How companies make millions off lead-poisoned, poor blacks

Excellent comment and similar to a thought I had while reading this. Sure, in this case there are legitimate competency questions that make us wonder if the individuals in question should even be allowed to enter into a contract of this nature.

But it's not that hard to imagine Access Funding making similar deals with other owners of structured settlements. Can a man who was hit by a car and lost the use of his leg sell his settlement at a drastic discount like we see here? How big a discount is too big?

I suppose this is why some states have usury laws. Above a certain interest rate the state decides that willingness to take the loan is, in and of itself, evidence of lack of competency.

>It's unclear what exactly it means to "not understand" the tradeoff - presumably if you said the words to them they would repeat them back and tell you they "understand" that this will happen in the future; it's not exactly a difficult calculation, just an if-then.

I think the mean these people don't understand they are giving up +70% of the present value of the settlement. They probably don't understand what present value means, and figuring out 70% of a large number might not be something they could do even with a calculator. They do know this is bad and embarrassing so they will try to cover up their ignorance by saying, "Yes I understand" even if they do not. I would expect they would be unable to correctly explain un-assited, and un-promted, why they got a structured settlement in the first place, how the structured stealement plays into their everyday finances, why they now think a structured settlement was a bad idea, and how the plan to make up for the loss of monthly checks in their day-to-day expensies.

As I side note I feel you could make a convincing argument that alcoholics should lack legal competency when dealing with matters that involve them getting alcohol. They routinely do things that I don't think can be called competent (much less legal) for example putting people they care about at risk of death by driving while very drunk. We even have special rules for these people related to drinking and driving namely ignition interlocks, that we don't require non-alcoholics to use.

Honestly, rubbish - getting an illiterate, brain damaged person to sign a contract they never read and signed without advice on their side for 1/5 of the face value is not about time preference - it's fraud, or undue pressure or something illegal.

Jail time.

Ethics have nothing to do with it. Time preference is very well defined in financial terms, because it can be replicated easily. That is why the author can say that the value of her judgement is 338k today.

Any substantial divergence from that number is just plain fraud, regardless of how 'strongly' the person wants it.

You can't just swap dollars for pennies, you can't allow that for an awful lot of reasons.

This is particularly screwed up because they had the option of a structured settlement vs. lump-sum at the outset, and were shepherded into the structured settlement. Later, when their circumstances generally have NOT changed, it's absurd that they'd give up 70-90% of NPV to transition.

I wonder if there could be a requirement written into the structured settlements that the settlement provider handle a market-rate transition to lump sum at any time, as part of creditworthiness of the settlement provider. Then, petition a judge in jurisdiction of residence to do the transition.

I'm pretty far-right libertarian, but this is just gratuitous abuse of people who aren't able to take care of their own affairs. Selfishly, I want it destroyed with fire because otherwise people will see this abuse and think they need more regulation even in other areas where it's not necessary.

I would suspect that they would have to argue their case for incapacitation in court, which comes with legal fees, which they likely cannot afford.

Perhaps a class action lawsuit with many such victims assembled will be compelling enough in size that a law firm will take the case on a contingency basis.

Half-baked thought: What about a free, opt-in service requiring a second reading of a contract by volunteers? So, nothing can be enacted/fulfilled from a contract with someone registered with that system until the deal has been reviewed. Or even just a service that someone can use to double-check something.

I get countless emails/calls from clients checking whether the domain registration letter they've got is legit. They're smart people but they're not familiar with domains. I'd hate to think of how many people fall for those things.

In Canada it is a crime to charge more then 60% per annum. I would not be shocked if the States had something similar on the books. http://laws-lois.justice.gc.ca/eng/acts/c-46/page-179.html#d...

Edit: It's a States issue. It looks like Massachusetts has some rules http://www.mass.gov/courts/case-legal-res/law-lib/laws-by-su....

> Are these actually bad deals?

Yes.

Whether or not they are good deals is a secondary question to whether or not the people signing the contracts have any idea what is going on. The article makes it pretty clear: the legal protections are too weak, and severely impaired people are signing documents they don't understand.

It's easy to construct scenarios where the closing prices are fair - even generous. It's also totally irrelevant.

A lot of the value of the settlement can't be transferred to the new owner, so it's unlikely that the deals would happen if someone wasn't getting screwed.

In particular, structured settlements are usually protected from bankruptcy, and usually are enough to keep the beneficiary off public assistance (so it transfers the cost from the taxpayer to whoever caused the harm). Allowing the payments to be sold off into a non-protected lump-sum at the discounted present value defeats the entire purpose of the lawsuit that generated the settlement.

Yes, it's a very bad deal. She's 20 years old, figuring the chances of death and the valuation, she's lost the vast majority of the actual value, and the guys who bought the settlement from her can make upwards of $1m of profit over the next 35 years, above and beyond what they paid for it.

It's not 'value'. If you have $3k annual income for the next 50 years and I offer you $100k for it, it's not value, it's total bs. It becomes value ones the valuations are close. Plenty of investors will give you value, and if put on an open market, you'd get that value. But this happened due to predatory business, calling people who are mentally challenged and offering an awful rate. I'd have given her double and I'd still make a profit of more than half a million dollars, investors would line up to give her even more than that.

If she'd been given a market rate, then yes it'd be good value to an ordinary person who has this preference. Although the whole point is that she wasn't because she's a vulnerable person with no financial sense who's better off receiving $1k for the next 35 years, than receiving pennies on the dollar in a lumpsum $60k which lasts her for 5 years if she'd be frugal, and likely won't last because shitty friends/family will exploit a mentally damaged person who's known to have just received $60k.

Even for an ordinary person, this just makes no sense. After all, you can apply this type of discounting to any payment stream. Take your salary for example.

I mean let's scale the numbers to a salary that makes sense to some of you. The average payment the woman in the article was getting in those 35 years is about $1.4k or say $17k per year, and she's forgoing them for $63k.

Now let's quadruple those numbers to get to a salary some of you might get, about $70k per year, forgone for a one-time $250k. Imagine that $70k is your salary.

Now who here is willing to sell/forgo their GUARANTEED, 0 hours of work, $70k annual salary for the next 35 years, for $250k? Absolutely nobody, not a single soul.

There's no way you can call that 'value', until someone offers you a few million dollars at least. And if you had such a salary, guaranteed, without any hours of work, because someone poisoned you with lead and you're brain damaged... it's NOT okay for someone to convince you to forgo it for $250k over steak. That's predatory, unethical, harmful business. Especially when that person is DEPENDENT on that money. Yeah stealing $50 billion from Buffet is one thing, or even $1m from you or me. We can actually work and still live and thrive and enjoy life even if all our wealth is stolen. But she's brain damaged, can't work and can't live alone. She's the type of person that without $1k a month will end up homeless or on welfare or a combination of both, 20 years down the line.

Pretty much. Entering into a contract with a brain damaged individual who was not at all educated would get the contract thrown out of court pretty quickly.

That line of reasoning is a double-edged sword.

That's a strawman - at least, in the case of minarchist-Libertarians. We explicitly advocate for restricted right to contract.

Some examples of proscribed contracts include those involving minors, or slavery (see 'unalienable rights').

Not at all. Valid contracts must pass a minimum bar of consent. There was no consent granted, the victim in this case is blatantly incapable of giving it.

What occurred is theft.

This is the nirvana fallacy. That people enter into contracts they later regret does not disprove the obvious benefits of allowing legally binding agreements.

If you have an alternate solution, by all means propose it.

(And while we're on the topic of libertarianism, I'd like to note that lawyers being too expensive for poor people is largely a product certification costs, something libertarians want to get rid of)

No, this is where your insert social system fails to eliminate deception and fraud. Because no social system can be expected to accomplish that.

"Just where in the world are you going to find these angels who are going to organize society for us?"

This is where you need to do some research on what Libertarians really believe.

Looks like our current government isn't fairing much better =P

Let's not forget that even most libertarians would be fine with:

1. giving protections to mentally handicapped people when it comes to signing contracts. 2. Allowing for bankruptcy if you cannot uphold a contract

Good point.

Sad part is she discussed it on the phone with her lawyer. Good grief... my brother is a lawyer, if he ever got a call from a client saying a man came over, bought her steak and would give her a lumpsum of money in return for her monthly payment contract, all alarm bells would go off. He wouldn't even need to see the specific contract or have to be aware his client is mentally challenged to say 'no', first and foremost, followed with 'send it over or come over so we can review the contract'.

> Im exaggerating of course but wow

Why pull back like that? This is exactly what the US is driven towards. 'The Market' is more important than any person in the country. Taking advantage of people is big business and because 'The Market' has spoken it is left to operate.

Meanwhile, governments specifically target the poor with lottery advertising. There will always be scumbags who prey on the weak; at least when they're in the private sector they can be sued or arrested.

This isn't a market. Markets operate between consenting adults; these people lack the mental faculties to count as consenting adults. The buyers here are actually violating the rights of the sellers.

No, there is wide gulf between "guilty" and "best way to do it"

Not necessarily... In any business there's such a thing as "headline risk," distinct from legal or compliance risk. It's where the mere perception of wrongdoing can be almost as damaging to your business as actual wrongdoing/noncompliance; anything can be spun as sinister by an unsympathetic press. So to mitigate headline risk you might actually make your compliance controls much stronger than legally necessary. I think Borkowski is trying to say something like his business is fundamentally honest, but the reporter has raised some serious points of possible misperception about it, and they're going to make some compliance changes to clarify themselves against possible misperceptions of wrongdoing.

Of course it's kind of too late if you're finding out about your headline risk from a reporter. And not to defend these bozos.

Sometimes, the easiest person to fool is yourself.

The second paragraph of the article states she can't live alone:

"She says she can’t work a professional job. She can’t live alone. And, she says, she surely couldn’t understand this letter."

You can't apply your logic and thought process to someone with mental or development issues. It's ignorant.

The article is in the Washington Post, not the WSJ.

    “A lot of them can barely read,” said Saul E.
    Kerpelman, who estimates he has defended more than
    4,000 victims of lead poisoning, nearly all of them
    black.

They suggest the demographics support the title.

When the country has systematically denied access to capital to a certain race of people, and continues to support and legitimize this practice, it absolutely makes a difference what race these people are.

Black lives matter.

    It absolutely makes no difference what race the poor people are.

Yes, in theory; but if you had read the article, you would clearly see that this article is talking about actual corrupt practices that have taken place within the actual evolutionary history of this simulation.

When did it become cool to assume that the logical possibility of discrimination is on the same order of effects to our free markets as actual discrimination? How did you people get past high school?

Victims that likely don't use the internet or understand what a settlement is aren't likely to find such a service very beneficial.

One would think that eventually the unfortunate neighbors, erstwhile friends, and shamed families of Michael Borkowski, Charles E. Smith, and Brendan Franks would help them see the error of their ways.

Unfortunately, there is no Hell, so we'd better do something about the issue in this world.

That 'hell' is a firm place in the American upper class, free of worldy consequences and troubles that affect honest and hard working people.

Can you point out a biased sentence?

I'm going to ignore your global warming comment. At some point you're going to have to accept that the vast majority of scientists accept that climate change is real and that the vast majority of people who deny the reality of climate change are not scientists and have misunderstood the science.

Implying that there are more intelligent people on HN than somewhere else.

Inflammatory?

Unfortunately, some things will incite a rise within any reasonable person, regardless of title. This is definitely one of those articles.

Not to mention the title is concise and accurate, while summarizing the article well.

I can think of lots, yes.

This is a substantive claim in spite of the accuser. The independent advisor should not be helping their client solicit other bids...not very impartial.

Is this a joke?

Maybe they could bring in Bitcoin somehow.

It's relevant because it's the reason she's getting $1k in payments in the first place, as a settlement from whoever was responsible for the lead. It's not that she sold welfare payments and wants to explain away the bad decision with lead. It's that she's a damaged person (lead is a neurotoxin), got settlement payments, and made a bad decision that's more understandable in that context. Without the lead dialogue, she made a bad decision she could've prevented herself you might be able to argue. With the lead dialogue it's, on a mental level, probably quite similar like stealing candy from a baby. Now imagine the baby has to live off of settlements for decades, which have just been reduced by a gigantic amount. Now consider what it means in 5 years when the money's gone (even if she spent as frugally as normal, living on $12k per year tops), and you know she's going to either become homeless or severely dependent on the state or likely a combination of both. That's horrible for her first and foremost, and it doesn't help us or our society, either. Lead played a big role in this. Hell even outside of the 'bad decision', a normal person who lost out on $1m in benefits could still go to work, live a normal life. She can't because she's damaged by lead. (it doesn't talk about it deeply but it says for example she can't live alone or work).

But they are poor, with very little sense of stock value and market returns. While you might think more educates about it, they sadly dont. So they blow the money quickly for something they need at the time. So no, it really wasn't a good deal.

Congratulations djrogers! By sucking at math you just cost yourself nearly 1.5 million dollars in retirement savings!

https://docs.google.com/spreadsheets/d/1y3PFiRhnixOcqeVrxZ2j...

I think one of the kind men from Access Funding would like to buy you a steak dinner.

Not at all. Try doing 60k at a 7% market rate (which is optimistic by the way). You get to about 600k. Now value the monthly payments invested in a similar manner, you get to around $2m. It's a gigantic difference. And no not even Buffet had the returns necessary to make money out of this (which is an average of > 23% annual returns for 35 years).

This isn't some government agency giving you the approximate lifetime value upfront as a way to offer choice. It's a for-profit business looking to cash in on the difference, not a charity, not a break-even operation. They're there to make as much money as possible. Doesn't take much to assume they're not going to be 'approximately stock market investment rates', and if you look at the numbers, surprise surprise they aren't anywhere near it because it wouldn't make them any money.

I think you're missing a subtle but important point here - namely, that Warren Buffet can read.

What are you even saying? Lead is very well-established as a neurotoxin.

The epidemiology is solid. Some cohort studies ran for decades. They followed lead levels in blood and bone. They tested intelligence and documented behavior. They tracked educational and criminal history. The neonatal brain is exquisitely sensitive to lead.

[Citation really badly needed]