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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