Minnesota laws geared toward protecting people who sell their structured settlement payments in exchange for smaller cash lump sums will become stronger with new legislation set to take effect in July that gives judges more access to transaction histories.
“This really is a consumer protection issue,” said the legislation’s author, Rep. Debra Hilstrom, DFL-Brooklyn Center. “This is to make sure everyone knows and understands the consequences of these sales, and so a judge can really evaluate whether or not someone in a stressful situation knows what they’re getting into.”
Widely embraced by insurance companies and the legal community alike, structured settlements are designed to spread out payments to guarantee future income. That way, recipients are less likely to spend the money all at once. Structured settlements have also created a lucrative industry for “secondary market” companies that buy settlements, annuities and lottery winnings at a steep discount. About two dozen large companies nationwide compete for the $6 billion in structured settlements paid out annually. The sales can benefit some, who may need a down payment on a home or tuition. But others can be taken advantage of, which is why Minnesota law, like 46 other states’, requires a judge’s approval before a payee can sell their structured settlement payments. But before the new legislation, judges weren’t aware of any prior transactions or applications they may have made.
The law comes just a few years after a Hennepin County judge Mel Dickstein became alarmed when Tasheeka Griffith of Minneapolis came before him wanting to sell $299,000 in future structured settlement payments to Texas-based RSL Funding in exchange for just $19,000 cash. Dickstein appointed a guardian ad litem to investigate. The probe revealed that Griffith, a victim of childhood lead poisoning, had been awarded $786,000 in monthly installments of $1,255 for the rest of her life. By the time she appeared before Dickstein, she had already sold $352,000 of her settlement for just $77,000 in two transactions to RSL Funding. Two other attempts at selling her settlement were rejected. Because of the “deals,” her monthly payments shrank from $1,255 to $252 a month.
Griffith’s case revealed that the judges required to sign off on such transactions under state law knew nothing about any sales that came before them. Until Dickstein asked for an investigation, he didn’t know that Griffith had already sold half of her settlement for a small fraction of its value. Dickstein said Griffith and others like her are the “poster child for why the transfer or structured settlement process may need repair.”
The Minnesota Attorney General’s Office also investigated RSL Funding in the wake of Griffith’s case, and although they found it troubling, her case “seemed to be an outlier based on other evidence,” spokesman Ben Wogsland said.
Still, the concerns were enough for the Attorney General’s Office to take initiative and help Hilstrom and others draft the bill.
Minnesota’s legislation is modeled after laws like those in New York and California that mandate judges be made aware of previous transaction attempts. The new legislation will take effect Aug. 1.
“This is a bill that will help judges do what’s right,” Dickstein said last week.
Hilstrom said the law will protect all people who sell their structured settlement payments, especially those who could be particularly susceptible to a bum deal.
“A lot of folks are selling these structured settlement payments at difficult times in their life,” she said. “In order for the court to reveal whether or not they’re being put in a bad situation or whether or not the deal is fair, they need to know the entire history.”