Sell Structured Settlement Finding Buyers and Pricing 1 — Questions and Answers
Question 1: Which of the following is the most reliable way for a payee to find legitimate structured settlement buyers?
- Responding to unsolicited phone calls offering to buy settlements
- Researching NASP (National Association of Settlement Purchasers) member companies and comparing quotes (Correct answer)
- Accepting the first offer from any online advertisement
- Asking the annuity issuer to recommend a buyer
Correct answer: Researching NASP (National Association of Settlement Purchasers) member companies and comparing quotes
NASP member companies have agreed to ethical standards; researching and comparing multiple NASP members helps payees identify reputable buyers and competitive offers.
Question 2: What organization represents structured settlement purchasing companies in the US?
- NSSTA (National Structured Settlements Trade Association)
- NASP (National Association of Settlement Purchasers) (Correct answer)
- FINRA
- NAIC (National Association of Insurance Commissioners)
Correct answer: NASP (National Association of Settlement Purchasers)
NASP is the primary trade association for companies that purchase structured settlement payment rights, advocating for industry standards and consumer protection.
Question 3: What is the standard way a factoring company calculates its offer to a structured settlement payee?
- By averaging competitor offers
- By discounting the future payment stream to a present value using the company's chosen discount rate (Correct answer)
- By using the annuity's original purchase price as a baseline
- By referencing published IRS tables for annuity valuations
Correct answer: By discounting the future payment stream to a present value using the company's chosen discount rate
Factoring companies apply a proprietary discount rate to each future payment to calculate a present value, which becomes the gross offer — minus fees and costs to arrive at the net offer.
Question 4: What does a 'bid sheet' from a factoring company typically include?
- Only the final lump sum to be paid
- The proposed lump sum, the discount rate applied, fees, and a breakdown of payments being purchased (Correct answer)
- The annuity issuer's rating and financial strength
- A list of court dates for the approval hearing
Correct answer: The proposed lump sum, the discount rate applied, fees, and a breakdown of payments being purchased
A bid sheet (or quote sheet) breaks down the offer — showing which payments are included, the discount rate, all fees and closing costs, and the net cash to be received by the payee.
Question 5: Which of the following is a major red flag indicating a potentially predatory structured settlement buyer?
- The company is a NASP member and licensed in your state
- The buyer discourages the payee from seeking independent legal or financial advice (Correct answer)
- The buyer provides a written disclosure statement 3 days before signing
- The buyer files a petition with the court for approval
Correct answer: The buyer discourages the payee from seeking independent legal or financial advice
Legitimate factoring companies encourage independent advice; a buyer who pressures the payee not to consult an attorney or advisor is trying to prevent informed decision-making.
Question 6: What factor most directly allows a payee to increase the lump sum offered by factoring companies?
- Having a longer remaining life expectancy
- Creating competitive pressure by obtaining multiple written quotes (Correct answer)
- Choosing a larger factoring company with more assets
- Selling the payments quickly without delay
Correct answer: Creating competitive pressure by obtaining multiple written quotes
Multiple competing quotes create leverage — factoring companies may lower their discount rates to win the business, directly increasing the net lump sum the payee receives.
Sell Structured Settlement Finding Buyers and Pricing 1
Which of the following is the most reliable way for a payee to find legitimate structured settlement buyers?