Broward firm buys injury settlements, allowing consumers to get cash earlier
Marcia Heroux Pounds, Sun Sentinel
By Marcia Heroux Pounds, Sun Sentinel
McClatchy-Tribune Information Services
June 15--A couple suffers injuries in a car accident and receives a settlement in a lawsuit. Insurance won't cover all their bills and they need to make changes to their home, now that one partner is confined to a wheelchair.
So they turn to a company that buys "structure settlements" resulting from a lawsuit or personal injury matter to access their money that otherwise is paid out over many years through an annuity.
One growing company in the industry is Lauderhill-based 123 Lump Sum. The 13-year old business generates $30 million in annual revenues and employs more than 100 people. The company recently moved into a new headquarters in Lauderhill, into a building the firm purchased and renovated.
"We try to understand our customers current financial needs and design a transaction that is customized to fit those needs, rather than just simply buying out the entire annuity," said Andrew Savysky, president of 123 Lump Sum.
Co-founders Savysky and Michael Asseff, the company's chief executive, were in their 20s and working together at a local settlement company when they decided to launch their own business 13 years ago.
Now in their 40s, Asseff and Savysky say they've built a firm that helps consumers access money they otherwise couldn't for pressing needs, such as medical bills or to stop the foreclosure on a home. Lately, many customers have been using proceeds to purchase or lease new houses or apartments.
"The aftermath of the financial crisis left a lot of consumers with financial needs related to housing," Savysky said.
123 Lump Sum's website invites people to "live the life of your dreams" by selling a structured settlement or annuity for "financial freedom." It depicts consumers driving a sports car, traveling or buying a home as possibilities for those who sell their future cash streams.
The happy pictures of people on 123LumpSum.com are for marketing purposes, Savysky said. "You have to present a website that's something consumers will respond to. You don't want to have only down-and-out pictures," he said.
The website also appears to offer cash advances on pending lawsuit settlements, but Savysky said that business is referred to another company.
More often, people decide to sell their future cash flows for more pressing needs, such as medical bills or avoiding eviction on their home, the business partners say.
Financial planners warn consumers to proceed with caution on selling a future income stream and to do their homework on the structured settlement company.
The Financial Industry Regulatory Authority and the SEC issued a warning in 2013 to inform anyone considering selling their rights to an income stream -- or investing in someone else's -- of the risks involved, urging them to proceed with caution. The lump sum amount offered will most always be significantly lower than the present value of that future income stream, the note says.
Matthew Saneholtz, certified financial planner for Tobias Financial Advisors in Plantation, said selling a structured settlement should be a last resort. "You're making a shorter-term decision that will help you buy a car, but you may be jeopardizing your future," he said.
But if the consumer opts for a sale, "shop it around like you would anything else, receiving multiple quotes from companies and get it in writing," he advised.
Make sure you understand all the fees involved and consider whether you're better off getting a loan from a family member or even a bank at today's lower rates, Saneholtz said.
Under Florida law, structured settlement purchases must first be approved by a judge, who deems whether the transaction benefits the consumer.
123 Lump Sum was a founding member of the National Association of Settlement Purchasers, which in 2001 spearheaded creation of a law protecting consumers' rights. The law has been adopted by 48 states, including Florida. Provisions include a cooling-off period prior to signing the contract and 30 days or more where interested parties can testify whether or not the deal is a good one.
Structured settlement companies were once known for buying lottery winnings, but most states including Florida have reduced that business by offering a lump-sum option to winners.
After competitors Peachtree Settlement Funding and J.G. Wentworth merged in 2011, 123 Lump Sum's co-founders saw an opportunity to increase market share.
Last year, the partners sold a minority interest to GCP Capital Partners in New York, using proceeds to purchase the new headquarters building. 123 Lump Sum said it continues to hire paralegals, sales executives, client relations workers, administrative assistants and staff accountants.
Boris Gutin, managing partner of GCP Capital Partners, said 123 Lump Sum stands out from smaller players because of the system the partners have built for servicing, tracking and financing purchased settlements.
"They're well-positioned to be the No. 2 player in the industry," he said.