If not, it is almost certain that you have seen one of their advertisements on television. These companies participate in a dangerous practice called “factoring”, and it recently made headlines when Last Week Tonight with John Oliver dedicated a full segment to it.
John Oliver Reinforces Factoring Company Abuse
During the segment, John Oliver examines predatory practices by factoring companies who pay annuitants as little as 25 cents on the dollar for their structured settlement payments. This, however, is nothing new, and the National Structured Settlement Trade Association (NSSTA) has been documenting cases of harm caused by factoring companies for years.
Factored Out of Long-Term Care.
In one such case, a young woman with a traumatic brain injury was coaxed into selling 17 of her payments, ultimately losing a settlement stream meant to support her long-term care. It is because of instances like this that NSSTA has called for several reforms which would protect payees from making long-term decisions that they do not fully understand the consequences of.
A Settlement Built to Last & NSSTA.
Structured Settlments are built to last. Before you or a loved one considers any offer to sell settlement payments, please speak with a qualified professional first.
Check out this article on the NSSTA website to learn more about what is being done to combat the factoring industry.
For more information on structures in general, contact us or visit NSSTA.com.
– Parmelee Brothers
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Structured Settlement Factoring: Frequently Asked Questions.
The primary risk is a severe loss of long-term financial security. Aggressive factoring companies frequently purchase future, guaranteed income streams for a small fraction of their actual lifetime value, leaving the recipient without the financial safety net their settlement was originally designed to provide.
Maryland successfully reduced predatory factoring transactions from 1,800 cases down to just 6 in a single year by implementing two critical legislative reforms:
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Localized Jurisdiction: Factoring companies are forced to file cases exclusively in the settlement recipient’s home county, preventing them from “forum-shopping” for lenient judges.
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Mandatory Judicial Scrutiny: Judges are legally required to thoroughly examine the seller’s current and future financial circumstances before granting approval.
Traditional protections often fail because court hearings can become quick, bureaucratic formalities lasting only a few minutes. Without strict oversight, judges may approve transfers without thoroughly evaluating whether the transaction serves the seller’s long-term financial interest, leaving vulnerable individuals exposed to aggressive cash-now companies.
Structured settlement protection laws are state-level statutes designed to protect injury victims (annuitants) from predatory financial practices. They typically require a judge to review and approve any transaction where an individual attempts to sell their future guaranteed settlement payments for an immediate lump sum of cash.
The NSSTA is actively working to protect settlement recipients through three main initiatives:
- Federal Advocacy: Urging the CFPB to crack down on unfair and deceptive industry practices.
- Judicial Education: Providing Continuing Legal Education (CLE) programs to help judges spot predatory deals and strictly enforce “best-interest” laws.
- Public Awareness: Partnering with journalists and lawmakers to expose bad actors and push for stricter legal reforms.
Before signing any contract with a factoring company, take these essential steps:
- Check for hardship options: Contact your original settlement insurance company to see if you can access emergency funds under better terms.
- Demand full disclosure: By law, companies must provide a written breakdown of the total value of your payments, the present value, the lower lump sum offered, and all hidden fees.
- Know your cancellation rights: Most states offer a “cooling-off” window. Ensure your right to cancel is confirmed in writing before signing.
On Last Week Tonight, John Oliver exposed the predatory nature of the factoring industry, which buys an estimated $1 billion in payment rights annually. The segment revealed that companies routinely target vulnerable or cognitively impaired individuals, taking an average of 60% of their money through fast-tracked court hearings that lack proper scrutiny.
A guardian ad litem (GAL) is a court-appointed, independent advisor who reviews a proposed sale to ensure it is genuinely in your best interest.
- GALs provide judges with unbiased facts that factoring companies might hide.
- Currently, only five states authorize GALs for these cases.
- When a GAL is involved, predatory transactions drop sharply, and many sellers choose to withdraw their requests.
An SSPA is a state law designed to regulate the sale of settlement rights to factoring companies. While all 50 states and D.C. have an SSPA requiring a judge to approve transfers, consumer advocates note that court oversight is often weak and heavily favors the factoring companies.
Yes. Under Section 104(a) of the Internal Revenue Code, original structured settlement payments are entirely exempt from federal, state, income, interest, and capital gains taxes. Note: This tax-free status does not transfer to the lump sum if you sell your payments to a factoring company.
Factoring companies typically take a massive cut. Data highlights severe financial losses for sellers:
- An analysis across seven states showed factoring companies retain an average of 60% of the payment stream’s total value.
- The National Structured Settlements Trade Association (NSSTA) documented discount rates between 16% and 28%.
- Investigative reports in some states found payees receiving as little as 25 cents on the dollar.
Structured settlement factoring is when a third-party company buys the rights to your future settlement payments in exchange for an immediate cash lump sum.
- How it works: You permanently surrender your future payments, and the factoring company collects them instead.
- The catch: The upfront lump sum you receive is only a fraction of the total value of your original settlement.
