Wisconsin Governor Scott Walker yesterday signed into law a bill that governs structured settlement factoring transactions and provides protections for recipients of structured settlement payments.
When the statute goes into effect tomorrow, November 13, Wisconsin will become the 49th state with a structured settlement protection act (“SSPA”), leaving New Hampshire as the only state without an SSPA.
The newly-enacted Wisconsin SSPA governs transfers of structured settlement payment rights from individuals who are entitled to receive such payments (“payees”, as defined by the SSPA) to transferees, including factoring companies that are in the business obtaining the rights to receive future payments in exchange for a discounted price.
And also like other SSPAs, such transactions are not effective unless and until a court reviews the transaction, concludes that it meets the statutory requirements, and decides to approve the transaction.
The Wisconsin SSPA is based on model legislation that also requires pre-transaction disclosures to the payee, and requires that the reviewing court approve the transfer only if it finds that the transfer would be in the best interest of the payee, taking into consideration the interests of the payee’s dependents.
The Wisconsin SSPA differs from model legislation in that it also requires the following:
- Disclosure of the effective interest rate, so that the payee knows the interest rate charged if the transfer were a loan (and not a sale of future payment rights, as with most factoring transactions);
- At the hearing on the proposed transfer, the payee “must attend . . . in person unless the court determines that appearance via audiovisual technology is appropriate or that good cause exists for the payee not to appear”;
- The court must be provided with an affidavit stating, inter alia, whether the payee is delinquent “in any payments required to be made pursuant to a restitution order in a criminal or juvenile deliquency proceeding, or pursuant to a child support order”.
The Wisconsin legislature first considered enacting an SSPA more than fifteen years ago, but legislative efforts ended and did not begin again in earnest until 2014, when legislators began work on the bill that has now been signed into law.
With the enactment of the Wisconsin SSPA, New Hampshire is now the only state without an SSPA.
The full text of the Wisconsin SSPA, and the joint legislative prefatory statement, may be found here.