Upon the foregoing papers, the motion by petitioner for an order pursuant to General Obligations Law (GOL) §5-1706, approving the sale and transfer of structured settlement payment rights of Chee Chee Taylor a/k/a Chee Chee Simone Taylor to petitioner, is denied.

The structured settlement that is the subject of this application was obtained on May 2, 1991, as a result of a lead paint poisoning case involving Ms. Taylor. Said action settled for a total of $425,000; $375,000 of that amount was placed in a structured settlement to provide for a lifetime monthly income for Ms. Taylor starting at the age of eighteen, based on a life expectancy of seventy-five years but in any event, which is guaranteed for thirty (30) years. (Exhibit B).

Under the terms of the structured settlement, Ms. Taylor would receive three hundred sixty (360) monthly payments beginning with the payment on June 9, 1996 in the amount of $1,372, compounded annually at 3% on the 9th of June of each applicable year, and ending with the payment on May 9, 2026 in the amount of $3,233.21. Ms. Taylor currently seeks to transfer the following payments: two hundred thirty-six (236) monthly payments, beginning with the [*2]payment due and payable on October 6, 2006 in the amount of $1,843.85, compounded annually at three (3.00%) on the 9th day of June of each applicable year and ending with the payment due and payable on May 9, 2026 in the amount of $3,233.21.

According to the Disclosure Statement annexed to the petition as Exhibit E, the aggregate amount of the structured settlement payments to be transferred is $587,164.72. The discounted present value of the payments to be transferred at an applicable federal rate of 6.0% is $329,598.54. According to the Disclosure Statement which was signed by Ms. Taylor, the discounted present value is "...the calculation of current value of the transferred structured settlement payments under federal standards for valuing annuities..." (Exhibit E). The gross advance amount payable to Ms. Taylor is $151,000 and the annual discount rate, compounded monthly, used to determine the gross advance amount is 17.76%. There is no charge to Ms. Taylor for commissions, fees, costs or expenses.

Ms. Taylor seeks to transfer the aforesaid payments to petitioner in exchange for a net advance amount of $151,000. Ms. Taylor states that she intends to use $55,000 of that amount to put a down payment on a home. She has been working with a real estate agent and has located a three-family home in Bronx County that she would like to purchase. She intends to use some of the proceeds for "any home improvements" needed on said home. In addition, she would like to use the remainder of the proceeds to enroll in a Culinary Arts Program and she has found several schools wherein the tuition ranges from $35,000 to $45,000. (Petitioner's Exhibit F). Ms. Taylor states that she is currently renting an apartment, she is twenty-eight (28) years old and has two dependents, a four year old daughter and a six year old son. Although she signed a purchase agreement wherein she asserted that the periodic payments are not her primary source of income (Exhibit D, p. 2), the petition does not indicate whether or not Ms. Taylor is employed and what, if any, additional sources of income she has.

In her affidavit, Ms. Taylor states that she is fully aware of the economic consequences of this transaction and is fully capable of managing her financial, personal and business affairs. She also indicates that she was advised by petitioner to consult her own independent professional advisors regarding this transaction and the purchase agreement. However, Ms. Taylor waived her right to seek independent professional advice. (Exhibit H).

The Structured Settlement Protection Act (SSPA) codified under General Obligations Law , Title 17, was enacted in July of 2002 because of the concern that "...a growing number of factoring companies have used aggressive advertising, plus the allure of quick and easy cash, to induce settlement recipients to cash out future payments, often at substantial discounts, depriving victims and their families of the long-term financial security their structured settlements were designed to provide. Although transfers of structured settlements payments are generally prohibited by contract...factoring companies have built a rapidly expanding business around circumventing these prohibitions." (NY Spons. Memo., 2002 Ch. 537). A determination would be made by a Supreme Court judge as to whether the transfer is "in compliance with applicable law, that key terms have been disclosed, that the transfer meets a hardship standard, and that independent professional advice has been obtained." (NY Bill Jacket, 2002 A.B. 6936, Ch. 537). [*3]In 2004, the SSPA was amended in that the hardship requirement was"eliminated as a precondition to transfers and the requirement that disclosures be made at the front end' was added." (NY Spons. Memo., 2004 Ch. 480).

The procedural requirements that must be met for approval of a transfer are found under General Obligations Law §5-1705. The requirements are that a copy of the notice of petition and petition by order to show cause be served upon all interested parties at least twenty days before the time at which the petition is noticed to be heard, the petition must include a copy of the transfer agreement, a copy of the disclosure statement and proof of notice of that statement as well as a listing of each of the payee's dependents along with the dependents' age. Procedurally, the petitioner herein has met the aforementioned requirements.

Pursuant to General Obligations Law §5-1706, the court must make the following findings before a transfer can be effectuated. These are that: "(a) the transfer complies with the requirements of this title; (b) the transfer is in the best interest of the payee, taking into account the welfare and support of the payee's dependants; and whether the transaction, including the discount rate used to determine the gross advance amount and the fees and expenses used to determine the net advance amount, are fair and reasonable. Provided the court makes the findings as outlined in this subdivision, there is no requirement for the court to find that an applicant is suffering from a hardship to approve the transfer of structured settlement payments under this subdivision; ( c) the payee has been advised in writing by the transferee to seek independent professional advice regarding the transfer and has either received such advice or knowingly waived such advice in writing; (d) the transfer does not contravene any applicable statute or the order of any court or other government authority; and (e) is written in plain language and in compliance with section 5-702 of this article."

The two most important components of the SSPA are whether or not the transaction, including the discount rate and the amount of fees and expenses, is fair and reasonable and whether the transaction is in the best interest of the payee. The trial courts have ruled on what is determined to be fair and reasonable and whether the transfer is in the best interest of the payee on a case by case basis viewing the totality of the circumstances. Matter of Settlement Capital Corp. v. Yates, 12 Misc 3d 1198(A) [2006].

The affidavit of Andrew S. Hillman, the Chief Executive Officer of Specialty Asset Advisors, Inc., a consulting firm specializing in providing advice to entities involved in all aspects of the secondary structured settlement market, was annexed to the petition. In his affidavit, Mr. Hillman states that the discount rate of 17.76% offered to Ms. Taylor in this transaction is fair, reasonable and consistent with the market rate applicable to these assets. He asserts that the current discount rate for transfers ranges from 15.5% to 23% and a majority of these transactions falls between 18% and 23%. Mr. Hillman cites to several factors which affect the discount rate including the credit worthiness of the payee. Mr. Hillman asserts that based upon a review of the file materials in this matter, "Chee-Chee Taylor has very poor credit." (Exhibit G, p. 5, para. 5). Moreover, he states, "...it is clear that Chee-Chee Taylor would not qualify for a mortgage...because of her poor credit and lack of collateral (real estate)..." (Exhibit [*4]G, p. 6, para. 7a).

Even though petitioner attempts to justify the rate of 17.76%, this court finds that a discount rate of 17.76% is not fair and reasonable when compared to other cases of this nature. The lower courts have found that discount rates of 15.46% (Matter of Settlement Funding of NY (Cunningham), 195 Misc 2d 721 [2003]) and 18.621% (In re Settlement Capital Corp. for Approval of Transfer of Structured Settlement Payment Rights of "Y", 194 Misc 2d 711 [2003]), were unreasonable. Moreover, this court recently found that a discount rate of 15.16% was not fair and reasonable when taking into account the actual amount the payee would be receiving. Petition of Settlement Funding of NY LLC v Allstate Settlement Corp., 13 Misc 3d 1245(A) [2006]). Ms. Taylor would be receiving less than half of the discounted present value of the payments to be transferred.

Moreover, when determining whether or not the transfer is in the best interest of the payee, the court must consider the totality of the circumstances including what the payee proposes to use the funds for. This court does not find that the proposed transfer is in the best interest of Ms. Taylor or her two children. She is transferring all of her future monthly payments which total $587,164.72 for a mere $151,000. Nowhere in the petition does Ms. Taylor indicate whether or not she is employed and whether or not she has other sources of income to pay her mortgage and other monthly expenses. In addition, Ms. Taylor does not state the total purchase price of the three-family home she is interested in purchasing or whether she would even qualify for a mortgage. Petitioner, through the affidavit of Mr. Hillman admits that Ms. Taylor has poor credit and would not qualify for a mortgage. It is troublesome to this court that Ms. Taylor, though she had every right to do so, waived her right to seek independent professional advice regarding the legal, tax and financial implications of this transfer. Seeking independent professional advice may have benefitted her and allowed her to explore other options for obtaining money.

The transfer of the remainder of her lifetime monthly annuity payments in excess of $500,000 in exchange for only $151,000, is not in the best interest of either Ms. Taylor or her dependents. Accordingly, the motion by petitioner is hereby denied.

A copy of this decision and order shall be attached to any future applications by Ms. Taylor to transfer her structured settlement funds.

This constitutes the decision and order of the court.

Dated February 13, 2007