Frosh backs bill to protect sellers of structured settlements

ANNAPOLIS – Attorney General Brian E. Frosh urged lawmakers Thursday to pass legislation protecting holders of structured settlements, who have already suffered personal injuries, from a “predatory” purchaser who preys on their imminent need for money by offering them just pennies on the dollars due them.

“Some of our most vulnerable citizens have been victimized twice,” Frosh told the House Judiciary Committee, referring to the physical injury followed by the financial victimization.

Frosh’s call followed a Washington Post report 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 that was to be paid out over 35 years.

Frosh’s testimony before the House committee also followed the Jan. 1 implementation of a Maryland Judiciary rule aimed at ensuring that judges protect recipients of structured settlements from being exploited by purchasers.

The Frosh-backed measure, House Bill 535, would enable him and future attorneys general to adopt and enforce regulations on structured settlement purchases, including the establishment of a permissible discount rate to ensure the sellers are not being exploited.

The regulatory provision would enable attorneys general to make sure purchasers of structured settlements “follow the law and are responsible … and can be held accountable,” Frosh said. These protections would ensure that those selling their structured settlements “don’t lose their futures,” he added.

But Patricia LaBorde, president of the National Association of Settlement Purchasers, stated in written testimony that buyers are “particularly concerned” about the provision enabling attorneys general to adopt and enforce regulations.

“While NASP and its members do not object to being regulated by an appropriate state agency, House Bill 535 provides little direction, guidance or boundaries to the proposed regulator, the attorney general,” LaBorde wrote. “In enacting House Bill 535, the legislature would be surrendering its legislative authority to the attorney general. The attorney general would have unfettered authority to develop a system of regulating the industry with the industry having a very limited opportunity to participate in the abbreviated process.”

HB 535 would also codify the Judiciary’s rule designed to protect sellers by preventing 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 most recent settlement claim was filed.

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.

Judges who rule on whether to approve the purchase of structured settlements would have to determine the transfer is “necessary, reasonable, and appropriate and in the best interest of the payee, taking into account the welfare and support of the payee’s dependents.” The judge would have to ensure that the payee received independent professional advice concerning the proposed transfer from a lawyer or accountant.

The House Judiciary Committee on Thursday also considered similar legislation that would bar purchasers of structured settlements involving alleged victims of childhood lead poisoning from buying more than 25 percent of the remaining funds owed to the seller.

The bill’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.

“Individuals who are victims of lead paint poisoning may be lower income” and more amenable to a predatory offer of immediate funds based on cents on the dollar of what they would be entitled to over time, said Del. Keith E. Haynes, chief sponsor of the measure, House Bill 42.

“These individuals, a year, 18 months down the road, end up on the state system because they have run out of money,” added Haynes, D-Baltimore City.