About Payment Servicing
In the financial landscape, payment servicing is common.
Mortgage payments are serviced by a mortgage servicer, credit card payments are generally collected by payment servicer, mutual fund redemptions and deposits are serviced.
All IRA and 401(k) administration is a form of payment servicing also.
In securities, bonds, and most securitized products, payment servicing is essential to collect and track income from diverse sources and make payable to bondholders.
Even a property manager is a form of a payment servicer, collecting income on behalf of the property owner, paying expenses, and paying the owner.
In all of these cases, the payments servicer is an important functionary role that requires bonding and is subject to oversight. Trillions of dollars every month flow through payment servicers.
Therefore it is a mystery why retail consumers don’t more readily understand payment servicing.
Our Preferred Payment Servicer:
Our preferred payment servicing company is Asset Servicing Group (ASG). ASG is a significant servicer in the life settlement industry, and has extensive experience working with insurance carriers. ASG also is routinely appointed as the servicer by Courts nationwide in liquidations and workouts. They are one of the top names in the industry.
We buy each case for resale purposes, and specify ASG as the servicer of record when we buy the case. See Our SMA Purchase Procedure for more details.
For a nominal fee, ASG receives the payments from the insurance carrier, and makes them payable to the investor. They can do direct deposit or mail a physical check. They also perform services for investors such as confirming payment streams, and interfacing with the insurance carriers in the event of a missed payment.
Should the investor wish to change payment servicers, that is also possible.
ASG is a professional payment servicing company who provides a valuable service and plays an integral role in our secondary market annuity business.
Secondary Market Annuity Payment Servicing
In the realm of secondary market annuities, payment servicing very common, however certain past industry practices give rise for concern. Naming servicing companies directly as the buyer yet omitting “On Behalf Of” language, and using prepaid accounts at payment servicers for example, unnecessarily exposes investors. This unfortunately has made some investors wary.
There are better and more appropriate ways to use servicing however, which we adhere to. Be sure to look over Our Transfer Procedure for more details.
All of our payment streams are serviced by default. Our advisors should take time to understand the merits of servicing fully to better assist their clients.
Benefits of Servicing
For secondary market annuities, payment servicing serves several important functions and offers many benefits to investors.
First of all, with a structured settlement, the annuity issuer may not always allow a payee to sell just a portion of their payments. In this case, payment servicing is required so that the entire payment is sent to one address, and then split between the original payee, and a new investor.
For example, if the payee has $1000 per month, and chooses to sell $500, the issuer may only consent to write one check for $1000. A payment servicer is required to split it into $500 each to two people.
Another benefit of payment servicing is ACH deposits. Remarkably, many annuity issuers of structured settlements will not do direct electronic deposit of payments. Using a payment servicer to receive the paper check, then make an electronic deposit to the investor’s bank account, solves this problem.
Yet another benefit of servicing is for account administration. Address changes and basic account service can be challenging for a new payee. It is not uncommon for an original structured settlement annuitant to have sold portions of their payments many times.
Annuity issuers are understandably reluctant to accommodate multiple splits of a payment stream and when one new investor inquires about their payment stream for $500, and the original payee’s payment stream may have been $5000, it can at times be challenging for the new investor to get proper account service from the carrier directly.
Using a payment servicer who has experience in the industry and contacts at each of the carriers allows a professional to interface with the annuity issuer, and helps to further protect the investor from frustrations.
Finally, should a secondary market annuity investor choose to sell their payment stream at a later date, or if the payments need to be made payable to an heir after death, a payment servicer is a quick and easy way to make this change.
Payment Servicing Summary:
Payment servicing is common in banking, credit card processing, securities, mortgage servicing, property management, IRA administration, investment management, consumer finance, auto finance… in short, nearly every transaction in the financial landscape involves a form of payment servicing.
The benefits of payment servicing for SMA’s are as follows:
- Easy account administration for address & bank account changes
- Easy administration for heirs/successors/beneficiaries of payments
- Human interface for account issues
- ACH transfers and direct deposit–incredibly, many insurance carriers will NOT accommodate ACH deposits!
- Easy transferability of payments to new owners, beneficiaries, or heirs.
One of the key benefits of servicing is the last mentioned: transferability. It is a simple process for an investor to re-transfer a payment stream purchased using properly structured servicing should they need to in the future.
By comparison, re-assigning a cash flow an investor may acquire in an inferior purchase procedure processed ‘the old way’ via the purchaser being named directly in the court order is virtually impossible. Re-assignment in that process requires opening a new court proceeding with the seller and factoring company, notice to the carrier, affidavits, and other documentation. It is expensive, time consuming, and error prone.
In sum, while some purchasers have an emotional or visceral desire to receive a paper check direct from the issuer, it is not ultimately in the purchaser’s best interest to do so in light of the benefits servicing offers.