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Post date: December 14 1999

Agreement To Alter Structured Settlement Contracts

Attorney General Spitzer today announced an agreement with a financial services company that will protect consumers who seek to cash in their settlement awards.

"The sale of structured settlements is becoming a popular mechanism for consumers to get immediate access to cash without taking out a loan," Spitzer said. "As with borrowing, however, it is imperative that limits be placed on the rates charged and that certain important information be provided to consumers in order that they make informed choices."

After an investigation by Spitzer's office, concerns were raised about certain aspects of the purchase of structured settlements provided by the Singer Asset Finance Company, LLC, of Boca Raton, Florida.

Singer purchases structured settlements by paying an up-front lump sum payment to a consumer in exchange for the consumer's fixed compensation payments from a personal injury judgment or settlement.  It is estimated that Singer has entered into contracts with approximately 300 consumers throughout New York State for the rights to their settlement monies.

In recent months, Spitzer's office has become increasingly concerned about the growing number of companies that target consumers with limited legal and financial knowledge with offers of quick cash in return for rights to their injury-related award.

In order to address consumer protection concerns regarding the purchase of structured settlement contracts, the agreement requires that Singer:

  • Provide consumers a five-day right to cancel a contract without penalty or further obligation;
  • Limit the effective annual discount rate to no more than 25%.  In determining the overall lump sum payment to a consumer, the discount rate is used to determine the current cash value of the total settlement payments;
  • Provide important disclosures including: (a) the gross amount payable to the consumer; (b) the amounts of all fees, commissions, and charges; (c) the net amount payable to the consumer after these fees; (d) the amounts and due dates to be transferred to Singer and the aggregate amount of these payments; (e) the annual discount rate; (f) the amount of any liquidated damages due to any breach of the contract; and (g) statements warning consumers to seek tax and legal advice;
  • Rewrite all contracts to comply with plain language requirements of New York State law; and
  • Ensure that future contracts do not preclude consumers' right of trial by jury.

Singer also agreed to reduce the rate charged to not more than 25% to any consumers who complain and to pay $45,000 to cover the cost of the Attorney General's investigation.

Singer cooperated fully with the Attorney General's inquiry.  The company entered into the agreement without admitting any violation of law, or commission of any wrongful or improper act.  This is the second settlement of this kind that the Attorney General's Office has obtained in the past six months.  Last July, JG Wentworth of Philadelphia, the nation's largest specialty finance firm, agreed to very similar terms.

Individuals with questions regarding this settlement with Singer are encouraged to contact the Attorney General's consumer help line at (800) 771-7755.

This case was handled by Assistant Attorney General Stephen Mindell, the Director of Consumer  Advocacy and Assistant Attorney General Herbert Israel of the Consumer Frauds and Protection Bureau.