The Washington Post’s series of stories on structured settlement factoring shows that the structured settlement factoring industry is not “under control” of legal regulations, and new laws – possibly including an interest rate cap – may be needed.
That’s the conclusion of Don McNay, a writer and financial advisor with years of experience in the business of establishing structured settlements for injury victims.
McNay, in “Stopping Structured Settlement Predators for Good This Time“, praised the Washington Post’s investigatory work, and described his experiences at the time of the adoption in 1998 of the Kentucky structured settlement protection act (SSPA) – only the second state SSPA, and the first to require up-front disclosures to payees considering whether to sell their payment rights.
McNay says that the current laws, in practice, do not offer the “real protection” for payees as originally envisioned, and called for national legislation that would possibly “follow what Congress did to payday lenders preying on the military and put a cap on the interest rate, or internal rate of return, that a settlement purchaser is able to charge.” The interest rate cap, said McNay, offers the “best solution” to the problems of predatory factoring company practices.
McNay’s commentary is available in full here.
Secondary Insurance Market Blog’s previous commentary on the Washington Post’s report, and subsequent news items, is available here, here, here and here.