The Truth: Got a Cash Advance? Structured Settlement Purchasers Can't Force You To Sell

Have you been paid a cash advance by structured settlement purchasers on the condition that you agree to sell you payments?

Have you agreed to repay a cash advance in case you decide to abandon the deal while pending completion or court approval, but you don't have the money to pay back?

Cash Advance agreements with structured settlement purchasers: your rights and obligations

Know your rights and duties:

  • You do have to pay back a cash advance if agreed to
  • You do agree to subtract the cash advance payout amount from the lump sum paid by the structured settlement purchasers once the transfer transaction is completed
  • You do NOT have to sell your structured settlement payments just because you owe repaying a cash advance and are unable to do so even if you agreed in writing to do so, as long as the sale is not completed and approved in court

You are not obligated to sell your payments to pay off a cash advance debt

What does all this mean to you?

By accepting an advanced cash payout on a structured settlement transfer to carry some pocket money and make ends meet while awaiting the completion and court authorization on the sale, you are obligating yourself to the terms of the advance agreement and will have to repay the advance if so agreed by you and the structured settlement purchasers.

However, your structured settlement payments are not a collateral against the cash advance "loan," and you are not obligated to sell your structured settlement to anyone even in exchange for a cash advance that you can't afford to pay back to the purchasing company.

You may need to repay a cash advance, but you have the right to refuse a payments transfer and you don't have to sell a structured settlement to repay a cash-advance debt.

In fact, the structured settlement purchasers are not allowed by law to force you to sell your payments, and it may not be legitimate to buy out your payments in case you think that the sale is not in your best interest.

None the less, if you have agreed to pay back a cash advance and you discard the payments sale, you remain liable and indebted to the purchasing company and you will need to pay back the advance amount.

If you fail to pay back money, the company may file a court lawsuit against you and possibly put a lean on attempts to sell your payments to other structured settlement purchasers while you owe repaying them the advanced money.

Cash Advance obligations: what structured settlement purchasers need to know

  • Structured settlement buyers may issue cash advances to payees of structured settlements to be subtracted later from the lump sum payout to the seller or to be repaid in case the seller abandons the transaction.
  • Structured settlement purchasers may, however, not condition the advance on buying out the payments, and the payee has no obligation to sell payments regardless of whether he received a cash advance or not, or whether a cash advance has to be paid back or not.
  • Purchasing payments from a structured settlement recipient when not in his best interest and, worse, misleading them about obligations to sell payment, may be a violation of laws governing fair consumer service practices as well as laws regulating the purchases of structured settlement payments.
  • Conditioning a cash advance on agreement to sell the payments, failure to disclose to the seller his rights to retreat from the sale pending court approval, signing agreements with persons with cognitive impairments who may not have full understanding of the terms, or implying to consumers that the sale of their payments is required when they can't repay a cash advance, may be a cause for the court to decline the transfer and may yield lawsuits against the structured settlement purchasers.

Case study: lawsuit against payments a purchasing company

A lawsuit has been filed on September 13, 2017 in the United District Court for the District of Maryland by the Consumer Financial Protection Bureau (CFPB) against a factoring company that purchases structured settlement payments.

The lawsuit included a number of complaint, some of which the court upheld and others that were dismissed by the judge, but one of the complaints that were accepted in the lawsuit was that the Maryland based structured settlement funding company violated the CFPA by "abusing consumers with respect to the payments of advances."

According to the complaint, the payments purchasing company issued advances to sellers of structured settlement payments before completion of the transfer as well as at the time of the court approval. Payees agreed to repay the advances in case they don't finally complete the transaction, and payees who were unable to repay the money of the advance, were told that they were obligated to continue with the payments transfer deal even if they did not realize that it was not in their best interest.

The judge opined that if the allegations against the structured settlement funding company are true, it would constitute "taking unreasonable advantage of consumers's lack of understanding of the material risks, costs, or conditions of [a] product or service."

That would be a violation of US code §5531 "Prohibiting unfair, deceptive, or abusive acts or practices," including:

"the act or practice—

(1) materially interferes with the ability of a consumer to understand a term or condition of a consumer financial product or service; or

(2) takes unreasonable advantage of—

(A) a lack of understanding on the part of the consumer of the material risks, costs, or conditions of the product or service;"


The above complaint was from a perspective of consumer finance protection, but according to federal and statuary law governing secondary structured settlement purchases, the sale of the payments has to be in the "best interest" of the payee, and thus if consumers are told that the issuance of a cash advance obligates them to complete the payments sale even when not in their best interests, it is misleading and it is a violation of the structured settlement law and the SSPA.

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