Factoring Company’s ‘Exploitation’ of Payee’s ‘Sense of Desperation’ Leads Bay State Court to Rejected Proposed Settlement Payment Transaction

Factoring Company’s ‘Exploitation’ of Payee’s ‘Sense of Desperation’ Leads Bay State Court to Rejected Proposed Settlement Payment Transaction

The “severity” of a factoring company’s “exploitation” of a structured settlement payee’s “sense of desperation” lead a Massachusetts judge to reject a proposed transfer of structured settlement payment rights that the judge said had the hallmarks of a usurious loan.

Boston Superior Court Judge Robert B. Gordon, in In Re J.G. Wentworth Originations, LLC (Laudano), Opinion No.: 137624, Docket Number: SUCV2017-02188-C, 2017 Mass. Super. LEXIS 119 (Mass. Super. Ct. Aug. 11, 2017), reviewed the proposed transaction, whereby payee N. Laudano would transfer to factoring company J.G. Wentworth Originations, L.L.C., her rights to 49 monthly structured settlement payments due to be paid in the future.

In exchange for these payments, with a face value of more than $27,000, J.G. Wentworth had proposed paying the payee $17,165.00.

J.G. Wentworth filed a petition for judicial approval of the transaction, since the Massachusetts Structured Settlement Protection Act provides that such deals cannot become legally effective unless and until they receive court approval.  The Massachusetts SSPA further provides that court approval is authorized only if the court can find that the transfer is “fair and reasonable” and is in the best interests of the payee – and meets other requirements of the SSPA.

The court held a hearing on August 11, 2017, and concluded that the transfer was not “fair and reasonable” and was not in the payee’s best interests.

The court said that the interest rate – if the sale of payment rights were a loan – was nearly 30%, a rate that “far exceeds” the state’s criminal usury law’s limit of 20%.  In fact, said the court, the transaction “is in function and economic substance – if not nominally in form – a loan” and that the transfer “cannot be considered ‘fair, just and reasonable'” when J.G. Wentworth was essentially asking the payee “to pay a rate of interest that far exceeds our criminal usury law’s limit of 20% . . . .”

Judge Gordon pointed out that, at the hearing, “counsel for Wentworth disagreed with the proposition that the assignment of payments transaction was a loan, but acknowledged that he could identify no legal authority – in this Court or anywhere else – that had in terms reached such a conclusion.”  In his written opinion, Judge Gordon said that the “Court stands prepared to revisit this issue should Wentworth elect to brief a motion for reconsideration.”

As for the payee’s interests, Judge Gordon said that the payee “testified that she did not have the benefit of either legal counsel or advice from a financial professional before entering into her agreement with Wentworth” and that “when pressed by counsel for Wentworth at hearing to declare her current preferences, Ms. Laudano stated that she wished to be treated fairly and would like the transaction to be repriced if that would yield more equitable payments to her.”  The court concluded, then, that the transfer was not in the payee’s best interests.

The full opinion can be found here.

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