Upon the foregoing papers, 321 petitioner Henderson Receivables Origination, LLC. ("petitioner") makes the instant application, pursuant to the Structured Settlement Protection Act, General Obligations Law § 5-1701 et seq., for the approval of the transfer of certain rights vested in Melissa Nelson ("Ms. Nelson") to the petitioner.

The structured settlement that was the subject of petitioner's application was obtained as a result of an action for personal injuries filed by Eileen Nelson on or about November 18, 1999, against Brian Katz, Mount Sinai Hospital, et al, in the Supreme Court Kings County. The complaint arose out of certain alleged negligent acts or omissions by the defendants. Petitioner, Melissa Nelson, is the designated beneficiary after the death of the plaintiff/payee pursuant to the terms of the settlement agreement (No death certificate for Eileen Nelson has been provided to the court).

In accordance with the structured settlement, an annuity was purchased from Transamerica Life Insurance Company of New York. Transamerica Annuity Service Corporation, is the Assignee and is the entity obligated to make the payments that are the subject of this transfer application to petitioner.

Under the terms of the agreement between Ms. Nelson and petitioner, Ms. Nelson is [*2]seeking the court's approval to transfer her rights to one hundred and twenty (120) monthly payments of $400.00 each beginning on July 1, 2008 and ending on June 1, 2018.

The New York Transfer Disclosure Document issued pursuant to the transfer states that the aggregate total of the transferred at 3.20% is $48,000.00. The discounted present value of the payments to be transferred is $41, 014.95 ^[FN1]. In consideration for such transfer, Ms. Nelson is to receive a gross advance amount of $23, 838.60. An annual discount rate of 19.99 % was used to determine the gross advance amount to be transferred. Ms. Nelson agreed to pay a compliance and administrative fee of $75.00 and a filing and related expenses fee of $1,500.00, resulting in a final net advance amount of $21,588.60.

At issue here is whether approval of the proposed transfer would be consistent with the letter and spirit of the Structured Settlement Protection Act.

The Structured Settlement Protection Act requires judicial approval for a transfer structured settlement payment rights (see General Obligations Law § § 5-1705, 5-1706). Pursuant to GOL § 5-1706, a transfer of structured settlement payment rights is not effective unless the transfer has been authorized, in advance, in a final order of a court of competent jurisdiction based upon the express finding by such court that, among other things, the transfer is in the best interest of the payee, taking into account the welfare and support of the payee's dependent, 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 is "fair and reasonable" (Matter of Settlement Funding of New York, LLC [Cunningham], 195 Misc 2d 721 [2003],quoting General Obligations Law § 5-1706 [b]). In this regard, the court notes that "the express intent of the enactment was to limit transfers of structured settlement payments to true hardship cases" (Matter of Settlement Capital Corporation [Ballos], 1 Misc 3d 446, 450[2003]). Although General Obligations Law § 5-1706 was amended in 2004 to provide that "a court need not make a finding that an applicant is suffering from a hardship before the court is able to approve the transfer of structured settlement payments," the requirement under General Obligations Law § 5-1706 still requires that a reviewing court ascertain whether the transfer is in the best interest of the payee which requires, in this court's view, an assessment of the payee's current financial deficiencies and needs and his or her probable future financial situation.

To support the application for judicial approval of the proposed transfer, petitioner submits the affidavit of John Calamari, in which he states that he is employed as Executive Vice President and Chief Financial Officer of 321 Receivables Organization, LLC since March of 2007. He avers that "one of my responsibilities includes overseeing pricing guidelines for our purchase of deferred cash flows, including structured settlements payment rights." Mr. Calamari attests to several factors he believes affect the discount rate, including the size and timing of payments, internal cost of funds, servicing expenses and the cost of locating potential clients. He proffers that "although competition exists among companies that acquire payment rights, [*3]because of the expenses involved, the typical effective discount rate charged to the seller is between 12% and 24%; the effective rate of Ms. Nelson's transfer is 19.99%, which is within industry standards for these types of transfers and is comparable to major credit card rates." Accordingly, Mr. Calamari states that Ms. Nelson is receiving the present fair market value for this structured settlement transfer. He further states that "based on the applicable federal rate for valuing annuities, the seller is receiving 58.10% of the IRS valuation of this payment stream."

In her affidavit in support of the application, Ms. Nelson avers that she is a 34 year old single mother of one minor child age 17, who resides with his father. She also states that she is unemployed. Ms. Nelson explains that she intends to use the proceeds received from the petitioner as follows: 1) $10,000.00 to pay for her son's college; 2) $6,000.00 to pay her brother's medical bills and other expenses; and 3) $4,588.60 to rent an apartment and to pay for the security deposit and first months rent. Ms. Nelson claims that she is not selling her entire annuity and will continue to receive payments of $200.00 per month. She avers that she has considered the impact of this transaction and believes that it will allow her to improve her current standard of living and financial circumstances and believes it is in her best interest. She adds that she procured independent professional advice regarding the proposed transfer, evidenced by a letter from Raymond Pezzoli, Esq. which is attached to the application. .

This court believes that the "best interest" standard under the Structured Settlement Protection Act requires a case-by-case analysis to determine whether the proposed transfer of payments, which were designed to preserve the injured person's long-term financial security, will provide needed financial rescue without jeopardizing or irreparably impairing the financial security afforded to the payee and his or her dependents by the periodic payments (Matter of Settlement Capital Corp [Ballos], 1Misc 3d 455 [2003]). Specific consideration should be given to the payee's age; payee's ability to show sufficient income that is independent of the payments sought for transfer; payee's capacity to provide for the welfare and support of his/her dependents; and the demonstrated ability of the payee to appreciate the financial terms and consequences of the proposed transfer based upon truly independent legal and financial advice ( Matter of Settlement Funding of New York L.L.C. [Platt], 2 Misc 3d 873, 876 [2003]).

Courts generally have found transfers not in the best interest of the payee where the payee intends to use the proceeds of the transfer to ease relatively minor financial burdens such as paying back loans, credit card debt, purchasing a new car or home improvements (see, Matter of Barr v Hartford Life Ins., 4 Misc 3d 1021 (A) [2004]; Matter of Settlement funding of New York L.L.C. [Cunningham], 195 Misc 2d 725 [2003]); Matter of 321 Henderson Receivables Limited Partnership [DeMallie], 2 Misc 3d 463 [2003]). Nonetheless, the existence of hardship, such as a looming foreclosure on the family home or the need for life-sustaining medical treatment, weighs heavily in favor of determining that a transfer of structured settlement rights is in the payee's best interest (see Matter of Settlement Funding of New York, LLC [Brown] 11 Misc 3d 105 9[A] 2006 NYSlip OP 50286[u]). Conversely, the court approved a transfer with an unreasonable high interest rate based solely on the payee's best interest' where the payee desperately needed cash to obtain life-sustaining medical treatment for a loved one and had no other legitimate means of raising the money (see, Matter of 321 Henderson Receivables Limited Partnership [DeMallie], 2 Misc 3d 463 [2003]). The court concluded that in the face of a life and death emergency the payee's best interest could outweigh the fact that the transfer terms were [*4]unfair and unreasonable. In the instant application, the court does not find that Ms. Nelson is in such dire straits.

After consideration of these factors, the court does not find that the proposed transfer is in the best interest of Ms. Nelson. None of the proposed uses for the payment proceeds appear to be compelling at this time. This court is quite mindful of payees being lured into giving up their future financial security their structured settlement was designed to provide in order to get "quick and easy" cash. Oftentimes, there are less costly alternatives for payees to obtain money while preserving their structured settlement. Ms. Nelson has not shown that she has exhausted other options for obtaining a loan at a lower interest rate than what is being offered by the petitioner. Further, there is no showing that Ms. Nelson is unable to obtain financial aid or a college loans for her son's education and to defer repayment of said loans until he graduates.

As part of its review, the court is also required to make a finding that the proposed 19.99% discount rate used to determine the gross advance amount is fair and reasonable' (see General Obligations Law § 5-1706 [b]). Lower courts have reached different conclusions in regard to what constitutes a proper discount rate or what amount of fees and costs are allowable (see In Re Settlement Capital Corp. for Approval of Structured Settlement Payment Rights, of "Y", 194 Misc 2d 711[2003]; Settlement Funding of New York, LLC [Ocasio], 11 Misc 3d 1061 (A) [2006]).

Ms. Nelson's willingness to proceed with the subject transaction has no bearing on the court's determination of whether the rate is "fair and reasonable" (Matter of Settlement Funding of New York L.L.C. [Cunningham], 195 Misc 2d 724 [2003]). Despite Ms. Nelson's consent to the transfer and petitioner's attempt to justify the rate of 19.99%, this court finds that said discount rate is neither fair nor reasonable when taking into account the actual amount Ms. Nelson would be receiving (see Petition of Settlement Funding of New York LLC v. Allstate Settlement Corp., 13 Misc 3d 1245 (A) [2006]). It seems like Ms. Nelson would be receiving less than half of the discounted present value of the payments to be transferred. This is quite troublesome to this court, which is mindful of the legislative intent to protect the recipients of long-term structured settlements from being victimized by companies aggressively seeking the acquisition of their rights (GOL § 5-1706). Further, the fact that the discount rate may reflect the industry's standard is not persuasive because it is the practices and standard of this industry that are the target of the Structured Protection Settlement Act (Matter of Henderson Receivables, Origination [Winsom], 16 Misc 3d 1112(A) [2007]).

This court also takes issue with the $75.00 and the $1,500.00 fees charged by the petitioner. Such amounts are summarily characterized in the disclosure statement as compliance and administrative fees and filing and related expenses. New York GOL 5-1703(f) requires a disclosure statement to set forth "an itemized listing of all commissions, fees, costs, expenses and charges payable by the payee or deductible from the gross amount otherwise payable to the payee and the total amount of such fees." In this case, the disclosure statement fails to include an itemized list or other evidence to support how the petitioner's fees were calculated or what they consisted of. Further, paragraph 13 of the Purchase Agreement Provides that each party will each pay their respective costs and expenses in connection with the carrying out of the agreement. Based on the express language, as well as the lack of evidence to support the fees charged, this court is unable to make a finding pursuant to GOL 5-1706 (b), that the fees and expenses used to [*5]determine the net advance amount are "fair and reasonable."

The court further notes that in the petition in support of the order to show cause for the approval of the transfer, attorney Daniel Santarsiero states, that upon information and belief, no prior application for similar relief has been filed. However, in his letter dated May 28, 2008, Raymond Pezzoli, the attorney who advised Ms. Nelson on the tax consequences of the transfer, states that Ms. Nelson has had experience with the legalities and procedures of such a sale in the past. It is disturbing that petitioner did not disclose to the court that Ms. Nelson has had a prior transfer of her structured settlement payments. This information and supporting documents should have been provided to the court.

Under the circumstances, the court finds that the petitioner has failed to meet its burden of establishing that the transfer is the best interest of Ms. Nelson and that the terms of the transaction are fair and reasonable. Accordingly, the petition is denied.

The foregoing constitutes the decision, order and judgment of this court.

E N T E R,

J. S. C.