RICHMOND — A Virginia House of Delegates committee on Tuesday advanced a bill intended to reform an industry that critics say has made millions of dollars off people in financial distress.
The measure, which could reach the House floor by Thursday, proposes a raft of changes to laws governing the sales of structured settlements.
The industry offers cash upfront to people in exchange for money bound up in structured settlements. Lawyers often recommend the arrangements, in which cash from lawsuits is dispensed in installments over years, to protect vulnerable people from spending a large payout at once.
The industry’s questionable practices were the subject of a Washington Post investigation in December.
“This legislation makes necessary reforms to Virginia’s structured-settlement laws,” said Del. Terry G. Kilgore (R-Scott), who introduced the bill a month ahead of the Post’s report.
Virginia is one of 49 states that require county courts to determine whether a settlement-purchase deal is in the seller’s best interest. But industry experts say there are weaknesses in state law: Structured-settlement recipients who want to sell their payments are not obligated to attend hearings, and companies can file their deals anywhere in the state.
Kilgore’s bill would require cases to be filed and heard in the jurisdiction where the seller lives, and require the seller to appear in person at the hearing. The bill says a purchase application must include a summary of prior transfers as well as notice of the hearing.
The legislation passed the Commerce and Labor Committee, which Kilgore chairs, with unanimous support. No one spoke against it. The National Association of Settlement Purchasers has acknowledged flaws in laws across the country and worked with Kilgore on the measure.
“This bill will require greater diligence by purchasers, provide additional protections for settlement recipients, and increase transparency in settlement applications so the courts can make informed decisions about settlement sales,” Kilgore said.
The Post investigation told the story of burn survivor Terrence Taylor, who as a child was diagnosed with a cognitive impairment and sold $11 million in future payments for a small fraction of their current-day value. A similar Post investigation, published in August, led to court reforms to protect recipients of structured settlements in Maryland.
The Virginia story drew attention to Del. Stephen E. Heretick (D-Portsmouth), a lawyer who has worked for more than a dozen settlement-purchasing firms. He has handled thousands of purchase agreements, including 10 involving Taylor.
Heretick, who was elected in the fall with strong support from Gov. Terry McAuliffe (D) and liberal advocacy groups, has called Taylor’s case a “significant anomaly” among structured-settlement sales and defended the practice, which he said can help people save their homes or afford medical care. Industry experts, however, have said sellers frequently sell most of their payments over a short period of time for pennies or dimes on the dollar.
Heretick did not immediately respond to a request for comment.
Republicans were eager to trumpet their role in tackling the problem.
“Republicans are leading the effort to reform Virginia’s laws on structured-settlement sales,” said House Speaker William J. Howell (R-Stafford). “This important reform bill increases court oversight and protects consumers.”