BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 510|
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UNFINISHED BUSINESS
Bill No: SB 510
Author: Corbett (D), et al
Amended: 8/20/09
Vote: 21
SENATE JUDICIARY COMMITTEE : 3-2, 4/28/09
AYES: Corbett, Florez, Leno
NOES: Harman, Walters
SENATE FLOOR : 24-13, 5/14/09
AYES: Aanestad, Alquist, Calderon, Corbett, Correa,
DeSaulnier, Ducheny, Florez, Hancock, Kehoe, Leno, Liu,
Lowenthal, Negrete McLeod, Padilla, Pavley, Romero,
Simitian, Steinberg, Strickland, Wiggins, Wolk, Wright,
Yee
NOES: Ashburn, Benoit, Cogdill, Cox, Denham, Dutton,
Harman, Hollingsworth, Huff, Maldonado, Runner, Walters,
Wyland
NO VOTE RECORDED: Cedillo, Oropeza, Vacancy
ASSEMBLY FLOOR : 74-0, 8/24/09 - See last page for vote
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 in order to better protect consumers who wish to
transfer to a financial entity their structured settlement
CONTINUED
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payment rights, i.e., periodic payment rights, for a lump
sum payment.
Assembly Amendments (1) added provisions specifying that
provisions in existing law only apply to agreements with
certain connections in California and specifies new
information to be included in the written disclosure
statement, and (2) added a co-author.
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 Transfers
of Structured Settlement Payment Rights Act (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
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transfer agreement, including a specified disclosure
statement.
6. The payee reasonably understands and does not wish to
exercise the payee's right to cancel the transfer
agreement. (Section 10139.5(a) of the Insurance Code)
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.
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
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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 : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 8/26/09)
Consumer Attorneys of California (source)
California Alliance for Retired Americans
California Judges Association
Congress of California Seniors
Consumer Federation of California
OPPOSITION : (Verified 8/26/09)
Governor's Office of Planning and Research
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
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
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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.
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.
A secondary market, commonly referred to as structured
settlement factoring companies, has since emerged.
According to the bill's sponsor, Consumer Attorneys of
California, these factoring companies aggressively
advertise to convince those with structured settlements to
transfer or sell future payments for present cash. 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; Section 10134 et
seq. of the Insurance Code] This bill is intended to
provide further substantive and procedural protections, as
well as provisions negotiated by the structured settlement
industry.
ARGUMENTS IN OPPOSITION : The Governor's Office of
Planning and Research argues that "As written, SB 510 would
revise the structured settlement laws by substantially
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increasing: 1) the number of times a court must examine
when approving such a transfer, 2) the information to be
included in every application for approval of a transfer,
and 3) whom the information is sent. Currently, despite
choosing to take a settlement in periodic payments, there
is a market for the sale of future rights to these payments
if a person wants to later take a lump sum from a company
willing to buy these rights. Existing law carefully
regulates this transfer of rights and requires numerous
checks along the way to ensure the person selling these
rights is knowingly doing so. Under the aim of trying to
protect consumers from making bad decisions, this bill
would unnecessarily impose numerous and nebulous criteria
to obtain court approval for a sale of structured
settlements. It would create more problems and procedures
than guidance for a court and individuals seeking to
legitimately sell or buy an asset. There is no significant
reason to intrude on parties' ability to freely contract
and to make choices based on need, time or
cost-effectiveness and existing law provides extensive
protections to ensure that unwary parties are not
unknowingly entering a contract. Furthermore, SB 510 would
potentially expose confidential and identifying information
to a wider audience than warranted. Although we applaud
the intent of the bill to make sure people enter contracts
knowingly and voluntarily, SB 510 would substantially
increase the associated legal costs for structured
settlement transfers. Such an effect is in direct contrast
to the intent of federal and state law allowing individuals
to receive approval in selling these future payments.
Therefore, we must oppose SB 510."
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Anderson, Arambula, Beall, Bill
Berryhill, Tom Berryhill, Blakeslee, Block, Blumenfield,
Brownley, Buchanan, Caballero, Charles Calderon, Carter,
Conway, Cook, Coto, Davis, De La Torre, De Leon, DeVore,
Emmerson, Eng, Evans, Feuer, Fletcher, Fong, Fuentes,
Fuller, Furutani, Galgiani, Garrick, Gilmore, Hagman,
Harkey, Hayashi, Hernandez, Hill, Huber, Huffman,
Jeffries, Jones, Knight, Krekorian, Lieu, Logue, Bonnie
Lowenthal, Ma, Mendoza, Miller, Monning, Nava, Nestande,
Niello, Nielsen, John A. Perez, V. Manuel Perez,
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Portantino, Ruskin, Salas, Silva, Skinner, Smyth,
Solorio, Audra Strickland, Swanson, Torlakson, Torres,
Torrico, Tran, Villines, Yamada, Bass
NO VOTE RECORDED: Chesbro, Duvall, Gaines, Hall, Saldana,
Vacancy
RJG:mw 8/26/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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