Structured Settlement Protection Act: A Beginning, But Not the Finish Line

Investigative Reporting Sparks Reform

Journalist David Weissman of The State (McClatchy Media) reported on the new, more stringent Structured Settlement Protection Act in South Carolina that was prompted by his investigation into factoring company abuses in the state. His article can be found HERE.

Factoring: The Business of Purchasing Cash Flows at a Discount

Factoring companies purchase cash flows at a deeply discounted price. Structured settlement recipients are a prime target due to the annuities that fund their settlements, issued by highly rated, secure life insurance companies. Investigations by the media have led to stricter laws and enforcement in several states, starting with a Washington Post article on Freddie Gray a few years ago. Although tougher Structured Settlement Protection Acts help, they are only the beginning.

Structured Settlement Protection Acts: Only as Good as the Judge Who Applies Them

These acts exist in all 50 states but are only effective if judges apply them correctly. The law mandates that the court must determine:

• the factoring deal is in the payee's best interest,
• a multi-pronged review that should consider the discount rate,
• the payee's financial and mental acuity,
• sources of other income,
• intended use of the funds, and
• whether they have alternative sources of income to replace the structured settlement they are relinquishing for a steep discount.

Judiciary Education: A Step in the Right Direction

Investigators like Weissman have started the ball rolling, but it is up to the courts to enforce the protections. South Carolina's judiciary has taken the next step, receiving a judicial education session on factoring from the National Structured Settlement Trade Association (www.nssta.com), an organization that has worked for the protection and betterment of structured settlement payees for decades.

Education Is Key: Encouraging All 50 States to Get Informed

Investigations into factoring companies are an important starting point for protecting structured settlement payees. However, enforcement of Structured Settlement Protection Acts and judicial education on factoring are necessary.

We urge courts in all 50 states to reach out to NSSTA and get educated on the history and perils of factoring. With education and better understanding, judges can prevent abuses and protect structured settlement payees from being taken advantage of.

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