According to published reports, Judge Marvin J. Garbis ruled against David Springer and Sovereign Funding Group’s motion for summary judgment in favor of plaintiff Woodbridge Structured Funding, LLC. (Woodbridge Structured Funding, LLC v Sovereign Funding et al. Civil action No. MJG-11-3421)1
The judge issued a scheduling order requiring all fact discovery be completed by December 31, 2012. Woodbridge’s complaint states that the defendants allegedly utilize unfair competitive practices including trademark infringement, false advertising, libel, defamation and product disparagement.
Previously, structured settlement factoring company and competitor J.G. Wentworth filed a similar lawsuit against Springer and Sovereign Funding accusing the Maryland based company of comparable allegations as the Woodbridge lawsuit. That lawsuit was settled in March 2012.
In February 2012, it was reported that several other companies/individuals were also victims of the alleged SEO tactics of Sovereign Funding and/or its SEO vendors including MetLife, Pacific Life and industry blogger John Darer.
Last week J.G. Wentworth released a press release stating that only 6.6% of structured settlement recipients sell their future payments and that those who do sell commonly cite getting out of debt, purchasing a home or vehicle, unexpected medical bills or continuing their education as reasons for selling. [i]
The press release stated that the study was based upon data collected by J.G. Wentworth over the past 20 years but it did not provide any further details regarding the data collection. For instance, how did they obtain the data; how many people were included in the study and did it include data from other factoring companies besides J.G. Wentworth/PeachTree? In addition, there was no mention as to whether discount rate played a considerable role in the annuitants’ decision to sell.
Back in 2008, J.G. Wentworth published an email survey of 115 respondents who previously sold some or all of the payments to J.G. Wentworth in exchange for a lump sum payment. In this survey, only 18% said they were completely satisfied with their structured settlement. 31% said they didn’t wish that there attorney negotiated a single lump sum payment which means that many of them would have liked a lump sum payment. 60% of the respondents sold their payments to pay bills while less than 5% did so in order to buy a house. 30% stated that they would not sell their payments again. J.G. Wentworth only released 9 questions to an industry blogger and did not reveal the remaining questions, the number of individuals the survey was sent to or any other circumstances that could have skewed the results of the survey.[ii]
In the 2006 The National Structured Settlement Trade Association (NSSTA) survey of attorneys involved in structured settlements (43 telephone surveys) and structured settlement recipients (1275 telephone and Internet surveys) 75% of annuitants were happy with their structured settlement and would recommend one. [iii]
In an AIG survey of 1,000 participants, 65% of respondents said they would elect a lump sum payment, while 26% stated that a lump sum was more appropriate to pay bills.[iv]
So if that many people wanted a lump sum payment then why aren’t they selling? In a review of 100 recent factoring transactions it was revealed that the average discount rate was 13.75% with 7.5% being the lowest and 20% being the highest. So you have to question whether the 93.4% of individuals that chose not to sell would have changed their mind IF the discount rate was closer to the 7.5% rate.
As structured settlement annuity premiums continue to decline (10% from 2010 and 20% from 2008)[v], there will be fewer annuitants available to market. While it seems perfectly logical that this would in fact lower the discount rate, if one looks at current trends it mostly will not occur.
For example, the top three companies spend millions of dollars a year in order to entice annuitants to sell. They’re all well established and are household names. Smaller, lesser known companies cannot afford to go head to head in advertising spends with these industry giants so they tend to focus on non-traditional marketings. While some sellers will seek out these smaller players in order to obtain better rates more often than not a first time seller will call one or two companies they see on TV. Which basically means they are going to receive rates of 13% or higher.
While the decline in annuities does not currently seem to be an issue for J.G. Worthworth/Peachtree who already completed a $244 Million Securitization this year[vi], one has to wonder whether primary market decline and increased competition combined with well informed, tech savvy consumers could adversely affect their business in years to come.
J.G. Wentworth had securitizations worth $469,000,000 in 2011 and $579,000,000 in 2010.[vii] This represents 9.4% and 10% of the annual premiums for those years.
Houston, TX – According to a recent press release by The Structured Settlement Institute, JGWPT Holdings and David Miller, JGWPT’s CEO has been sued in Harris County for allegedly colluding with competing factoring companies to fix prices. 
The lawsuit also claims that J.G. Wentworth, JGWPT, Peachtree and other entities are being sued for entering into agreements with members of trade association The National Association of Settlement Purchasers (NASP) to refrain from soliciting customers of other NASP members* as well as making competitive bids to customers who have signed agreements. 
This lawsuit is part of ongoing litigation between RSL Funding and Peachtree. Each side accuses each other of myriad of improprieties. For example, JGWPT was able to quash RSL Funding’s oral deposition of Fortress Funding’s Michelle Hofkin because they claimed lead counsel and RSL Funding CEO Stewart Feldman purposely scheduled the deposition during a time when Peachtree’s counsel was unavailable. 
Another example of the many accusations include one stated by SSI spokesperson and RSL Funding’s Vice President of Sales and Marketing Paul McHugh, “Another common tactic used by Wentworth is to have its customers ‘shop’ its offers with sister company Peachtree, with the customer not knowing that Peachtree and Wentworth are affiliated and share call data, ensuring that they don’t compete with one another. Customers are lured into believing they are getting a fair deal when the other company doesn’t make a better competitive offer,” explained McHugh. 
It was previously reported that RSL filed a countersuit in March against Peachtree and its entities claiming they allegedly engaged in activities that violate Structured Settlement Protection Acts by bribing and/or enticing potential sellers of structured settlement annuity payments without providing the proper disclosures to the courts. The suit also states that JGWPT removes the contact information of the sellers in order to block competitors. In addition, there are numerous claims about the wrongful seizure of equipment, furnishings and other property by the defendants. 
Peachtree had previously accused RSL of offering its customers more money for their annuities as well as fraud. RSL admitted they did offer their clients more money therefore the trial judge sided with Peachtree thereby preventing RSL from competing in the secondary marketplace. 
An appeals court dissolved and reversed a temporary injunction against the RSL Funding LLC, which had prevented it from competing for Peachtree Settlement Funding’s U.S. clients. The decision was reversed because the ruling was “an unreasonable restraint on trade.” 
RSL claims that Peachtree has continued to try to impose similar over broad injunctions against them. 
Peachtree Financial merged with J.G. Wentworth in July and formed a new holding company called JGWPT. The combined company is based out of Radnor, PA and are owned by JLL Partners in New York. It is estimated that JGWPT controls an estimated 65-80% of the structured settlement factoring market.
RSL Funding is a Houston, TX based purchaser of structured settlements. Its CEO, Stewart Feldman is CEO of Capstone Associated Services, Ltd. and Managing Partner at The Feldman Law Firm LLP.
*Rescue Capital is not a member of any trade organizations including NASP.
Broome County--Justice Ferris D. Lebous denied the petition for court approval of the proposed transfer of structured settlement payments from Michelle Longe to Peachtree Settlement Funding. The justice cites Longe’s long history of petitioning the courts to sell her payments combined with other factors as a reason for denial.
Longe, who received her settlement in 2005 for the wrongful death of her two children, has petitioned the courts on 10 separate occasions, in three different counties, during the past seven years. Some of these petitions were denied for not being in her best interest therefore she would simply make a similar petition in a different county until she got the approval she desired.
The company she used for 8 of the petitions was Settlement Funding of New York, LLC also known as Peachtree Settlement Funding. The other petition was 321 Henderson Receivables Origination, LLC also known as J.G. Wentworth. The current petition was Peachtree Settlement Funding which merged with J.G. Wentworth in July 2011.
In her current petition, Ms. Longe seeks to transfer $70,000 in future payments in exchange for a gross advance amount of $6,000 calculated by applying an annual discount rate of 16.04%. The courts mentioned that similar rates have been deemed unreasonable. The $6,000 gross amount is less than 10% of the future payments of $70,000. The courts believe this was not fair or reasonable.
Ms. Longe was currently unemployed and seeking the money to clothe her children and refurbish her home after a severe flood. In previous applications Ms. Longe sold her payments to start a business, pay off her credit cards, pay bills as well as purchase a home after her previous one was damaged by fire.
Longe is currently awaiting a determination regarding her eligibility for social security disability which she anticipates receiving within three months.
While the court finds that Ms. Longe is in a genuine financial dilemma, her past history demonstrates that cash payments have been “a temporary band aid and have never provided Ms. Longe a long term solution”.
The court believes Longe needs protection for her assets and the allure of fast cash citing the Peachtree proposal’s “ludicrous nature”. The courts believe this transaction is not in her best interest.