Structured Settlements Secondary Market and Factoring 2

Question 1

What is the typical legal structure used by factoring companies to resell purchased structured settlement payment rights to investors?

Accepted Answer

Securitization — pooling payment rights into asset-backed securities sold to institutional investors

Answer

Direct sale of the annuity contract

Answer

A limited partnership interests offering to retail investors

Answer

A mutual fund investing in structured settlement annuities

Question 2

What is the 'face value' of a structured settlement payment stream in factoring transactions?

Accepted Answer

The sum of all future payments without any discounting

Answer

The annuity's surrender value

Answer

The lump sum offered by the factoring company

Answer

The insurance company's reserve for future payments

Question 3

Why is the effective discount rate in a factoring transaction often higher than the nominal rate disclosed?

Accepted Answer

Because fees, closing costs, and the timing of payment receipts mean the true cost to the payee exceeds the nominal discount rate

Answer

Because the IRS adds a surcharge to the disclosed rate

Answer

Because the court adds interest to the factoring company's rate

Answer

Because the annuity issuer charges transfer fees that increase the effective rate

Question 4

Can a factoring company acquire structured settlement payment rights without a transfer agreement signed by the payee?

Accepted Answer

No — a voluntary transfer agreement signed by the payee is a prerequisite to any court approval process under SSPAs

Answer

Yes, if the court approves the transfer independently

Answer

Yes, if the annuity issuer consents

Answer

Yes, if the transaction is below $10,000

Question 5

What recourse does a structured settlement payee have if a factoring company violates SSPA disclosure requirements?

Accepted Answer

The payee may rescind the transfer agreement and potentially seek damages under state consumer protection laws

Answer

The payee can only seek damages in federal court

Answer

The payee must pay back any advance received

Answer

No recourse is available — signed agreements are final

Question 6

What is a 'partial transfer' in structured settlement factoring?

Accepted Answer

A transaction in which the payee sells only some of the future payments (e.g., every other payment) while retaining others

Answer

A transfer that has been partially approved by the court

Answer

A transfer involving only part of the payments from one of multiple annuities

Answer

A factoring transaction in which two buyers share the purchase