Blogger and structured settlement commentator Pat Hindert wrote an interesting article about the most recent meeting of the National Structured Settlement Trade Association (“NSSTA”), which is the trade group for the “primary” structured settlement market (insurance brokers and companies who are involved in setting up structured settlements). For the first time in six years, NSSTA discussed structured settlement factoring transactions at its educational committee. Apparently no longer the “elephant in the room,” NSSTA had a panel discussion about how the state structured settlement transfer laws are working in practice.

The NSSTA panel consisted of a trial judge, a plaintiff’s attorney, and an attorney who regularly represents insurance companies. Does it seem like anyone was missing?

While I applaud the NSSTA for finally addressing this important topic, I fail to understand why they choose to remain substantially in the dark. By not including anyone at all from the factoring point of view, they continue on the path of willful ignorance. There are many attorneys in private practice, in-house counsel, and business professionals who work in factoring and would have been delighted to present a truly different point of view at this meeting – yet none were included.

Contrast this with last year’s annual meeting of the factoring industry. At the National Association of Settlement Purchasers (“NASP”) meeting in 2006, several primary market attorneys were invited to speak (none accepted the invitation). To his credit, Pat Hindert (former President of NSSTA) did attend and speak. I think everyone benefited from hearing a different, and often critical, perspective.

How much more interesting and enriching the conversations at NSSTA would have been with an actual factoring representative or two on the panel. For instance,

• When Judge Solomon opined that she does not believe factoring company attorneys are “capable of or appropriate for providing” independent financial advice, a factoring representative would have agreed (undoubtedly surprising some in attendance); and, by the way, he could have pointed out that the New York transfer laws actually speak of “independent professional advice” not “financial advice.” There is a difference. Nonetheless, most members of NASP that I know would also agree that a factoring company lawyer is not the right person to purport to give independent professional advice to a seller.
• Judge Solomon went on to make recommendations for some legislative changes. Did anyone consider the negative impact these changes might have on the seller? In particular, requiring the seller to appear in court on each and every transfer may create an unreasonable burden for them, effectively locking them out of the process. Under current law, having evaluated the individual circumstances being presented, a Judge could certainly require a seller to appear. But should this be required always? A factoring company representative, arguably more closely aligned and sympathetic to the individual situation of the seller, could have raised these questions, if present to do so.
• When Daniel Hindert spoke about the one factoring transaction he has handled, where he found it difficult to “look through the paper work to the reality of the transaction,” perhaps a factoring company representative could have guided him though the documents, pointing out in particular the Disclosure Statement which requires, in 14-point bold type no less, the amounts and due dates of payments to be transferred, the discounted present value of the payment to be sold, the actual net amount to be received by the seller, etc.

Unfortunately for NSSTA attendees, this key perspective was purposefully excluded from the program, and half the issue was left unaddressed. It was like watching a Superbowl pregame show, where none of the sportscasters had ever played football. An important part of the picture was missing.

Pat Hindert wrote that insurance company lawyer Craig Ulman “challenged all structured settlement stakeholders to make the factoring process more efficient.” It would be hard, if not impossible, to improve efficiencies in the factoring process without all stakeholders, especially the factoring companies, taking part.