As The Settlement Channel reported on February 29, 2016, Maryland Attorney General Brian Frosh has proposed some changes in Maryland’s law regarding the purchase and sale of structured settlements, prompted by the sale of lead paint settlements for pennies on the dollar. Frosh is asking the Maryland legislature for authority to regulate these transactions. The National Association of Settlement Purchasers (NASP) has some concerns about Frosh’s proposal. NASP president Patricia LaBorde discusses the proposed law in this report.
LaBorde explains that the proposed law would make three major changes. One would change the Maryland standard of review from “fair and reasonable” to the “best interest” standard, the one used in most states. Another provision would change the rule on who could be an independent professional advisor in Maryland, expanding the category to include financial planners and accountants. NASP has no concerns about these changes.
NASP’s concern is the third change that would give the attorney general regulatory authority over anything related to structured settlement payment prices. LaBorde points out that the law, as proposed, with give the attorney general carte blanche to write regulations “with no framework, no parameters.” The proposal will be studied by a senate committee on March 3. NASP has made its own proposal for regulation, including licensing, bonding, and reporting, to be included in the statute.
One item missing from the news coverage and the discussions of the sale of structured settlements, LaBorde points out, is the discount rates that have been applied in the purchase and sale of structured settlements. The average discount rate on a guaranteed structured settlement is currently 10.5%. The average rate on a life contingent transaction (no payments go to the purchaser if the annuitant dies) is 22%. These are competitive rates. And, LaBorde points out, structured settlement sale transactions must be approved by a judge, and judges will reject settlements where the buyer is apparently taking advantage of the seller.
The Settlement Channel will continue to follow this proposal and the NASP proposals to amend it.
Patricia LaBorde is the senior vice president and Structured Settlement Division counsel at Stone Street Capital, LLC based in Bethesda, Maryland. Since joining Stone Street in 2003, Patricia has overseen all legal, regulatory, and transactional issues for its Structured Settlement Division. She has served as NASP’s Legal Committee chair and Conference Planning chair. Previously, LaBorde was a business and litigation attorney with a McLean, Virginia law firm, handling structured settlement transactions. The Settlement Channel is a featured network of Sequence Media Group.