Excellent comment and similar to a thought I had while reading this. Sure, in this case there are legitimate competency questions that make us wonder if the individuals in question should even be allowed to enter into a contract of this nature.
But it's not that hard to imagine Access Funding making similar deals with other owners of structured settlements. Can a man who was hit by a car and lost the use of his leg sell his settlement at a drastic discount like we see here? How big a discount is too big?
I suppose this is why some states have usury laws. Above a certain interest rate the state decides that willingness to take the loan is, in and of itself, evidence of lack of competency.
I don't see why structured settlements should be allowed to be sold off at all.
The whole point of choosing a structured settlement is to prevent the person from spending a one-time windfall. So why allow that arrangement to be undone after the fact?
When you retire, you cannot assign your Social Security payments to a company in return for a lump sum. Many pension plans also prohibit you from assigning your pension checks. As a society, we've decided that preventing retirees from becoming destitute is more important than allowing those retirees to access their benefit as a lump sum.
Structured settlements are not exclusively used for those reasons:
> Structured settlement cases became more popular in the United States during the 1970s as an alternative to lump sum settlements. The increased popularity was due to several rulings by the IRS, an increase in personal injury awards, and higher interest rates. The IRS rulings changed policies such that if certain requirements were met then claimants could have federal income tax waived. Higher interest rates result in lower present values, hence annuity premiums, for deferred payments versus a lump sum.
They are presumably easier for the person paying the settlement as well. They can pay it from their cash flow over time, instead of liquidating businesses for up front payments, etc.
It's possible that the article is drawing a false connection between the nature of the injury that the settlement is redressing, and structured settlements. It seems like people who are properly unable to care for themselves will require legal guardianship or conservatorship by another, and a trust set up on their behalf, etc. I don't get the impression that structured settlements alone are meant to deny the person who was awarded the settlement a right, so much as that they provide an advantage to one or both parties.
> Structured settlement cases became more popular in the United States during the 1970s as an alternative to lump sum settlements. The increased popularity was due to several rulings by the IRS, an increase in personal injury awards, and higher interest rates.
Well, in the 1970s, people had pensions and the 401(k) was a "thrift plan." Yet we've enacted all sorts of protections for the 401(k), because it is now the primary mechanism of retirement savings available to most Americans.
Structured settlements may have originated as a tax break in the 1970s. However, in the last 40 years they've become a way to provide a secure income stream for plaintiffs. We need to treat them as such.
Even if you don't allow them to be sold off, nothing is stopping someone from entering an agreement where they have to pay the same amount monthly to a person X in exchange for a lump sum received now. So they still receive their checks but they have to pay that money to someone anyway.
> Even if you don't allow them to be sold off, nothing is stopping someone from entering an agreement where they have to pay the same amount monthly to a person X in exchange for a lump sum received now. So they still receive their checks but they have to pay that money to someone anyway.
Such an arrangement would be an unsecured personal loan, which would not survive a bankruptcy filing.
This is why you see commercials on late-night TV for structured settlement cash-outs, but you don't see commercials offering to pay you a lump sum in return for handing over your Social Security payments.
The Social Security system pays out $700 billion in benefits each year. The entire structured settlement market is only about $6 billion a year. However, Social Security payments cannot be assigned, and structured settlements can.
These companies don't want to give out unsecured loans to poor people with lead poisoning who don't have jobs. They want to pay pennies on the dollar for a guaranteed stream of payments.
"...these structured agreements often deliver monthly payments across decades to protect vulnerable recipients from immediately spending the money."
Why must someone, an adult, be "protected" from spending their own money. This nanny state nonsense has got to stop. Do people really have to be protected from themselves? If they aren't smart enough to take care of their business, they ought not be allowed outside of a group home.
> if they aren't smart enough to take care of their business, they ought not be allowed outside of a group home.
Lack of capacity should be limited as far as possible. A person with intellectual disability may be able to live a reasonably normal life but need help with cooking; or with financial planning. Suggesting that we imprison (because that's what you're calling for) people who have no committed any crime; who pose no risk of harm to others; and who lack capacity over one small aspect of their life is fascistic.
What you're asking appears to be is "Why should this industry, which is heavily regulated to protect the general population from abusive practices, and which has a long history of illegal, unethical, sleazy, behaviours have to comply with regulation to protect society's vulnerable members?"
>Suggesting that we imprison (because that's what you're calling for) people who have no committed any crime; who pose no risk of harm to others; and who lack capacity over one small aspect of their life is fascistic.
This is largely how we treat children. For the extreme cases, look at those re-education camps parents can send their teens to, often with a 'transporter' that would by any other name be called a kidnapper. And if the child runs away and claims abuse... the police will be right there to send them back.
Is it wrong that the child is treated in so many ways as belonging to the parent?
That's the American experience. It's less the case in any country that has signed up to the convention on the rights of the child.
In the case of children we protect them because they lack capacity. When they develop capacity we reduce the constraints.
Have a look at English guidelines for medical competance: "Gillick competance". This is used to decide whether someone under the age of 16 can consent to medical treatment without their parents knowledge or permission. (The perhaps odd age of 16 is used because that's the age of consent for sex and the name Gillick Competance comes from a case where a mother did not want girls under the age of 16 to be prescribed the contraceptive pill. (16 is the age of sexual consent in England.)
1) it genuinely protects people who otherwise don't have to live in a group home. silly exaggeration.
2) as you by now should know if you didn't know already, you can sell guaranteed future payments and get your lump-sum if you really want to. tons of businesses will do buy it from you. you're not forced into receiving monthly payments if you don't want to, you can change it on day 1, it just happens to be the default because it makes more sense for most people.
that's not a nanny state, it's incredibly sensible.
Is the state even involved in the decision to structure these settlements (other than through its role as enforcer of a contract between 2 non-state parties, namely, the insurer and the insured)?
It could be that the insurer chose to write structuring into the contract to avoid negative publicity from the insured's spending the entire settlement and ending up poor again.
This setup is also protecting the state from having to support these people through increased welfare and other social program costs. Therefore the state has an interest in encouraging or even mandating this form of agreement. Otherwise these people are more likely to end up on benefits and receiving assistance from social services that your tax money pays for. But if you'd rather have tax payer funded group homes set up with all the associated costs, that's up to you. I'm not a US citizen, so I've no skin in this particular game.
But it's not that hard to imagine Access Funding making similar deals with other owners of structured settlements. Can a man who was hit by a car and lost the use of his leg sell his settlement at a drastic discount like we see here? How big a discount is too big?
I suppose this is why some states have usury laws. Above a certain interest rate the state decides that willingness to take the loan is, in and of itself, evidence of lack of competency.