Bill would cap structured-settlement purchases in Md. at 25 percent

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Purchasers of structured financial settlements would be barred from buying more than 25 percent of the remaining funds owed to the seller under legislation designed to protect alleged victims of childhood lead poisoning from being exploited if they choose to sell their settlement share for pennies on the dollar due to an imminent need for money.

The legislation, filed in advance of Wednesday’s start of the General Assembly session, follows reported instances of exploitation by some purchasers.

The Washington Post reported in August that – despite federal and state laws aimed at preventing abuse – a Baltimore victim of lead-paint poisoning had sold for less than $63,000 her nearly $574,000 structured settlement, which was to be paid out over 35 years.

The bill’s introduction also follows the Jan. 1 implementation of a Maryland Judiciary rule aimed at ensuring that judges protect recipients of structured settlements from being exploited by purchasers.

“We’re finding that individuals sometimes may not make the wisest decisions” in selling their settlement funds for cents on the dollar, said Del. Keith E. Haynes, D-Baltimore, the bill’s chief sponsor. “The idea is to protect individuals from themselves in some cases.”

“People do understandably have emergencies” and need funds quickly, Haynes said of those selling structured settlements. “At the same time, we don’t want [them] to give away the bank.”

House Bill 42 would “allow a purchaser to continue to purchase those structured settlements, but just not at 26 percent,” added Haynes, an attorney with The Law Offices of Peter G. Angelos P.C. in Baltimore.

But the National Association of Settlement Purchasers objected to the bill’s limitation, saying it would limit judges’ ability to approve some transactions they otherwise deem necessary, reasonable, and appropriate.

“NASP supports Delegate Haynes’ objective of ensuring that structured settlement transfers are in the payees’ best interest – those involving victims of childhood lead poisoning in particular,” the association’s president, Patricia LaBorde, said in a statement. “However, House Bill 42’s provision that limits a payee’s ability to transfer not more than 25 percent of their settlement payments is based on an arbitrary value that does not account for the amount or timing of payments that the payee is seeking to sell.”

H.B. 42’s 25 percent cap would apply only to the sale of structured settlements that resolved “a claim for damages for personal injury caused by the ingestion of lead by a minor.” The limit would be applied to the discounted present value of future payments under the structured settlement as of the date the settlement was approved by a court.

The bill has been referred to the House Judiciary Committee. The measure has not been cross-filed in the Senate.

No ‘forum shopping’

Attorney Scott E. Nevin, who represents childhood victims of lead poisoning, said he does not like his clients selling any of the structured settlement proceeds he has hammered out on their long-term behalf via negotiation with defendants.

“It’s important that the purpose of these structures is to help my clients with the stressors of life,” Nevin said, referring to financial demands. “If you start tapping that and making it smaller, it won’t be there for you.”

Ideally, the purchase of structured settlements would be permitted only for “exceptional circumstances,” such as a serious health issue or for tuition, said Nevin, of The Law Offices of Peter T. Nicholl in Baltimore.

“Having said that, this bill is better than what is out there, which is nothing” in terms of protecting the seller, Nevin added.

Under the legislation, the sale of the structured settlement would need judicial approval following a hearing at which the judge would be required to ask the seller if he or she had entered into and other agreement to sell settlement funds.

The bill also contains a provision that codifies the Judiciary’s rule designed to prevent structured-settlement purchasers from filing purchase petitions in courts thought most likely to approve settlement sales.

To prevent such “forum shopping,” the legislation requires that purchase petitions be filed in the circuit court for the county where the seller resides. If the seller now lives outside of Maryland, the petition would have to be filed in the circuit court where the settled claim was pending when the settlement was reached.

The bill, like the Judiciary’s rule, would also require the seller to appear in person at the court hearing on the sale of the structured settlement.