JG Wentworth, in a press release today claimed that this filing would not impact customers completing a transaction with the company.

Yes, JG Wentworth is still airing their “cash now” commercials and will continue airing them due to the financial relief  this filing has provided the company.

Please feel free to comment below if you have any questions on this matter.

Here are a few of the blog comments that Settlement Quotes has received in the past few months:

“JASON JAMERSON- I began the sell of an annuity payment with Stone Street Capital on Aug. 5th 2008 because they promised to meet my simple demands that I be funded by NOV.15 2008.Well it is Feb.18 2009 and I have received a very small advance they are calling a loan and more excuses about the economy being the reason for me not being funded yet.They are pulling excuses from a hat telling asking if my name is my real name and is it legal and so on when they have all documentations ,court approval cooperation the insurance company,and all notarized so-called legal papers obtained by them(Stone Street Capital)provide to be necessary to be funded by them. Stone Street Capital,INC. has breached everything they had told me in early AUGUST OF 2008 to make me decide to go with them to purchase a future annuity payment of mine to receive a lump sum within 30 days ,my reason for selling the payment early to simply get my license back pay some collections and open a business and purchase equipment .Since August they have done nothing advance my funds and even just recently fired the person I Have been speaking to for the last seven months.”

“Mike (regarding Stone Street post)- I’ve been waiting two months since we went to court to recieve my cash and I started this process back in October with them because they promised fast result.”

“Lynda Reilly- I started this contract with Seneca One in August 29 2008. I was quoted several dollar amounts which were nothing of the dollar amounts that the phone sales person first quoted me. After paperwork was started the quote went from a large dollar amount down to a very low dollar amount. They said, at first they would be getting the money from my former investors at the time of the transaction. So when the court date was over on 10/10/08, they told me they would not get the money from my investors until 2010. Also at this time they would not advance me the dollar amount on the contract, they did advance me small dollar amounts at my request. But they said they were waiting for my former investor to sign papers. I called my former investors and they said, they had signed off the agreement in Oct 14,2008 when I went back to my rep. he told me that there was nothing down as of November the 19th 2008. With follow up to my original investor they couldn’t understand why I did not have the money yet, this was in December 20th 2008. I was told by Seneca One that the reason for the delay was because of the stock market, and several more reasons. I have not receive the full dollar amount as of yet it is Feb.-05 2009, they did how ever advance me money to cover my bills. But the money I was suppose to be getting should have been in a bank with interest I would receive. They final sent me the finalized paperwork to sign off with the rest of the dollar amount without interest. I feel I have been treated unfairly by this company at my own expense. I tried one more time today February 05,2009, to retrieve my money that they did not even agree to advance me and they have not even called or email me when the money would be with in my procession, they keep on avoiding me and telling me the stock market is down. Which as a consumer it makes me think that they have no money to fund me at is time and I should have been directed to another company to sell my investment. I did get finally a letter from Structured Asset Funding L.L.C, which is going to fund the money. But this process has added another 30 days already. Which was on January 7th 2009, I will never go threw this company again and please advice others not too either.”

“Wayne Allen- I am in the process of trying to receive the funds promised me by J.G.Wentworth. It had now been 30 days since the judge signed the paperwork. After many, many, many phone calls to different people and many, many lies, they will no longer take my phone calls and I STILL have no answer or monies that I desperately am in need of! Thanks J.G. Wentworth. I will tell EVERYONE that this is the worst company I have ever dealt with. Especially for the amount of monies they are receiving!”

Some of these companies may be experiencing pressure from their investors which has most likely caused rates to increase. A rate increase usually means that they cannot fund your transaction at the agreed upon price. This leaves you with a few options.

1. Cancel the transaction.
2. Continue to contact the structured settlement factoring company until your transaction is paid in full.
3. Find out how much they would be willing to pay now for your transaction.
4. Contact an attorney to find other legal options.

It is important to remember that you cannot enter into a structured settlement factoring transaction with another company until you have received a cancellation letter from the original structured settlement factoring company.

Please contact us if you have any further questions on this matter.

In Stone Street’s defense, this author understands that receiving your money in 6 weeks compared to years from now can be construed as “cash now,” but how does Stone Street defend allegations of false advertising? Technically speaking, an annuitant cannot receive “cash now” when involved in a structured settlement factoring transaction. These types of transactions need to be court approved which takes an average of 6-8 weeks and in some states longer.

The primary market’s main concern of the secondary market is the advertising practices that some companies in the secondary market continue to use. If companies in the secondary market can clean up some of these problems, the primary market may look upon the secondary market with a brighter light.

In the article published by Mr. Green, he explained the concept of an annuity’s present value. I would like to provide a few examples on the concept.

“In order to place a present value on an annuity’s payments, a discount rate must be applied to account for the decreased value of those future dollars. The higher the rate, the lower the present value. The lower the rate, the higher the present value.”

Example A: Discount Rate= 20% and Present Value= $40,000

Example B: Discount Rate= 10% and Present Value= $100,000

As you can see, the higher the rate, the lower the present value, thus the lower the rate, the higher the present value of the annuity. Feel free to use our present value calculator below to calculate the present value of your annuity.

Created by- Settlement Quotes, LLC

IRS Discount Rate

The IRS discount rate is present in documents received by the annuitant when transferring the rights to their structured settlement payments. This rate is artificially low and confuses the annuitant because the annuitant compares the IRS rate to the rate offered by the structured settlement factoring company purchasing the rights to the payments.

Every structured settlement factoring company “borrows” money in order to purchase the rights to an annuity. There is no way for any company to borrow money at a 4% rate to match the rate listed by the IRS. When an annuitant views the effective discount rate associated with the transaction and then views the IRS rate, many annuitants question the overall validity of the transaction.

The IRS’s rate of 4.2% is artificially low to increase the present value, which in turn will increase taxable revenue. With this said, what is the rate to be used by a state’s Guarantee Association to calculate the present value of an annuity if an insurance company defaults? Currently there is no listed rate by any Guarantee Association.

High Discount Rates

There are certain transactions where the discount rate of a transfer can exceed 20%. This does not necessarily mean that the annuitant is receiving a “bad” deal. The circumstances that create a discount rate which exceed 20% are usually caused by one of two reasons:

1. The payments being transferred are in the very near future, usually within a year or two.
2. The present value of the annuity is near or under $10,000.

Transactions that exceed the 20% threshold will become more prevalent in the near future due to the increase in inflation caused by the downturn in the economy. I believe that if a judge thinks an annuitant can receive a better deal by going elsewhere, the judge has an obligation to require the annuitant to obtain quotes from other companies before approving the transaction. It should not be a judge’s responsibility to know the overhead of a company when approving a transaction. If a different company can complete the transaction at a cheaper rate, then they should have the opportunity to provide the annuitant with the increased funds.

Created by- Settlement Quotes, LLC

Within a period of 12 hours, JG Wentworth’s rating went from unsatisfactory to satisfactory. J.G Wentworth’s BBB profile was under review for a three week period throughout September. Once their profile came back online on October 3rd, 2008 their profile was stripped of the satisfactory rating.

This author has a call into Maria Sivalac, JG Wentworth’s BBB representative who stated to Richard M. Connelly, General Counsel of J.G. Wentworth that it was a mistake that their Better Business Bureau profile was without the satisfactory rating.

In my opinion it is unusual that an individual at the Better Business Bureau removed this rating after weeks of review but within about 12 hours after our last Blog entry the rating returns to “satisfactory” with no explanation. Persons who would consider doing business with JG Wentworth may want to enquire further with the Better Business Bureau.

“To have a “satisfactory BBB Rating” with BBB, a business must be in business for at least 12 months, properly and promptly address matters referred to it by BBB, and be free from an unusual volume or pattern of complaints and law enforcement action involving its marketplace conduct. In addition, BBB must have a clear understanding of the business and no concerns about its industry.”

This author believes that JG Wentworth has had it’s satisfactory rating removed due to a high number of complaints over the last few years.

Here is a picture of JG Wentworth’s satisfactory rating in early September 2008.

Here is the updated file without the satisfactory rating.

There may be a correlation between JG Wentworth canceling cases due to lack of funding and an increase in complaints over the last few weeks.  Hopefully this company is learning their lesson and will treat annuitants with care and not as a dollar sign.

Insurance Companies Purchasing Their Own Product

There are currently two issuers who factor structured settlements- Allstate and Clearscape Funding (Symetra). The problem with these two companies is that they have high discount rates starting at 10- 12%, they take forever to complete a transaction, and it is a conflict of interest to purchase the settlement on the back end and make another profit off of the annuitant.

An annuitant can receive a better rate anywhere.

Reasons an Annuitant Sells the Rights to Their Payments

Over the past few months Settlement Quotes has been keeping track of the reasons our clients have sold the rights to their payments. With the consent of these individuals we will be publishing the list to show how 99% of these individuals had no choice but to sell their payment rights because of their particular financial circumstances.

Rate Increases

Rates are increasing throughout the settlement funding industry because of the inevitable inflation increase. It will be no surprise to this author to see rates increase up and over 10% throughout the next few years. Structured settlement factoring transactions are priced on the basis that a dollar today will not have the same buying power as it will tomorrow.

The $700 billion bailout along with the increasing deficit is just the start to the reasons why inflation could spin out of control over the next few years. If inflation increases then so do prices for everything else, therefore a $1.00 today will buy even less 5 years from now.

Guaranteed Payments- Maybe Not

Many individuals state that these annuities are guaranteed payments and risk free for investors. This may be to an extent for the tort victim, but not so for the secondary market. As some of you know, the guarantee committee met with a few members of the secondary market in August to decide if they are going to guarantee the payments when purchased. To this author’s knowledge no decision has been made.

This has a huge impact on how these annuities are priced. If a company like AIG were to go under an investor would be out $10’s of millions. Even if the guarantee committee decides to guarantee a transaction per the state requirement, the investor would still lose money on the transactions where the present value was calculated to be over the state maximum guarantee level, usually $100,000.

The situation outlined above was very close to reality a few weeks ago and many investors would have lost millions.

1. Can a structured settlement recipient choose to forgo getting Court approval? If so, what are the consequences?
2. How does the factoring company “factor in” the 40% excise penalty (set forth in IRC 5891) in the factoring quote to the structured settlement recipient?

The answer to this is quite simple. An annuitant cannot forgo the court approval process in a structured settlement factoring transaction. Here is why:

IRC 5891 states the following:

“There is hereby imposed on any person who acquires directly or indirectly structured settlement payment rights in a structured settlement factoring transaction a tax equal to 40 percent of the factoring discount as determined under subsection (c)(4) with respect to such factoring transaction.”

Reason an annuitant cannot sell a structured settlement without court approval:

Internal Revenue Code 5891 can be misunderstood because IRC 5891 is a federal tax provision, under constitutional law the U.S. Government cannot legislate in the area of insurance law.  The states legislate in the area of insurance law.  The state transfer laws must be adhered to without exception so transfers cannot be completed (it is illegal to do so) without court order.   However if the state law is not adhered to, then not only is the transaction illegal, there is a 40% excise tax due under federal law.

If an annuitant could forgo the court approval process in a structured settlement factoring transaction and were to face a 40% excise tax penalty, in some cases the 40% penalty could exceed the purchase price. The reason for this is because the excise tax is on the future value and not on the present value (purchase price).

Most structured settlement annuities qualify for tax free treatment under section 130 of the Internal Revenue Code. The U.S Governement has taken several steps to protect tort victims and other parties from unfair taxes that resulted from personal injury settlements.

Section 104(a)(2) of the Internal Revenue Code states that damages (money) received from personal injury settlements and sickness should not be considered as income and therefor should not be subject to tax.

The U.S. Government passed Section 5891 of the Internal Revenue Code in 2002 which protects annuitants in the sale of their structured settlement payments. Section 5891 requires that the sale of structured settlement payments be approved by a judge in accordance to the state legislation and statute. This model act was created to make sure that every structured settlement transfer is in the best interest of the annuitant and dependents of the annuitant.

The money received from the transfer of structured settlement payments is tax free 99% of the time. If your current structured settlement is tax free, and you sold the rights to those payments, the lump sum you would received would be tax free.

Annuitants sell the rights to their payments for a multitude of reasons, most caused by a financial situation such as debt. Once a lump sum of money is received for selling their structured settlement, the last thing these individuals need is to be placed in the same exact position a few years later. If this situation were to occur again, the annuitant will either have to sell more payments or may have to file bankruptcy.

The purpose of selling a structured settlement is to eliminate or solve the financial dilemma the annuitant was presented with in the first place, but the lump sum should also provide some sort of security to enact a plan that will protect the individual from financial difficulties in the near future. Matching the financial strength of a structured settlement annuity is near impossible and all options should be investigated before selling the annuity away.