The financial service business of purchasing future structured settlement payments has been constantly and historically maligned. Those who make their living in this business have variously been described by detractors as "pawn brokers," "predatory," or even "cockroaches." While this business is not filled with saints, the overwhelming majority of structured settlement purchasers are decent business people performing a needed service. Meanwhile, the vast majority of those who condemn the business simply do not understand it.

Structured settlements, the settlement of a personal injury lawsuit by means of periodic payments over time instead of a lump sum, is a very large business in the US, with in excess of $6 Billion in premiums paid each year. Structured settlement purchasing, or "factoring" (the "F" word of the title) as it is known in the regulating statutes, has been a business since the late ‘80s. In short, factoring is the purchase of a structured settlement recipient’s right to receive some of his future payments. In order to generate a lump sum of cash for a personal or family need, the structured settlement recipient can sell some or all of his future payments for a discounted amount of present cash.

Despite the obvious linkage between the two businesses, if you mention the term "factoring" at a trade group meeting of structured settlement brokers and insurers, a fight may well break out (unless they kick you out so fast that no one notices). With most primary market brokers (those who establish structured settlements), this term has been added to religion and politics as topics not to be discussed in polite conversation or at the dinner table. Dare to suggest that these brokers, insurers and the plaintiff’s lawyers they work with might ****gasp**** actually inform the structured settlement recipients that they have the legal right to sell their future payments, and ****double gasp**** that they might actually be paid a referral fee for doing so, and you’d think you just burned the flag while stomping on some apple pie in the middle of Arlington Cemetery on the 4^th of July.

Many of us in the factoring business have long resisted using this term. Its origins were pejorative in application to this industry, and in the beginning more often then not the term was spit out of a critic’s mouth with a snarl. I will not here dwell on the contentious history between the primary structured settlement business and the secondary, uh, I mean factoring, business. Suffice to say that it was hostile in very public ways, legislative and litigious. That hostility has mostly subsided, but its remnants live on in the use of some terms and certainly in some individual and institutionalized attitudes. For some, use of the term "factoring" still evokes memories of the Big Fight. As with many other terms throughout history that began as pejorative and wound up sticking (such as "Methodist," "Jesuit," or "Yankee" for example), "factoring" is now the name of this industry. Factoring companies stumbling around for a better name for themselves has lead to some problems, notably those ending up in the sights of primary broker and industry commentator John Darer and his "Wall of Shame."

Structured settlement recipients do have the right, established by 46 states and the US Congress, to factor their payments. What could possibly be wrong with informing someone of their rights? If someone identifies a need and then can help provide a solution, what is wrong with compensating that person? Although the definition of a broker does not explicitly include compensation, professionals are generally compensated for what they do.

The established and clear public policy in the United States is that people who elected to structure their personal injury damages should have the option, given certain safeguards and within certain bounds, to use their asset (rights to future payments) as they wish, to factor the payments if they wish. Is financial flexibility bad? To put this in context, should everyone who ever bought shares of stock be forced to hold them forever?

Regarding the safeguards and bounds mentioned above, factoring is the most regulated and scrutinized financial transaction today. Each transaction must be specifically approved by a judge, finding (in most states) that the transaction "is the best interests of the seller, taking into account the welfare and support of any dependants." What if before you bought your next car, a judge you don’t know got to ask you (in open court, in front of God-knows-who) details about your job and finances, why you think you need that car ("is a Corvette really necessary?"), whether another car might be more appropriate for you, and so on. Every structured settlement factoring transaction is subject to that level of scrutiny, and more. "Interested parties," including the insurance company that sends the settlement payments every month, can also appear at the hearing and object to the sale. Why they would care to do so is beyond me, but sometimes they do appear and object.

Nonetheless, this is the state of the factoring industry. We factoring companies don’t complain too much about the regulation of our business – in fact, we were instrumental in implementing most of these laws. What does get old though is the utter disrespect shown all too often to this business and our customers – the structured settlement recipients. Surely not all companies or people involved in this business are upstanding, and criticism (or more) of them is appropriate. But the broad brush used in such criticism ultimately, and unfairly, denigrates the industry as a whole. Factoring customers are really the hardest hit, both in terms of insults ("these people really shouldn’t be able to manage their own affairs, should they?") and in the restriction of access to this market in times of need. Is it too much to ask that some respect be shown to people who want, and in many cases need, to factor their payments?

Yes, I am in the structured settlement FACTORING business, and I am proud of it. Settlement Capital has helped people improve their lives and living standards, attend school, pay for medical treatment, buy houses and businesses, and generally has provided them with a financial option (not involving incurring debt). Make no mistake, this is a business and we make a living at it. But, it’s a business to be proud of.    By Matt Bracy