At a hearing on her bill, Koegel said everyone has seen those television commercials for companies offering to buy structured settlements. For example, if you were injured in a car crash, and an insurance company offers lifetime payments to take care of your medical needs, another company might offer to buy your future payments at much less than you would receive.
“The worst part about it is they’re taking advantage of vulnerable people and that’s the big thing. We want to make sure vulnerable people are protected,” said Koegel.
Selling a structured settlement must be approved by a court. But judges say they lack the tools to review cases.
Judge Arlene Perkkio of Dakota Count testified.
“I just can’t stress enough I have never felt good about any of these. I see people, for the most part, are in financially desperate situations and do not fully understand what they are doing and how much money they are actually losing,” Perkkio told a house committee.
Koegel says the trouble with lump sum payments is that they can tempt people to accept a fraction of the money they were awarded.
“These settlements were made for a reason. Something horrible happened to somebody that wasn’t their fault, and is affecting their livelihood and their future,” said Koegel. “We want to make sure that the intent of the settlements was to support the person for a lifetime. We want to make sure they’re not being robbed of that.”
The legislation being proposed would not outlaw structured settlements, but instead strengthen protections outlined in a 1999 law.
For example, it would establish standards to give judges more tools, like deciding whether someone actually understands the financial terms of the agreement and what their future needs might be.
It would require jurisdiction in the person’s own county, not a judge chosen by the company. Harassment, like late-night telephone calls, is clearly prohibited.
The bill would also add an independent party to the courtroom. An evaluator could tell the judge whether the terms of the deals are reasonable.
People representing companies that buy these settlements also commented.
“In my experience, I’ve been able to witness both the benefits associated with these transactions for individuals, and unfortunately the great damage that bad actors in the marketplace can cause if left to their own devices,” said Brian Dean of the National Association of Settlement Purchasers.
The legislation passed a house committee unanimously.
“If there [are] legitimate reasons for people to sell their structured settlement and it is in their financial interest, we don’t want to stop those sales,” said Koegel. “But we want to make sure we’re protecting people.”
A similar bill is making its way through the Minnesota State Senate.
