September 11 Digital Archive: XML Document
Congress of the United States
House of Representatives
Washington, DC 20515-0922
October 9, 2001
The Honorable Dennis Hastert
Speaker of the House
H-232 The Capitol
Washington, D.C. 20510
Dear Mr. Speaker:
I am writing as the sponsor of the Structured Settlement Protections Act (H.R. 1514) to
strongly urge the enactment of this legislation as soon as possible to protect injured victims and the families of those killed in the September 11 attacks who will be receiving compensation in the form of structured settlements under the September 11th Victim Compensation Fund created by the Air Transportation Safety and System Stabilization Act recently signed into law by the President.
Structured settlements have been widely used in the tort area for years to compensate
victims of serious, often profoundly disabling or fatal physical injuries and their families. Under a structured settlement, the injured victim (or the surviving family) receives damages in the form of a stream of periodic payments tailored to the specific future medical and basic living needs from a well-capitalized financial institution. Congress has adopted special tax rules to encourage the use of structured settlements to provide long-term financial security to these victims and their families.
I understand that the Federal Government through the Justice Department makes
substantial use of structured settlements to resolve physical injury and wrongful death claims under the Federal Tort Claims Act and the National Vaccine Injury Compensation Program. Based on this experience, I would expect that the September 11th Victim Compensation Fund also would make substantial use of structured settlements to compensate those injured or killed in the September 11 attacks.
I am very concerned that injured victims and surviving families receiving structured
settlements as compensation under the September 11th Victim Compensation Fund not fall prey
to so-called factoring companies seeking to purchase their future payments. In these "factoring" transactions, factoring companies induce these injured victims or the surviving family to sell off part or all of their future compensation payments for a deeply-discounted cash lump sum, thereby unraveling the structured settlement and the crucial long-term financial security that the settlement provides to the injured victim or the surviving family.
My concern here is very real. These factoring companies got their start in buying up
lottery annuities, moved on to buying up structured settlement payments and then worker's
compensation payments, and most recently VA disability and retirement benefits. Structured
settlements under the September 11th Victim Compensation Fund--given the number and size of
claims expected under the Fund are sure to be the next target for unregulated factoring
transactions. We must act without delay to protect these injured victims and surviving families.
My Structured Settlement Protection Act, which is cosponsored by a broad bipartisan
majority of the House Ways and Means Committee, would protect these structured settlement
recipients form the harms posed by factoring transactions. Under the Act, the States are given the consumer protection role. The Act utilizes the threat of a penalty on the factoring company to discourage factoring companies from purchasing structured settlement payments from victims and surviving families except where the factoring transaction has been reviewed and approved by a State court. The State court review process with respect to a proposed factoring transaction ensures that the structured settlement serves the purpose Congress intended providing long-term financial security for the injured victim or the surviving family while enabling the victim or family to get access to future payments should the court determine that such access is in the best interests of the victim (or family), taking into account the welfare and support of the dependents.
In addition to the broad bipartisan cosponsorship totalling 23 Members of the Ways and
Means Committee, my legislation has been endorsed by the disability community including the American Association of People with Disabilities, the National Spinal Cord Injury Association, United Cerebral Palsy, Easter Seals, National Foundation of the Blind, National Organization on Disability, the Arc of the United States, and NISH--and has been accepted as the basis of regulation by the National Association of Settlement Purchasers on behalf of the factoring industry. The Treasury Department has been briefed on the legislation and has indicated that it has no objection.
Thus, the legislation should be noncontroversial and has been scored by the Joint Tax
Committee as being essentially revenue neutral, with a total revenue loss of $5 million over a 10-year period.
With the September 11th Victim Compensation Fund preparing to begin operation, it is
critical that we put these structured settlement protections into place as quickly as possible, and accordingly I would strongly urge that the provisions of the Structured Settlement Protection Act be included in the tax stimulus package that the House is preparing to adopt.
E. Clay Shaw, Jr.
Member of Congress
cc: The Honorable Bill Thomas