Lawmakers ask attorney general to probe structured settlement buyouts

 Structured Settlement Buyouts

September 1 at 7:50 PM
Two members of the U.S. Congress have written a letter to Attorney General Loretta Lynch requesting an investigation into whether companies that purchase settlement payment rights have violated federal law amid mounting criticism that some deals have taken advantage of vulnerable residents in poor, urban communities.“Our goal is to have the Attorney General’s office take a deep dive into these practices and expose wrongdoing, because clearly we have a situation where people are preying on individuals who have already been victimized,” said Rep. Chris Van Hollen (D-Md.), who authored the letter last Friday with Rep. Louise M. Slaughter (D-N.Y.). “And this is re-victimizing the victims. All the facts indicate that either people are violating the law or we have inadequate protections.”The congressmen are the latest to press for increased scrutiny of companies that purchase settlement payment rights following a report in The Washington Post that detailed how some deals have doled out dimes on the dollar to lead-paint poisoning victims who are poor and mentally disabled.Rep. Elijah E. Cummings (D-Md.) last week requested a meeting with and information from one company in Chevy Chase that has often struck deals with victims of lead poisoning. Maryland Attorney General Brian E. Frosh (D) said he will look into how these companies operate in Maryland, and state lawmakers are planning to propose tighter restrictions in January.The industry involves what’s known as structured settlements. Unlike traditional settlements, which are paid out in one lump sum, they are trickled out across decades to protect vulnerable recipients from immediately spending all of their compensation. A secondary market, populated by dozens of companies, has risen around this one to purchase the rights to those payments for a fraction of their value.

Industry advocates say these deals help desperate people get the money they need now. Critics say the firms profit off disability and poverty.

The industry, which began in the 1980s, initially had few restrictions. But about two decades ago, states started passing laws intended to protect vulnerable recipients from what critics called predatory deals. Maryland was one of the first states to do so, inking the Structured Settlement Protection Act in 2000. That law, like most others across the country, called upon county judges to decide whether a deal reflected the seller’s best interests. In 2002, the U.S. Congress passed its own eponymous law, which enacted a steep tax on companies that didn’t seek the approval of a state court.

Van Hollen now questions whether some of those laws are failing. He said such legislation doesn’t specifically reference structured settlement recipients who have mental or behavioral disabilities. “That’s the key distinction there,” he said. “The current laws create some assumption that the people who are entering into these agreements have their full mental capacities and aren’t disabled,” he said.

Slaughter said this isn’t just a local issue. It can also have national consequences. “When the victims run out of that [lump-sum] money, then the rest of us have to pick up the slack,” she said. “It’s another way they’re forced onto public assistance.”

She said she her office hasn’t gotten a response from Lynch yet but is hopeful the attorney general will soon take up the issue.

Terrence McCoy covers poverty, inequality, and social justice. He also writes about solutions to social problems. 

Structured settlement buyouts without an Independent Professional Advisor or Structured Settlement Attorney are subject to these types of problems, and why we are focused on education sellers of their rights.


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