BILL ANALYSIS
SB 510
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SENATE THIRD READING
SB 510 (Corbett)
As Amended July 14, 2009
Majority vote
SENATE VOTE :24-13
JUDICIARY 10-0
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|Ayes:|Feuer, Tran, Brownley, | | |
| |Evans, Jones, Knight, | | |
| |Krekorian, Lieu, Monning, | | |
| |Silva | | |
|-----+--------------------------+-----+--------------------------|
| | | | |
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SUMMARY : Revises the structured settlement approval laws.
Specifically, this bill :
1)Limits application of the transfer approval statute to transfers
where the payee (person selling settlement payment rights) is
domiciled in California at the time the transfer agreement is
signed by the payee or the payee is not domiciled in California at
the time the transfer agreement is signed and the state where the
payee is domiciled does not have a structured settlement transfer
statute, but either the structured settlement obligor or annuity
issuer is domiciled in California.
2)Limits the class of beneficiaries who are entitled to court notice
of a proposed sale of structured settlement rights to only those
beneficiaries irrevocably designated in the underlying annuity
agreement.
3)Provides new notice of the proposed transfers to the payee's
former attorney if the payee sells his or her structured
settlement rights within five years of the date of the structured
settlement agreement.
4)Provides new notice and disclosure to proposed payees.
5)Further specifies the factors and circumstances the court must
consider before approving the transfer.
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6)Provides that every application for approval of a transfer of
structured settlement payment rights shall contain specified
information including notably, for the first time, whether the
payee completed previous transactions involving the payee's
structured settlement payments and the timing and size of the
previous transactions, and whether the payee was satisfied with
any previous transaction, as well as whether the transferee
attempted previous transactions involving the payee's structured
settlement payments that were denied or that were dismissed or
withdrawn prior to a decision on the merits, within the past five
years, and whether the payee is currently obligated under any
child support or spousal support order.
7)Exempts proposed purchasers of settlement rights (transferees)
from providing certain documentary evidence to the court if it is
unavailable, subject to a contractual non-disclosure requirement,
or if it is provided to the court orally.
FISCAL EFFECT : None
COMMENTS : According to the sponsor, Consumer Attorneys of
California:
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 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 other 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
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independent legal and financial advice.
A structured settlement is generally defined as a financial or
insurance arrangement, including periodic payments, that a plaintiff
accepts to settle a personal injury action or to compromise a
statutory periodic payment obligation. A structured settlement is
used as an alternative to a lump sum settlement in order to provide
for a claimant's medical, financial, personal, and familial needs
over time. Structured settlements usually are funded by
single-premium annuity contracts held by the party, the "structured
settlement obligor," that has the continuing periodic payment
obligation to the payee under a structured settlement agreement.
Structured settlements are favored as a means of assuring continuing
financial support to injury victims and minimizing the risk that
lump sum recoveries will be dissipated, leaving injury victims to
turn to public assistance to meet their medical and financial needs.
Beginning in the early 1990s, a secondary market, commonly referred
to as structured settlement factoring companies, began to emerge.
According to the sponsor, Consumer Attorneys of California (CAOC),
these factoring companies aggressively advertised (and continue to
do so) to convince those with structured settlements to transfer or
sell future payments for present cash. "Many payees who dealt with
factoring companies were exploited. By fashioning transactions as
purchases of future payment rights or as loans originated in states
with generous usury laws, factoring companies often charged sharp
discounts to payees who were ill equipped to appreciate the value of
their future payments or to understand the onerous terms of
factoring agreements. In some cases, factoring companies charged
discounts equivalent to annual interest rates as high as 70
percent." As a result of the emergence of the secondary market and
its concomitant problems and negative effects on consumers, many
states, including California, enacted structured settlement transfer
protection acts that require that a transfer be in the best interest
of the payee, be fair and reasonable, and be approved by the court.
(SB 491 (Johnston), Chapter 742, Statutes of 1999); Insurance Code
Section 10134 et seq.) This measure is intended to provide further
substantive and procedural protections, as well as provisions
negotiated by the structured settlement industry.
Analysis Prepared by : Kevin G. Baker / JUD. / (916) 319-2334
SB 510
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FN: 0001894