'Nobody Wants To End Up On the Front Page Of the Washington Post'
And now comes Virginia's turn....The transfer petition should be filed in the county where the recipient of the payments lives
Some of the called-for reforms for more oversight over transfers of payment rights of futures structured settlement payments to a third party include the following:
The payee - or seller of structured settlement payments - should personally appear in court at the mandatory hearing to approve the sale
Previous sales of structured payments by the same recipient should be disclosed in the application to the court
These reforms are not yet required in a number of States, while in others, such as Illinois, legislative reforms have recently been introduced. One such widely reported case is the State of Maryland where changes to the structured settlement transfer laws have been made following Washington Post reports about bad practices by structured settlement buying companies who have been manipulating cognitively impaired victims of led-paint poisoning in Baltimore, Maryland to sell their lawsuit payments in exchange for cash upfront at a discount.
Yesterday, the newspaper made news again about inappropriate structured settlement buy-out practices involving a payee who is reportedly cognitively impaired and has been manipulated into selling settlement money in the future value of $11 million dollars for a lump sum of only a small fraction of its present value.
Because of the time value of money, a dollar today is more worth than a dollar in the future. For this reason, when someone sells future payments in exchange for current money, they'll get less, because the smaller sum now is the equivalent of a much larger sum in years from now. Add to this the expenses involved in the sales process and the need of the payments buyer to make money on the sale, and the settlement recipient will end up getting a substantially smaller amount than the sum of future periodic payments.
In certain instances, such a transaction would make sense to the seller who is in need of current money for coverage of pressing expenses, given that a structured settlement, once established is illiquid; it can't be changed and can't be redeemed before maturity, so funds of the lawsuit settlement are inaccessible unless sold and exchanged for immediate money at a discount.
Still, in other cases, it would not make sense; thus, when not in the best interest of the seller. Unfortunately, companies are engaging in bad practices exploiting the poor, the needy, cognitively impaired and uneducated, persuading them to sell their future money that is locked into periodic payments for their protection, in exchange for a negligible amount of cash now.
These irresponsible companies are doing great damage both to the payees as well as to the whole industry. Ultimately, they are hurting themselves in addition to the market in general.
In a series of reports over recent weeks, the Washington Post has called attention to a number of such companies and transactions leading to calls for more control over the secondary structured settlement market by lawmakers and to new legislative reforms in the structured settlement sales business in the state of Maryland.
Lawyer and delegate-elect Stephen E. Heretick (D), in responding to the Washington Post report of the Virginia case, defended the structured settlement factoring business, saying that the Virginia case is an exception.
Heretick, who himself worked for a number of settlement payment buyout firms and who has handled "thousands of purchase agreements," according to the Washington Post, added that they have done "nothing wrong," and that he simply followed the written law.
Purchasing lawsuit settlement payments can "help people safe their homes or pay for medical care," Heretick said according to the newspaper.
In spite of this, Heretick expressed his plans to support more transparency in the structured settlement selling process, adding that nobody wants to end up on the front page of the a.m. newspaper.
In an upcoming bill that was filed past Nov. 30 by Del. Terry G. Kilgore (R-Scott), to keep under control the industry of buying out structured settlement payments for a lump sum, Heretick would probably abstain from voting, according to the Post.
The bill would require for the court hearing in settlement transfer petitions to be held in the jurisdiction where the seller is domicile. In addition, the payee and payments-recipient would need to show up personally in court.
Kilgore's bill is another step in the direction of regulating the structured settlement secondary market. It may be expected that similar legislative bills for settlement purchasing reforms will be filed in more states as well.
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