It’s Your Money and We Want It Now: Regulation of the Structured Settlement Factoring Industry in the Era of Dodd-Frank and the Consumer Financial Protection Bureau

Abstract

Calls for reform in the structured settlement factoring industry have recently grown louder across the nation. However, those calls ring hollow and many recipients of structured settlements are suffering abuses at the hands of the structured settlement factoring industry. Structured settlements substitute a lump-sum award with periodic payments, protecting against spendthrift behavior. The purpose of a structured settlement is to provide an income stream for the long term care of an injured party, and by “factoring,” often at a heavily discounted rate, the rights to future payments form the settlement leads to this purpose being completely undermined. A comprehensive approach enhancing existing protections, and layering in new federal regulation will advance the purpose of the structured settlement. Three solutions to protect the purposes of structured settlements and minimize unwanted outcomes in structured settlement factoring transactions. These include (1) increasing existing standards of review, (2) creating three protected “classes” of structured settlement recipients, and (3) regulating structured settlement factoring on an industry-wide scale with the Consumer Financial Protection Bureau. These proposals do not call for sweeping changes, but instead using existing mechanisms to protect the goals of structured settlements, as well as the recipients of structured settlements.