Is It Really a Loan?
August 27, 2014

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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October 22, 2026
Back in May, John Oliver closed his segment by proposing that a one-time independent guardian or advisor review every sale before it happens, and a handful of states already appoint ad litems to do something close to it. On paper it's hard to argue with: a court-appointed advisor canvasses the market and makes sure the annuitant walks away with the highest offer on the table. We'd love to tell you it works. In practice, it too often produces the opposite of what it promises. Here's what actually happens when an ad litem "shops the market." The ad litem, who as a rule knows the courtroom far better than they know factoring or finance, solicits competing bids and takes the best one. But the market they think they're canvassing isn't the market that exists. Big players, such as those with a family of companies, operate under enough names that a fistful of "competing" offers can all trace back to the same firm — a point we raised about industry aliases a decade ago, and one a Kiplinger column echoed this past June. The ad litem believes they've run a wide, competitive canvass. Often, they've just collected several quotes from the same house. It gets worse where the competition is real. In the few jurisdictions that mandate ad litems, a dominant firm, and one in particular, can afford to bid below its own cost — not to serve the annuitant, but to win the deal and bleed the legitimate competitors who can't match a rate that loses money. It absorbs those losses on the strength of the notoriously poor deals it writes everywhere ad litems aren't required. Do that long enough and the smaller ethical firms simply leave those markets or leave the business altogether. Once the competition is gone, the "best available rate" is whatever the last firm standing cares to offer, and it’s always the big one with its support cast of companies — which nullifies the entire reason for appointing an ad litem to find the best deal in the first place. The reform meant to guarantee competition ends up quietly strangling it. If that pattern sounds familiar, it should: reforms in this industry have a long habit of ending up as a gift to its biggest players. So no — we don't champion the guardian ad litem. Not because independent advice is a bad idea; it's a fine one. It's because an advisor who canvasses a rigged market and doesn't know the finance well enough to see that it's rigged, isn't the safeguard everyone assumes. The protection that actually works costs nothing and predates all of this: education and a referral. An annuitant should first hear about factoring from the structured-settlement broker who built the annuity, and that broker should refer only to factoring professionals with a clean, ethical record — no court appointment, no cold calls, no counterfeit competition, just a trusted professional pointing the annuitant toward one we'd put our name behind.
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