Patricia LaBorde, President of the National Association of Settlement Purchasers (NASP), opened her association's 2015 Annual Conference last week in Las Vegas with a provocative description of its prior 12 months: "a year of unimaginable successes and challenges".
Founded in 2004, NASP identifies itself as "a leader in setting standards and implementing best practices for the structured settlement purchasing industry. Our association safeguards the rights of settlement recipients to readily access their funds through an efficient, fair and transparent judicial process."
NASP Presidential Panel
Subsequent conference presentations detailed NASP's successes and challenges including an historic President's Panel, moderated by Robin Shapiro, and featuring LaBorde and Michael Goodman, the first sitting President of the National Structured Settlement Trade Association (NSSTA) to attend a NASP conference.
Goodman has identified "growth opportunities for the structured settlement industry" as his number one goal as NSSTA President. He also characterized his remarks and opinions as personal and not representative of official NSSTA policy or positions.
Goodman highlighted the need for "responsible factoring" and mentioned the consumer protections that have been put in place in Wisconsin, Maryland and Illinois. Based upon his own professional experience, Goodman gave multiple examples of what he considered appropriate and inappropriate transfer activities.
Among Goodman's other noteworthy comments:
- "Factoring is not a zero sum game. What is bad for the secondary market is not necessarily good for the primary market."
- "Both NSSTA and NASP need to improve/correct the branding of "structured settlements". Confusing the primary and secondary markets is not beneficial for either association."
- "I am proud we have been able to create more consumer protections for injured annuitants. I am hopeful that by the end of this year, we will have improved the Structured Settlement Protections Acts (SSPAs) in five states.”
Both LaBorde and Goodman acknowledged business practices within their own markets that have created problems for the structured settlement brand. Some of the worst of the secondary market business practices were publicized nationally in an August 25, 2015 Washington Post front page article (featuring a non-NASP company) which more than one industry observer called "a perfect storm" for the factoring industry.
Even before the Washington Post article, however, and as a direct result of the 2013 Brenston case, which temporarily shut down the secondary market in Illinois, NASP and NSSTA initiated a proactive and collaborative legislative strategy to add five consumer protection amendments to targeted state structured settlement protection statutes:
- No forum shopping.
- Payee required to attend hearing.
- Stricter application of approval requirements.
- Advanced notice of transfer.
- Required disclosure of prior transfers.
The first success of NSSTA and NASP's legislative collaboration resulted in amendments to the Illinois statute. The Brentson case propelled the two organizations to negotiate and work a compromise that improved the Illinois SSPA. From the perspective of LaBorde and NASP, the result in Illinois represented "the biggest victory since the Model Act".
To memorialize the success in Illinois, NASP honored Illinois State Representative Michael Zalewski as recipient of its 2015 Alexander Hamilton Award. Representative Zaleweski, who sponsored the new Illinois structured settlement legislation, praised its "clarity and protection" compared with the "ambiguity" of the prior law.
NASP has bestowed its Alexander Hamilton Award eight times "to distinguished individuals who have supported and defended the right to free alienability of property rights." NASP considers this right to be its own cornerstone and the foundation of the structured settlement factoring business.
Further highlighting the success of NSSTA and NASP's legislative collaboration, LaBorde and Goodman jointly announced that Governor Scott Walker had signed, just prior to their panel discussion, Wisconsin's first Structured Settlement Protection Act - thereby becoming the 49th state (all except New Hampshire) to have enacted such protective legislation.
During his Legislative and Regulatory Update, NASP lobbyist Jack Kelly, who serves as point person for the NSSTA / NASP collaborative state legislative strategy, provided additional details concerning both the political aftermath of the Washington Post article and the collaborative state legislative strategy.
Without dismissing the negative public relations impact of the Post article, Kelly does not see any immediate Congressional threat despite letters making headlines. "NASP's primary federal concern is the tax bill," Kelly stated, "and it's not on the calendar."
As for state legislation, "good planning has made the difference", according to Kelly. He spoke about "mutual respect" for NSSTA and identified Florida, Maryland and Virginia among priority states for joint future lobbying to improve consumer protection.
Additional Conference Highlights
In his Litigation Update, NASP Executive Director Earl Nesbitt summarized recent court decisions addressing statutory "no-split" payment provisions, judicial "best interest" standards and various lawsuits involving Rapid Settlements.
Nesbitt allocated significant time to In re: Rains, a Texas case in which the appellate court determined the trial court: 1) could not force MetLife into a contract with the transfer company, directly or indirectly, by imposing a servicing arrangement on account of the Texas statutory "no-split" provision; and 2) abused its discretion in approving the transfer citing a "severe discount rate" among other factors.
The Rains case featured an extensive "best interest" analysis establishing a new judicial precedent in Texas. This analysis requires a judge to consider a "penumbra" of information including "future yet foreseeable liabilities; domestic, economic, physical, medical and educational needs of payee and dependents." Also at issue: how much and what type of evidence is required to place into the court record to justify a transfer.
Matt Bracy reprised his role as moderator of NASP's popular Judicial Panel - this year featuring Judges Daniel Buckley (California); Laura Inveen (Washington); and Jeremy Warren (Texas). The two hour program included questions to and from the judges addressing such transfer topics as:
- Interpreting the best interest standard;
- Common mistakes at transfer hearings by attorneys, factoring companies and sellers;
- How to best present a transfer;
- How judges consider objections to transfers;
- What documentation judges want to see at transfer hearings;
- How to best protect the seller's privacy;
- Information judges are not seeing presented that should be;
- Significance of the origin (type of personal injury) to the judge's analysis;
- Impact of prior transfers on assessments.
Two separate NASP presentations addressed unprecedented and changing perspectives of risk. Discussing Privacy Issues in Structured Settlement Transfers, Shawn Tuma spoke about risks due to cyber attacks. Citing the FBI, Tuma divided corporate America into two company types: those that have been hacked and those that will be - including many that have but don't realize it.
Health records, according to Tuma, are more valuable than financial records because they are rarely modified. Regardless of how you obtain health information, Tuma emphasized, you are obligated to protect it. These obligations include: stewardship, legal and public relations.
Tuma reported that both the SEC and the FTC have developed legal requirements that encompass prevention, detection, response, training, and third party access - and companies cannot insulate officers and directors from personal liability for related damages.
The lessons to be learned, according to Tuma: 1) document a record of compliance; 2) you will be breached; 3) Its not the breach, its your diligence, that matters most. Steven Fox supplemented Tuma's presentation with a discussion of ID Theft and Domicile Determination.
As secondary market transfers have expanded to include life contingent annuity components, mortality underwriting has become a critical skill set. Michael Fasano focused his presentation about Mortality Review / Process in Life Contingent Underwriting on unhedged life contingent secondary market structured settlement transactions.
Fasano emphasized that traditional medical underwriting practices utilized for life settlements or normal life insurance and/or annuities won't work for this class of individuals. Reasons include a high frequency of:
- Low income demographics. Most are unemployed.
- Rx and illicit drug issues.
- Incarceration and other behavior issues.
- Anti-selection and/or lying.
Fasano approximates that, as a class, mortality impairment of life contingent structured settlements results from: accident and behavioral (55%) vs. medical (45%). In addition to medical reports, Fasano utilizes targeted questionnaires to obtain underwriting information and makes adjustments for lack of candor and non-disclosure.
Completing NASP educational program: Jason Sutherland moderated a Servicing Panel featuring Melissa Bolling and John Enyart. Additional Breakout Sessions offered the following topics and speakers:
- Successfully Managing Difficult Payee Issues - Brian Dear; Duane West.
- Strategies for Securing Approval From Tough Judges - Samuel Cortes; Abagail Adams.
- Primer on Special Needs Trusts and Medicare Set-Asides - Patrick Hindert.
- Spousal Consent Issues in Transfers - Elyse Strickland; Shannon Harvey.
Congratulations to NASP, especially Conference Chairman Doyle Chisholm and Association Administrator Susan Barnes, for organizing such an informative and well-attended conference.
For additional, related S2KM reporting, see the structured settlement wiki plus these prior S2KM blog posts, see: