California Enacts Major Structured Settlement Transfer Law Changes

 

On October 11, 2009, Governor Schwarzenegger signed into law major changes to the California structured settlement transfer, or "factoring", statute.  Senate Bill 510, co-sponsored by the Chair of the Senate Judiciary (Senator Corbett, a Democrat) and Assemblyman Tran (a Republican), becomes law on January 1, 2010.

Federal law (IRC 5891) mandates that all transfers of structured settlement payment rights be approved by a state court, or face a stiff punitive excise tax.  California and 46 other states have laws that regulate structured settlement factoring.  California first passed a structured settlement transfer law in 1999.

In addition to many minor "clean up" provisions, these revisions to California's transfer law also add for the first time certain factors that the court must consider when determining whether a transfer should be approved.  These 15 factors include the "reasonable preference and desire" of the seller, any existing child support obligations, whether the future payments were intended for medical care, and whether there have been previous sales or attempted sales.

Another nuance of the revised California transfer law is the requirement under certain circumstances to notify the seller's former personal injury lawyer that they are trying to sell payments.  This requirement only applies to fairly recent settlements in California.  The former attorney is invited to contact the seller if desired, but is not required to do so.  Of course, the seller can elect not to speak with his or her former counsel as well. 

Politically this bill was a compromise between various interest groups, including the Consumer Attorneys of California (CAOC, formerly known as the California Trial Lawyers) and the National Association of Structured Settlement Purchasers (NASP).  As one of the participants in this process on behalf of my company and NASP, I am grateful to the CAOC for their work on this bill and for the collegial atmosphere that prevailed.

For more information, watch the below video interview I did with Scott Drake of the Legal Broadcast Network.  The text of SB 510 is here. 

By Matt Bracy, General Counsel, Settlement Capital Corporation.  We welcome your comments and questions on this article or any topic related to structured settlements.  You may post comments here, or email them to me directly at mbracy@setcap.com.   

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