It’s My Money Dammit!
Well the good news is that Christmas is almost over. No more of my Christmas rants!
The bad news is that millions of people will come out of December with more debt than they can deal with. If you watch television at all you see advertisement after advertisement for mortgage equity loans, credit cards, selling your timeshare, anything and everything that can be done to create cash for paying off debt.
One of the commercials I have seen repeatedly lately is for a company named J.G. Wentworth. If you have missed the commercial, it involves people yelling “It’s my money and I want it now!”.
It seems that J.G . Wentworth specializes in purchasing structured settlements from people. According to one article I read, Wentworth pays about 57 cents on the dollar for these settlements.
Wentworth’s sales pitch is that they will give you cash up front and you will have the money to use now and not have to wait to receive it.
You know, I always wondered how people who win the lottery end up broke again in a few years. I’m sure companies like J.G. Wentworth have something to do with it.
Let’s say you win a million in a lottery. The payments are 33,333 a year for 30 years. You would pay taxes on your yearly income and have maybe 27,000 left (I’m not converting for dollars, euros, etc. because that doesn’t really matter for this discussion). Over time you clear somewhere in the neighborhood of 810,000.
Now along comes a company like Wentworth and they give you 570,000 for your future payments. You would have to pay taxes on the entire amount, probably at a higher tax rate. Let’s say you end up with 450,000. Not bad to be sure, but not enough to keep you going for 30 years.
So what? It’s often said “A fool and his money are soon parted”. What do we care if the lottery winner ends up broke again in a few years?
The problem, as I see it, is that while lottery winnings are set up this way, most structured settlements are from insurance companies. These are set up for the long term care of accident victims. If the money is taken in a lump sum and spent, who supports the victim then? I suspect it would be you and I through tax funded government disability payments and medicare.
A Google search for J.G. Wentworth reveals that the company has had several lawsuits concerning their business practices. An article in the Philadelphia Business Journal reports that 3 states “…moved recently to require a court to look at every J.G. Wentworth deal before it is signed.”
Apparently the government and the insurance companies are beginning to look into the practice of purchasing these settlements, but will they go far enough? Shouldn’t there be a law that says, in effect, that if you sell your settlement the taxpayers are off the hook for your future care? Shouldn’t there be some rule that you can’t file bankruptcy if you sold a settlement for pennies on the dollar? Or should there just be a law that these settlements can’t be sold and companies like Wentworth can’t do business anymore?