Structured Settlements & Factoring Companies: Last Week Tonight with John Oliver (HBO)

Introduction to Structured Settlements and Factoring Companies

• The process of deciding what to cover in a story can be prompted by various factors, including urgent interest, ubiquity, or a combination of both, and this particular story started with the question of what the deal is with structured settlements and factoring companies like JG Wentworth 10s.
• JG Wentworth ads are extremely common and have become a pop culture staple, with their catchy song being featured in numerous styles and genres, making it difficult to miss or forget 2m6s.
• Structured settlements are generally awarded to individuals who have suffered a physical injury or have been affected by a wrongful action, and the settlement money can be structured into increments, often monthly with periodic lump sums, providing income tax-free support for the rest of the individual's life 4m37s.
• Personal finance experts, such as Susie Orman, endorse structured settlements, citing their potential to provide long-term financial support, and many people receive structured settlements, with estimates suggesting around 750,000 individuals in the US have them 6m15s.
• However, some recipients may need or want an advance on their settlement money, which can be challenging due to the structured nature of the payments, and this is where companies like JG Wentworth come in, buying the rights to future payments in exchange for a lump sum, but often taking a significant cut, with some analysis showing they can keep up to 60% of the money 8m30s.

The Business Model and Market of Factoring Companies

• The business model of factoring companies like JG Wentworth is built around getting people to sell their settlements for a fraction of their value, raising concerns about the fairness and transparency of these transactions 10m45s.
• The factoring industry is a large market where companies buy an estimated $1 billion worth of payments each year, with many individuals who do business with these companies ending up deeply regretting it 10s.
• A man who was in a car wreck in 8th grade and suffered severe brain injuries was awarded a structured settlement totaling up to $99,000, but he sold half of it to JG Wentworth, which he now regrets 42s.
• JG Wentworth was one of the first big companies to enter the factoring industry, founded in the 1990s, and has since become the largest purchaser of structured settlement payments in the US, with several subsidiaries 2m6s.
• The factoring industry has inspired many copycat companies, including 123 Lumpsum, which has tried to imitate JG Wentworth's success with its own jingle, but with mixed results 2m6s.

Marketing and Public Perception of Factoring Companies

• Factoring companies often present themselves as performing a public service, lending people assistance to get around a system that is too inflexible for their needs, but their ads can be condescending and fail to clearly explain the potential costs of their services 4m10s.
• Many individuals with structured settlements have permanent disabilities from the incidents that led to the settlements, which can affect them physically, cognitively, behaviorally, and emotionally, making it difficult for them to fully understand the complex transactions involved in selling their settlements 6m20s.
• The factoring industry has been the subject of in-depth reporting, including a story about Freddy Gray, who was awarded a structured settlement as a result of a lead paint lawsuit and later sold it to a factoring company, highlighting the need for greater awareness and regulation of the industry 8m0s.

Case Studies of Individuals Who Sold Their Settlements

• Crystal Linton, a victim of lead paint poisoning, settled a lawsuit for $630,000, but then sold her payment stream, valued at $48,000, for $66,000 to companies including Stone Street Capital, without fully understanding the contract she was signing 10s.
• Access Funding, another company, allegedly targeted at least 100 injured and intellectually impaired Marylanders, most of whom were victims of lead paint poisoning, and used aggressive sales tactics, including having 22 billboards throughout the city, to persuade them to sell their settlements 2m6s.
• The company's employees worked on a "Virgin Research Project" to identify people who had received lead paint settlements but had not sold them yet, and internal emails show the company's excitement about the potential new client pool, with one executive writing about a "whole generation" of people with lead paint settlements 2m6s.

Aggressive Sales Tactics and Exploitation of Vulnerable Individuals

• The company's sales manual instructed staffers to bombard potential customers with calls, texts, and emails, and to target people who were likely to be worried about money, such as those who responded late at night, and also warned employees to be careful what they put in writing 4m30s.
• The Maryland AG estimates that Access Funding acquired future payments with a total value of $32.6 million, but paid out only $7.5 million, over a period of around 2 years, and the company's aggressive sales tactics have been criticized for taking advantage of vulnerable individuals 6m40s.
• The industry as a whole has been accused of using aggressive sales tactics to create a need for their services, with one JG Wentworth employee discussing the use of cold calling to create a sense of urgency and need among potential prospects 8m50s.
• Companies that purchase structured settlements often employ researchers to find cases with large settlements, and they may start contacting individuals as soon as they turn 18, using tactics such as sending checks and prepaid Visa gift cards to entice them to sell their payments 10s.

Legal and Regulatory Issues in the Factoring Industry

• These companies can be aggressive in their marketing, with some sales agents paying people to stay on the line, and others wining and dining potential customers at fancy restaurants and clubs, or even providing them with marijuana and taking them to strip clubs 2m6s.
• While every state in DC has a structured settlement protection act that requires court approval of these purchases, the system can be easily gamed, and the requirement of court approval has largely failed to prevent exploitation 4m30s.
• The court approval process is often flawed, with only three people present for the hearing: the judge, the person selling the payments, and a lawyer for the company buying them, which can lead to transactions being approved in a very short time, sometimes just 2 or 3 minutes 6m20s.
• Some judges may ask about the details of the deal, but if they don't, the factoring company's lawyer is not incentivized to volunteer information about major drawbacks to the deal, and many judges feel it's not their place to prevent a sale, even if they think it's a bad idea 8m40s.
• An investigation in Minnesota found that hearings took an average of seven minutes to finish, which is clearly not long enough to thoroughly consider the transaction, and some judges have approved transactions after very brief testimony 10m0s.
• Some judges have expressed concerns about the deals made by factoring companies, with one judge stating that they have never felt good about any of these cases, as people in financially desperate situations do not fully understand what they are doing and how much money they are actually losing 10s.
• Certain companies have been accused of actively coaching or pressuring sellers on how to meet the best interest standard, such as Vintage Equity, which is being sued by a woman who suffered lead poisoning as a child, claiming that the company coached her on how to answer the court's questions 2m6s.
• Some companies engage in forum shopping, where they seek out friendly judges known to approve deals, and may even take cases into courtrooms far from where the sellers live, such as Imperial, which allegedly suggested a New York resident take his case to a lenient judge in Florida 4m30s.

Systemic Flaws in the Court Approval Process

• The industry of structured settlement purchasing has been described as operating like an assembly line, with one attorney submitting at least 594 cases to the same judge in Virginia in just one year, and frequently getting them approved in bulk 6m20s.
• Factoring companies may take advantage of customers by encouraging them to make multiple transactions, with JG Wentworth reporting that their average customer has completed two separate transactions with them, and in some cases, customers have gone to court as many as 13 times to buy payments from one person 8m40s.
• The practice of repeat transactions with factoring companies may not be a sign of happy customers, but rather a sign that their financial condition is deteriorating, as they may need to sell more of their payments to make ends meet 10m50s.

Repeat Transactions and Their Implications

• The individual who commented "I love you" on a JG Wentworth marketing video is a mysterious figure, and their motivations for leaving such a comment are unclear, sparking speculation about their relationship to the company or its representatives 10s.
• Once someone does a transaction with a factoring company like JG Wentworth, they can become a target for other companies, as their information becomes part of public records and mailing lists, making them vulnerable to aggressive marketing and potential exploitation 2m6s.
• The story of Gary Davis, who sold off the majority of his $2.5 million settlement to factoring companies, including JG Wentworth, for roughly 35 cents on the dollar, highlights the potential consequences of dealing with these companies and the need for protection and oversight 4m42s.

Exploitation and Public Awareness

• To address the issues surrounding factoring companies, potential solutions include requiring hearings to take place in the seller's location, curbing aggressive solicitation, and appointing a guardian ad litem or attorney adviser to provide guidance and protection for sellers who may not fully understand the transaction 8m10s.
• Individuals with structured settlements who need cash quickly should be aware of the potential risks and consequences of dealing with factoring companies, and should consider seeking advice and exploring alternative options before making a decision 12m6s.
• Some insurance companies that manage settlements offer a hardship commutation, which may allow individuals to receive upfront cash at a better rate in extenuating circumstances 10s.
• The industry is filled with predators that have slick ads with catchy jingles, but they do not have the best interests of their clients at heart 42s.

Proposed Solutions and Alternatives

• To warn people about the risks of this industry, a mock ad was created to give a more accurate portrayal of the potential dangers and to inoculate individuals against the charms of these companies 1m6s.
• The mock ad features a song and a scenario where a person is taken advantage of by a factoring company, with the goal of getting the jingle stuck in people's heads to remind them of the potential risks 1m30s.
• The ad aims to caution individuals with structured settlements against dealing with factoring companies, which can bleed them of their money, and to remind them that these businesses are only looking out for their own interests 2m6s.