BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 510|
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THIRD READING
Bill No: SB 510
Author: Corbett (D)
Amended: 5/5/09
Vote: 21
SENATE JUDICIARY COMMITTEE : 3-2, 4/28/09
AYES: Corbett, Florez, Leno
NOES: Harman, Walters
SUBJECT : Structured settlements: payment transfers
SOURCE : Consumer Attorneys of California
DIGEST : This bill strengthens and refines the provisions
of Californias Transfers of Structured Settlement Payment
Rights Act (TSSPRA) in order to better protect consumers
who wish to transfer to a financial entity their structured
settlement payment rights, i.e., periodic payment rights,
for a lump sum payment. A structured settlement is a
financial arrangement that a plaintiff accepts in
settlement of a personal injury action. The TSSPRA
requires, among other things, that the transfer be in the
best interest of the payee (the person who received
tax-free payments pursuant to a structured settlement
agreement), be fair and reasonable, and be approved by the
court.
This bill requires the court, in determining whether a
transfer is in the best interest of the payee and is fair
and reasonable, to consider the totality of the
circumstances, including specified factors. This bill
CONTINUED
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requires every application for approval of a transfer to
contain certain specified information. This bill specifies
notice and disclosure requirements that would have to be
complied with prior to a transfer.
ANALYSIS : Existing law provides that a transfer of
structured settlement payment rights is void unless (1) the
transfer is fair and reasonable and in the best interest of
the payee, and (2) the transfer complies with the TSSPRA,
will not contravene other applicable law, and is approved
by the court. Existing law provides that the court
retains jurisdiction to interpret and monitor the
implementation of the transfer agreement as justice
requires. (Sections 10137 and 10139.5(f) of the Insurance
Code)
Existing law requires that for a transfer of structured
settlement rights to become effective, the transfer must be
approved in advance in a final court order based on express
written findings that:
1. The transfer is in the best interest of the payee,
taking into account the welfare and support of the
payees dependents.
2. The payee has been advised in writing by the transferee
(any person receiving structured settlement payment
rights resulting from a transfer) to seek independent
professional advice regarding the transfer and has
either received that advice or knowingly waived that
advice in writing.
3. The transferee has provided the payee with a disclosure
form and a transfer agreement that complies with
applicable law.
4. The transfer does not contravene any applicable statute
or the order of any court or other government authority.
5. The payee reasonably understands the terms of the
transfer agreement, including a specified disclosure
statement.
6. The payee reasonably understands and does not wish to
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exercise the payee's right to cancel the transfer
agreement. (Section 10139.5(a) of the Insurance Code)
This bill requires the court, in determining whether a
transfer is in the best interest of the payee, to consider
the totality of the circumstances, including all of the
following:
1. The reasonable preference of the payee in light of the
payee's age, mental capacity, maturity level, or
financial or legal knowledge.
2. The stated purpose of the transfer.
3. Whether the periodic payments of the structured
settlement were intended to cover future income loss or
future medical expenses.
4. The potential need for future medical treatment.
5. Whether the transfer is in the best interest of the
payee's dependents.
6. Whether the payee has means of support aside from the
structured settlement, if the transfer is allowed to
proceed, to meet his/her obligations for care,
treatment, and future maintenance and support of
dependents including, but not limited to, child support
obligations.
7. Whether the offered discount rate is in line with the
market rate for similar transfers and is considered
conscionable taking into account, among other factors,
the availability of alternate financial instruments, the
amount and sources of payee's monthly income and
financial resources, and, if presently married, the
amount and source of the monthly income and financial
resources of the payee's spouse.
8. Whether any previous applications pertaining to funds
that are the subject of the pending application or that
were a part of the original structure have been
submitted in any jurisdiction, including any
applications that have been submitted but later
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withdrawn before court determination.
9. Whether the payee is in a hardship situation.
10.Whether the payee has received independent legal and
financial advice so as to appreciate the financial
consequences of the proposed transaction.
This bill requires every application for approval of a
transfer of structured settlement payment rights to include
all of the following:
1. The payee's name, address, and age.
2. The payee's marital status, and if married or separated,
the name of the payee's spouse.
3. The names, ages, and place or places of residence of the
payee's minor children or other dependents, if any.
4. The payee's monthly income and sources of income, and,
if presently married, monthly income and sources of
income of the payee's spouse.
5. Whether the payee is currently obligated under any child
support or spousal support order, and, if so, the names,
addresses, and telephone numbers of all individuals who
are the beneficiaries of the orders and of all agencies
that have jurisdiction over the orders or payments.
Existing law requires that an application for approval of a
transfer of structured settlement rights be made by the
transferee and brought in the county in which the payee
resides. Existing law requires the transferee, not less
than 20 days prior to a hearing on an application, to file
with the court and serve on all interested parties a notice
of the proposed transfer and the application for its
authorization. (Section 10139.5(c)(d) of the Insurance
Code)
This bill provides that, for purposes of Section
10139.5(d), "interested parties" would include, but not be
limited to, any agency charged with enforcing the child
support, the payee's attorney of record as of the time of
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the creation of the structured settlement at the attorney's
current address on file with the State Bar, and the payee's
current attorney.
Existing law requires the transferee to advise the payee of
his/her right to seek independent counsel and financial
advice in connection with the transferee's petition for
court approval of the transfer agreement. Existing law
also requires the transferee to advise the payee that, if
the payee retains counsel, an accountant, or an actuary,
the transferee pays for the attorney, accountant, or
actuary up to $1,500 total. (Section 10139.5(e) of the
Insurance Code)
This bill requires the notification required by Section
10139.5(e) to include a conspicuous specified written
statement regarding the payee's right to seek independent
legal and financial advice before entering into a transfer
agreement.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 5/5/09)
Consumer Attorneys of California (source)
California Alliance for Retired Americans
Congress of California Seniors
Consumer Federation of California
OPPOSITION : (Verified >)
>
ARGUMENTS IN SUPPORT : The bill's sponsor, Consumer
Attorneys of California, writes:
"While current law requires that the transfer of
structured settlement payment rights be in the best
interest of the payee, current law does not specifically
enumerate the factors a court should consider in
determining whether a transfer is in the best interest of
a payee and his or her dependants, if any. This bill
would enumerate the factors a court would be required to
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consider in a best interest analysis. Under SB 510, the
required best interest analysis would include
consideration of the reasonable preference of the payee;
the purpose of the transfer; whether the structured
settlement was intended to cover future income loss
and/or medical expenses; the intention of the periodic
payments; the potential need for future coverage of
medical treatment; whether the payee has others means of
support; whether the periodic payments are in the best
interest of the payee's dependents; whether the payee is
in a hardship situation; and whether the payee has
received independent legal and financial advice.
"Consideration of the above factors would give the court
concrete information upon which to make an informed best
interest analysis and decision. In addition, to qualify
for the exemption from the 40 percent federal excise tax,
a structured settlement factoring transaction must be
found to be in the "best interest of the payee taking
into account the welfare and support of the payee's
dependents."
ARGUMENTS IN OPPOSITION : >
RJG:mw 5/5/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
SUPPORT/OPPOSITION: NONE RECEIVED
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