Finding Buyers and Pricing Flashcards
6 cards from real Sell Structured Settlement practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Finding Buyers and Pricing flashcards as text
What is one way a payee can verify that a factoring company is licensed to operate in their state?
Answer: Check with the state's financial regulatory authority or department of financial institutions
State financial regulatory agencies maintain records of licensed structured settlement purchasing companies — checking directly with the regulator ensures the company is authorized to operate.
A payee receives two offers: Company A offers $42,000 at a 15% discount rate, and Company B offers $40,000 at a 17% discount rate. Which offer should the payee prefer, all else being equal?
Answer: Company A because a lower discount rate means more money and a better deal for the payee
Company A's offer of $42,000 at a 15% discount rate gives the payee $2,000 more cash while also having a lower discount rate, making it clearly the superior offer.
What is 'cherry-picking' in the structured settlement secondary market?
Answer: When a buyer selects only the most near-term or guaranteed payments to purchase, leaving the payee with less valuable future payments
Cherry-picking occurs when factoring companies want to buy only the near-term, guaranteed payments (the most valuable) while leaving the payee with distant, life-contingent, or smaller payments.
Why might a payee choose to sell only a portion of their structured settlement payments instead of the entire stream?
Answer: To preserve some long-term income while accessing immediate cash for a specific need
A partial sale allows the payee to address a specific financial need while retaining future payments as ongoing income, balancing immediate cash needs with long-term financial security.
Which of the following is an example of a legitimate reason courts typically accept for approving a structured settlement transfer?
Answer: Paying for necessary home repairs, medical procedures, or clearing high-interest consumer debt
Courts consistently approve transfers that address genuine necessity — housing, health, or debt relief — where the sale proceeds improve the payee's real financial position.
What is the best way for a payee to protect themselves from predatory structured settlement purchasing practices?
Answer: Get independent legal advice, compare multiple quotes, and ensure the full required disclosures are provided
Independent advice, competitive bidding, and careful review of all required disclosures together form the strongest defense against exploitative terms in a structured settlement sale.