Structured settlement recipients across the country face a persistent threat: companies that purchase their future guaranteed payments for a fraction of their value. The mechanics of this secondary market, known as settlement factoring, have been extensively documented by investigative journalists, consumer advocates, and federal regulators. The question for legislators, judges, and attorneys general is no longer whether the problem exists. It is what specific steps have proven capable of reducing harm.
Maryland provides a concrete answer. Under reforms implemented in that state, predatory settlement factoring transactions fell from approximately 1,800 in a single year to just six the following year. That outcome was not accidental. It resulted from a defined set of judicial and procedural guardrails that other states can adopt.
NSSTA and the National Consumers League (NCL) have worked together for more than a decade on state-level structured settlement protection. In a joint conversation published May 29, 2026, NSSTA Executive Director Eric Vaughn and NCL CEO Sally Greenberg outlined what Maryland did, why it worked, and what a replicable reform model looks like. The full press release is available here: John Oliver Spotlighted Settlement Factoring.
What Is a Structured Settlement, and What Is Settlement Factoring?
A structured settlement resolves a personal injury, wrongful death, or similar claim through a stream of guaranteed periodic payments rather than a single lump sum. Payments are funded by highly rated life insurance company annuities and are exempt from federal and state income taxes under Section 104(a)(2) of the Internal Revenue Code. The payment schedule is designed to provide long-term financial security tailored to a recipient's actual medical and living needs.
Settlement factoring is a separate, secondary-market activity. A factoring company offers the recipient cash today in exchange for the right to collect that person's future payments. The lump sum offered is typically a fraction of the total value of the payments being surrendered. Unlike the structured settlement itself, the tax exemption does not transfer when payments are sold.
These are two distinct things. The structured settlement is a protective instrument established and recognized by federal law. Settlement factoring is a transaction that removes those protections. The public reaction to recent national coverage of this issue reflects that distinction clearly: concern has centered on the factoring transaction and the conditions under which it occurs, not on structured settlements themselves.
A Foundation Built Over Decades: SSPAs in All 50 States
The consumer protection framework that exists today for structured settlement recipients is the result of sustained advocacy stretching back to the 1990s. NSSTA worked with legislators across the country to establish Structured Settlement Protection Acts, state laws requiring judicial approval before any transfer of future settlement payments can take effect.
In August 2021, New Hampshire became the final state to enact an SSPA when Governor Chris Sununu signed Senate Bill 134 into law. With that signature, all 50 states and the District of Columbia had SSPAs in place -- a milestone NSSTA had pursued for more than two decades, initially against vigorous opposition from settlement purchasers. The full announcement is available here: NSSTA Applauds New Hampshire Structured Settlement Protection Act.
That foundation matters. But achieving universal SSPA coverage is not the same as achieving universal effectiveness. The structural problem is that factoring proceedings are non-adversarial. Typically, only the factoring company's attorney and the recipient are present, with no independent advocate for the recipient. Hearings have been documented taking as few as two to three minutes. Courts may technically apply a best-interest standard while lacking the information needed to do so meaningfully.
Maryland demonstrates what becomes possible when that foundational framework is reinforced with specific procedural guardrails.
What Maryland Did
Maryland's reforms were championed by then-Attorney General Brian Frosh and implemented with the involvement of the National Consumers League. The core elements of the Maryland model were straightforward:
- Home venue requirement. Factoring petitions must be heard in the recipient's home court, not in a distant jurisdiction chosen by the factoring company.
- Mandatory judicial questioning. Judges are required to ask specific questions directly of the recipient, including whether this is a first or a repeat transaction and how the recipient intends to meet ongoing financial obligations after selling future payments.
- Tightened review standards. Courts are equipped with clearer authority to evaluate whether a proposed transfer is genuinely in the recipient's best interest, with more structured guidance on what information must be presented and considered.
The outcome was unambiguous. In the year before these guardrails took effect, Maryland courts approved approximately 1,800 factoring transactions. In the year after, that number fell to six. As NCL CEO Sally Greenberg stated in the joint NSSTA-NCL conversation: if the proper restrictions and protections are put in place, people with a structured settlement who often do not understand these financial transactions will not give away all their future payments for pennies.
The results of appointing an independent guardian ad litem are instructive in this regard. Where courts have done so, approval rates for factoring transactions have dropped significantly, and in many cases recipients withdrew their requests after consulting with an advisor before the court even ruled. Only five states currently authorize courts to appoint a guardian ad litem in connection with transfer petitions.
NSSTA's formal comment to the Consumer Financial Protection Bureau documented the broader pattern: discount rates ranging from 16 percent to 28 percent in some transactions; complex agreements that recipients frequently cannot fully evaluate; marketing directed at cognitively impaired individuals; and repeat transactions that progressively deplete a recipient's payment stream. Read the NSSTA CFPB comment here.
Is Discounting Ever Legitimate? What the Debate Gets Right and Wrong
A portion of the public conversation following recent national coverage raised a fair technical point: discounting future payments to a present value is a legitimate financial concept. Future money is worth less than current money, and there are circumstances in which liquidity has genuine value to a recipient.
That point does not justify the practices that consumer advocates and NSSTA have documented. The problem is not that a discount exists. The problem is the conditions under which transactions occur: recipients who are cognitively impaired, who lack independent advice, who do not fully understand the terms, who are repeatedly solicited until they agree, or who are brought before courts in distant jurisdictions without meaningful review. Discounting is a financial tool. Exploiting information gaps, vulnerability, and inadequate oversight is something else entirely.
Before considering any factoring transaction, recipients should first contact the insurance company or qualified assignment company that administers their settlement to ask whether a hardship commutation provision is available. Some structured settlement arrangements include provisions that allow recipients to access funds under defined hardship circumstances at terms more favorable than a factoring transaction would provide. That option is worth exploring before any agreement with a factoring company is signed.
Protecting Young Recipients: The Court Record Problem
A separate but related vulnerability affects recipients who received structured settlements as minors. Some factoring companies monitor public court records to identify recipients of minor settlements, then contact those individuals the moment they reach adulthood, often before they have financial experience or family guidance in place.
Advocates in several states, including Ohio, Oregon, and California, are pursuing measures that would limit the personal information made available through court records in minor settlement proceedings. The goal is to make it harder for companies to locate and solicit young recipients during a period when they are least prepared to evaluate such offers. Ohio and Oregon have both enacted measures making court records in minor settlement proceedings confidential, accessible only on a showing of good cause.
For more detail on this aspect of the reform agenda, see the NSSTA blog post: How Can States Protect Structured Settlement Recipients from Predatory Factoring?
What the Reform Agenda Calls For
The joint NSSTA-NCL reform agenda, as outlined in the May 2026 conversation and the accompanying press release, includes the following state-level priorities:
- Mandatory local venue for factoring petitions, requiring proceedings to be held in the recipient's home jurisdiction.
- A defined set of judicial questions covering prior transactions, the recipient's household financial circumstances, and the intended use of the lump sum.
- Restrictions on aggressive solicitation practices directed at recipients.
- Protections for the personal information of young recipients, whose court records are accessible to factoring companies the moment they turn eighteen.
- Expanded use of independent advisors, including authorization for courts to appoint a guardian ad litem in appropriate cases.
Listen to the full NSSTA and NCL conversation: Protecting Structured Settlement Recipients.
What Recipients and Their Families Can Do
The most reliable protection against predatory factoring is preparation and independent advice. Before considering any offer to sell future payments, a recipient should first ask whether a hardship commutation provision exists in their settlement arrangement, then consult the qualified professional who helped establish the structured settlement, or another reputable independent advisor, to understand the full financial consequences of any proposed transaction.
Legitimate structured settlement consultants operate under NSSTA's Code of Ethics and are experienced in helping recipients address genuine short-term financial needs without surrendering guaranteed long-term payments. Factoring is rarely the only option, and it is almost never the best one.
Recipients have the right to receive written disclosure of all transaction terms before signing, including the total value of remaining payments, the present value of that amount, the lump sum being offered, and all fees and discount rates. Most states provide a cancellation window after signing; that right should be confirmed in writing before executing any agreement.
NSSTA does not refer cases or recommend individual consultants. Recipients can search for NSSTA member consultants at nssta.com/member-search. Additional public resources are available at nssta.com/structured-settlements/public-resources.
Related Resources
John Oliver Spotlighted Settlement Factoring -- NSSTA and NCL press release, June 2, 2026
How Can States Protect Structured Settlement Recipients from Predatory Factoring? -- NSSTA blog
Protecting Structured Settlements From Factoring Industry Abuses: Is Now a National Story -- NSSTA blog
Regulation is Required to Combat Factoring -- NSSTA formal comment to the Consumer Financial Protection Bureau
NSSTA Applauds New Hampshire Structured Settlement Protection Act -- PRWeb press release, August 2021
Watch the Full NSSTA and NCL Conversation -- YouTube, published May 29, 2026
