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Members of Congress seek investigation into factoring industry

In the wake of The Washington Post article by Terrence McCoy on the exploitation of lead-poisoning victims by the structured settlement factoring industry, Rep. Louise M. Slaughter (D-NY)Rep. Elijah E. Cummings (D-MD), and Rep. Chris Van Hollen (D-MD) have called for an investigation into the practices of the companies that buy lawsuit settlements at steep discount rates for one-time lump sum payments. In an interview with The Washington Post, Rep. Cummings said “[W]e need to look at the laws that are out there, both state and federal, and try to come up with some reforms to protect these folks.” Revisions to the current state structured settlement protection acts and Section 5891 of the Internal Revenue Code are no doubt in order. While judicial scrutiny of transfers seems to take place in some jurisdictions – certain courts in Texas, California and New York being known for their intense scrutiny of settlement transfer applications – other courts seem to turn a blind eye to the transfer applications, permitting the “sale” of payments without a court appearance by the seller, no disclosure of prior transactions, and without legal counsel or financial guidance. Surely that lack of scrutiny is not what was intended when Congress and 48 states enacted protective legislation with a “best interests” standard.