Yesterday the Council of the District of Columbia, in Washington, DC took a historic step by holding a Hearing to consider the adoption of the first-ever Structured Settlement Protection Act for the District of Columbia. Four Members of the DC City Council have introduced Bill 22-0020, the “Consumer Disclosure Act of 2017.” This bill would establish consumer protections for structured settlement annuitants who may consider selling some or all of their future payments in a factoring transaction.
Henry Strong, President of JMW Settlements, testified at the meeting in favor of the Consumer Disclosure Act. He described the time and care that goes into a comprehensive settlement plan for an injured claimant, and how these injury victims can be targeted by factoring companies after a structured settlement is in place.
“Unforeseen circumstances can arise and from time to time, and they may believe they need to access the value of their structured settlement in some other way,” Henry stated. “And here’s where it gets tricky: other people learn that they have this guaranteed income stream. And these other people may - or may not - have their best interest at heart, but they certainly know the value of that cash flow. A whole industry has sprung up offering “Cash Now for structured settlements.”
The official statement submitted to the Council by NSSTA explains why the District should have its own SSPA, and explains the proposed changes. The suggested amendments would:
Eliminate references to approval of structured settlements by a “responsible administrative authority.” Such references appear in the NCOIL Model and in some SSPAs, because in some jurisdictions structured settlements are approved in some cases by administrative agencies rather than courts. Because that is not true in the District, a D.C. SSPA need not refer to a “responsible administrative authority.”
Modify the requirement that a court approving a transfer of structured settlement payment rights find that the structured settlement payee “has received independent professional advice.” The amended bill would require that a court find that the payee has been advised to seek independent professional advice and has either received it or knowingly waived the right to receive it. This change recognizes that for many structured settlement payees who may propose to sell their payment rights the cost of obtaining genuinely independent professional advice may be prohibitive; and if they are required to obtain advice they too often will receive advice that may not be independent and professional.
Require that the advance disclosure statement provided to any payee in connection with a proposed transfer of structured settlement payment rights include disclosure of the “effective annual interest rate” implied in the transaction. (The bill already would require disclosure of the discounted present value of transferred payment rights; but in some cases disclosure of an implied interest rate may be more useful, because that rate can be readily compared with known market interest rates.)
Require that the court hold a hearing on any application for approval of a transfer of structured settlement payment rights (whether or not anyone contests the application) and require that the payee appear at the hearing unless he or she is excused for cause.
Require that any application for court approval of a transfer of structured settlement payment rights inform the court about previously approved transfers of the same payee’s payment rights and any previous instances in which proposed transfers have not been approved.
As Henry stated in his testimony, “This bill will give DC Judges the tools they need to fairly evaluate a person’s circumstance, to determine if the terms being proposed are fair and in the best interests of that person – and their dependents. It will go a long, long way to ensuring that the plans we so carefully craft at the outset will only be interrupted after a full hearing of the facts and the applied and considered wisdom of one of DC’s own Judges.”