Revisions to the Illinois Structured Settlement Protection Act, 5 ILCS 153/1 went into effect last month in the wake of Settlement Funding, LLC v. Brenston, 998 N.E. 2d 111 (Ill. App. Ct. 2013) where the Illinois Appellate Court held that the trial court erred in permitting a transfer where the settlement agreement contained an anti-assignment clause and the factoring company failed to disclose this to the court. Among the changes to the Illinois Structured Settlement Protection Act are provisions permitting an “interested party” to waive these assignment prohibitions. The revisions to the Illinois Structured Settlement Protection Act also include provisions designed to address “forum shopping” inside the state by requiring that transfer petitions be filed in the county where the payee lives.
The Washington Post reported that “Prince George County Circuit Court has implemented significant reforms” in its handling of structured settlement payment petitions filed pursuant to the Maryland Structured Settlement Protection Act. All sellers and their independent advisors must now appear at the hearings, and all petitions must be filed using the seller’s full name, rather than initials. Judge Herman C. Dawson who previously presided over the transfer petition hearings will no longer do so. Unfortunately, as this latest article on the structured settlement industry by Terrence McCoy points out, loopholes in the Maryland Structured Settlement Protection Act “benefit the companies” purchasing these structured settlement payments. More judicial reforms such as those being implemented in Prince George County would go a long way in protecting the recipients of structured settlements.
Council members Mary M. Cheh (D-Ward 3), Charles Allen (D-Ward 6), Anita Bonds (D-At Large), David Grosso (I-At Large) and Brandon T. Todd (D-Ward 4) introduced a structured settlement protection act to protect District of Columbia residents seeking to sell their structured settlement payment streams. While we agree with the op-ed in The Washington Post on September 11, 2015 by legal aid attorneys Heather Latino and Thomas Papson that the proposed legislation is a “huge step toward ensuring that District residents with structured settlements from personal injury cases are not victimized a second time by a company seeking to purchase their settlement payments” structured settlement protection acts need to ensure that they work to protect the recipients of structured settlements, not the companies purchasing the structured settlement payment streams. This proposed legislation does not do enough.
National media coverage of the practices of the structured settlement factoring industry has continued, with MSNBC airing a lengthy segment by reporter Melissa Harris-Perry on August 30, 2015. The segment included a discussion with reporter Terrence McCoy of The Washington Post, Judith Browne Dianis, noted civil rights attorney and Co-Director of the Advancement Project, E.J. Dionne, political commentator with The Washington Post, and William Jawando, Democratic candidate for election to Maryland’s 8th Congressional District. The exploitation of structured settlement recipients by the factoring industry has gone unchecked for years with the structured settlement protection acts doing little to protect the settlement recipients. Tougher legislation and redress for those who have been victimized is in order.
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.
A recent article in The Washington Post by Terrence McCoy “How companies make millions off lead-poisoned, poor blacks” highlights the problems plaguing the structured settlement factoring industry, where recipients of structured settlements are often urged to “sell” their payment streams in exchange for lump sums of cash at steep discount rates. Structured settlement protection acts which have been enacted by 48 states were designed to protect those seeking to sell their payments by providing court oversight and disclosures to sellers. All 48 statutes that have been enacted require that the sale be in the “best interests” of the seller, taking into account the needs of his/her dependents. Unfortunately, many of the structured settlement acts are not doing a good job of protecting anyone. According to the Washington Post, one company has had 160 petitions before the same judge in Prince George Circuit Court in Maryland, with the petitions approved 90% of the time. Eric Vaughn, executive director of the National Structured Settlements Trade Association (NSSTA) is quoted in the article as saying “And these companies are getting around the intents of the law….And when that happens, people get hammered.” After the article appeared in The Washington Post, Attorney General Brian E. Frosh (D) and Maryland legislators vowed to tighten restrictions on transfers. While “best interests” may be interpreted differently by different courts in different states, it clearly cannot mean “self-interest” of the factoring companies. When factoring companies prey upon seriously injured individuals and consummate multiple transactions over a short period of time, something is clearly wrong.
Two Edward Stone Law cases were featured prominently in today’s Wall Street Journal – “Firms Help Settlement Holders Cash Out Payments Meant to Last a Lifetime”. What the WSJ article fails to describe is the high pressure predatory sales tactics used to raid large structured settlement annuities that were intended to last a lifetime. The Taylor and Lafontant cases highlight just how far the factoring industry has fallen in recent years and how important it is to obtain independent professional advice. Instead of providing needed liquidity, as advertised, bad actors target large structured settlement annuities and shop for courts and judges they know will rubber stamp petitions that don’t meet the best interest standard required under state and federal law. If a slick annuity salesperson tries to convince you to fake your relocation to another state with promises of “cash now”, think twice. You could lose your identity (true story) and wind up destitute (truer still). If you or someone you know has been victimized by structured settlement fraud, Edward Stone Law will evaluate your transaction at no charge, and let you know if help if available. You can reach us via email at firstname.lastname@example.org or via telephone at (203) 504-8425.