access Funding allegedly targets lead paint victims, in particular: because they’re easy to find.  Court scraping 101 at its worst: a few easy keystrokes in a court search and you’ve got yourself a potential treasure trove of money.  The best part?  The annuitants are living hard lives, aren’t usually well educated, and are susceptible to a con job.  This shameful strategy for ‘easy’ money should not exist, but with the ease of court scraping software at hand – what is there to do?  At this point it’s worth noting that the perusal of court records for sales purposes is almost universally prohibited – but it happens all the time anyway.  This is the ethical dilemma facing our industry.

There are two solutions, and only one with much chance of success at this point in time:

1.)    Software/databases used for court sleuthing purposes need to locate, track, and punish violators of terms of use (no sleuthing for sales).

2.)    Legally imposed censorship of personal identification information in court documents to prevent sales sleuthing to begin with.

The purpose of being able to search through court records is explicitly for non-commercial research and personal reference.  Under no circumstances are court records permitted to be used for profit-bearing purposes.  Needless to say, few actually follow this rule; there’s just far too much profit in ignoring this rule.

It’s time to face facts: no one cares to follow rules that inconvenience profit making.  The industry clearly has no interest in self-policing; there is only one option left: government intervention and regulation.  It’s a dirty suggestion and no one likes the idea… but if it saves the industry from itself, and annuitants along with it… then it’s worth it.

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Myth: You will lose money by factoring, so take out a loan instead. Reality: Whether you factor annuity payments or take a loan, there is a cost to obtaining money, but many people believe that factoring involves “losing” money. This misconception comes from comparing the cumulative future payments with the present value lump sum payment offered by the factoring company. For instance, if an annuitant has 200 monthly payments of $1,000 , the cumulative payments would be $200,000 . In this case, a factoring transaction might net the annuitant approximately $100,000 or 50% of the cumulative total. This is not “losing” money, it is the result of obtaining future payments early at a 10% discount rate. If instead the annuitant took a $100,000 loan at 10% and paid it back over 200 months , the total cost including interest would also be $200,000 (assuming the annuitant had sufficient credit to get the loan). A loan requires credit, collateral, origination fees, and carries the risk of late fees and foreclosure if payments are not made when due. In the factoring scenario, the annuitant would need to wait 200 months (almost 17 years) to collect the full $200,000 , during which time the equivalent present value of the payments is continually diminishing due to inflation. A dollar will not have the same purchasing power in 17 years as it has today.

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The foundation of abuse in the factoring industry is cracking! South Carolina’s supreme court as well as its senate are readying for reform in response to the most recent expose (see here , here and here ). Both the court and the legislature are intent on fixing a clearly broken system. Despite the natural inclination to copy what other states have done (MN, GA, LA, etc.), whose reforms ironically ended up benefiting the worst abusers of the industry, we suggest a simpler reform that will solve the absolute majority of abuse: Keep the personal identification information (PII) protected for all structured settlement recipients from here on out. This way, the companies guilty of these abuses won’t be able to find new victims. More: make such protection retroactive. This is already standard practice for minors receiving structures, and it works, at least until they turn 18. Extending this protection would do wonders for structure health. What predatory companies can’t find, they can’t chase. Keep people safe and their identification information secure. Advocate for smart reforms.

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Cam Mears on Factoring with Dan Finn

22 Nov, 2021
We're thrilled to see that others are contributing to the factoring expose by the Minnesota Star Tribune . This time, structured settlement consultant Dan Finn. You can read his take on factoring and the Star article here . What's more, you can see Cam Mears delve into the details on factoring in his one-on-one interview with Finn here on YouTube! Factoring doesn't have to be the boogeyman. Make sure it's done right by referring only to those you trust to offer proper consultation.
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