JG Wentworth Origination, LLC, Transferee, and N. Laudano, Payee (Lawyers Weekly No. 12-110-17)
COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss SUPERIOR COURT
- 17-2188-C
J.G. WENTWORTH
ORIGINATIONS, LLC
Transferee
-and-
- LAUDANO
Payee
DECISION AND ORDER ON AMENDED APPLICATION
TO AUTHORIZE AND APPROVE TRANSFER OF PAYMENT RIGHTS
Transferee JG Wentworth Originations, LLC (“Wentworth”) has purchased a $ 27,395.90 structured settlement from payee N. Laudano (“Ms. Laudano”). The original structured settlement arose from the resolution of a personal injury lawsuit, and contemplates 49 monthly payments of $ 559.00 from annuity issuer Prudential Assigned Settlement Services Corporation. Wentworth has agreed to purchase these payments from Ms. Laudano for the discounted price of $ 17,165.00, and seeks judicial approval of this transaction in accordance with the requirements of G.L. c. 231C, _ 2. For the reasons stated in open court during the hearing held on August 11, 2017 and those set forth below, the Court cannot agree.
What Wentworth proposes is for Ms. Laudano to take a 34.2% discount on her overall settlement payout, effectively paying interest to Wentworth at a rate of 29.99% per year. The Court agrees with Judge Salinger’s thoughtful reasoning in In Re Stone Street Capital, 31 Mass. L. Rptr. 171 ( Mass. Super. Ct. 2013), that this transaction is in function and economic substance – if not nominally in form – a loan. Calling upon Ms. Laudano, the payee-debtor, to pay a rate of interest that far exceeds our criminal usury law’s limit of 20%, see G.L. c. 271, _ 49, the transaction cannot be considered “fair, just and reasonable.” G.L. c. 231C, _ 2(a)(7). See In Re Stone Street Capital, supra (holding that analogous Lottery Assignment Statute required disallowance of proposed purchase of lottery prize payments at a discount rate of 24%); Derochea v. Kane, 29 Mass. L. Rptr. 311 (Mass. Super. Ct. 2012) (Macdonald, J.) (holding that Chapter 231C, _ 2 compelled disallowance of child transferor’s assignment of structured settlement at 16% discount rate: “In this era of historically low interest rates, a 16% discount rate for determining present value borders on the unconscionable,” and is “neither fair, nor just, nor reasonable”).[1]
Further to the above, the Court finds, after giving due consideration to the testimony of Ms. Laudano at hearing, that this proposed transfer of payment rights is not “in the best interests of the payee.” G.L. c. 231C, _ 2(a)(3). Counsel for Wentworth has forthrightly acknowledged that 25% represents the very high end of discount rates that are applied in these transactions. For her part, 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, 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 acknowledges both the challenging family circumstances the payee in this case faces, and the earnestness of her stated need for up-front money from her civil settlement. But it is precisely the sense of desperation the undersigned perceives in Ms. Laudano’s current circumstances, and the severity of Wentworth’s exploitation of same, that leads the undersigned to exercise its statutory oversight of this transaction in the payee-protective manner it has.
CONCLUSION AND ORDER
For the foregoing reasons, Wentworth’s Application to Authorize and Approve Transfer of Payment Rights is DENIED.
SO ORDERED.
________________________
Robert B. Gordon
Justice of the Superior Court
Dated: August 10, 2017
[1]At 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. (The Court stands prepared to revisit this issue should Wentworth elect to brief a motion for reconsideration.) Wentworth’s suggestion that its transaction with Ms. Laudano is no different from the purchase of a commercial receivable is plainly not so. Commercial receivables are sold to parties at a discount that reflects not merely the time value of money, but the expected costs of collection and the risk of non-recovery. These factoring transactions are concededly not loans, but bear little resemblance to the proposed transfer of payments presented for review in this case.