> Are these actually bad deals?
Yes.
Yes.
Look just to give you a quick sense... The payments started at $1k but they go up. The average payment over 35 years is actually closer to $17k per year, and if you quadruple that (and the $60k or so she got in return) you get to amounts that make sense to many of us.
You get to a salary of $70k per year, a salary that is totally 100% guaranteed for 35 years (until death, and she's 20 years old so run the actuarial tables), and requires 0 hours of work.
Imagine you have that, $70k per year, guaranteed, can't be fired, and you put in 0 hours of work. It's independent of whether the market does well or not. And someone offers you $250k for you to forgo that for the rest of your life (well 35 years).
It's a total joke. You'd want at least upwards of $1m - $2m for it to come close to financially interesting. She got pennies on the dollar.
According to projections (http://www.census.gov/compendia/statab/2011/tables/11s0103.p...), a black woman who was 15 in 2007 would be expected to live to 63. So there is a significant risk that Rose would not live to the end of her payout period. But if the expected payout is >>18% of the present value of her payments (which it almost certainly is) then she got a bad deal.
Someone with time could use the annual mortality probabilities (http://www.ssa.gov/oact/STATS/table4c6.html) to calculate the expected payout. I'm bad at analysis so I'd probably use a Monte Carlo simulation.
People with lead poisoning probably live substantially shorter on average.
I don't think the risk of death is anywhere near significant enough for her to sign away half a million dollars in payments for $60k. She barely got more than 10 cents on the dollar in nominal amounts, and still less than 20c on the dollar in present dollar terms. I'd gladly pay double what she got and I'd still make a ton of money all things considered.
The number you were quoting (63) by the way is 'years of life remaining', not life expectancy as in 'age of death'. For example for a 100 year old the number is 2 years, which doesn't mean she'll live to 2 years old, obviously :)
> Taken together, the sample shows Access Funding petitioned to buy roughly $6.9 million worth of future payments — which had a present value of $5.3 million — for around $1.7 million.
This is particularly true when you consider that the only real risk is the annuitant dying before you recoup the money you paid them and that most of the one-time payouts seem to be in the range of $16,000, while many of the monthly payouts seem to be around $1000/mo. Given those numbers, in two years (padding a bit for extra costs to close the deal) you've recouped your initial cost and the rest is just gravy until the annuitant dies.
Payday loans (which are also extremely exploitative, frankly) at least have the more likely risk of the borrower being unable to pay you back to justify the raw deal.