Patricia LaBorde is president of the National Association of Settlement Purchasers and senior vice president and structured settlement division counsel at Stone Street Capital.
The National Association of Settlement Purchasers supports proposed legislation in Maryland and Virginia that would supplement existing measures in order to prevent future misconduct in the secondary-settlement market. This year, legislators can enact laws that bolster consumer protections in the secondary market for structured settlements. This is an opportunity that industry leaders and NASP encourages and we applaud the Virginia House of Delegates’ unanimous passage of House Bill 52 last month.
Structured-settlement recipients are those who opt to receive payments from the settlement of court cases in a series of installments rather than a single, upfront sum. The secondary market for structured settlements provides these recipients, also called payees, with the option to make a settlement transfer. Transfers allow payees to sell payments due in the future in exchange for an immediate payment. This option is beneficial to those experiencing financial stresses, including medical bills, eviction or home foreclosure. It also provides a liquidity option to those who need or want to address an upcoming significant expense, such as financing their own or a family member’s education, pursuing a business venture or relocating for personal or employment reasons.
As with 49 other states, Maryland and Virginia have structured-settlement protection acts (SSPAs), which ensure that proposed settlement payment transfers are approved in a court-review process that mandates high standards of transparency, written direction to seek professional advice and detailed disclosures to payees. The bills in Maryland and Virginia propose three amendments that would further safeguard sellers and aid state courts in reviewing these transactions.
The amendments would mandate that payees appear in person at the hearing when judges consider their proposed structured-settlement transfer. The procedures under other states’ SSPAs include this requirement with few exceptions, and it has proved to enhance thorough judicial reviews of these transactions. When payees appear in court, judges can address the transaction with the payees directly, get answers about the payees’ personal and financial circumstances and evaluate them in person. Requiring personal appearance of the payee further ensures that judges can assess the potential impact of a settlement transfer on the payee and promotes a well-informed decision.
The amendments include provisions that require court proceedings to be conducted and approved in the payee’s county of residence. This makes it easier for payees to appear at court hearings and strengthens judges’ ability to determine whether the transaction is in a payee’s best interest. By requiring approval in the county where a payee lives, judges are more likely to be familiar with a particular payee’s background and court history and likely better able to understand and appreciate local economic conditions and other factors. This context helps judges make better-informed approval decisions.
Finally, the amendments mandate payees’ disclosure of prior structured-settlement transactions and attempted transactions within a designated number of years. The details of such prior transactions are set forth and can be discussed with payees at the hearing and typically include the payments previously sold, the payees’ use of the proceeds and reasons for the prior transactions. Such information helps judges in thoroughly considering whether a proposed transfer is appropriate in light of such prior transactions, the remaining payments and other payee circumstances.
The media are right to criticize the conduct of some companies that crossed the line in isolated transactions. But it is important to note that industry leaders and legislators are working together to improve statutory protections for consumers. NASP and its state legislative partners support these pending proposals in both Maryland and Virginia, along with comparable legislation proposed in Florida.
With these changes in Virginia and Maryland, payees and courts will be better equipped and positioned to evaluate these transactions. Moreover, those payees who need or want liquidity relative to their financial situation can access their financial assets to protect and improve their lives and those of their families.