Letter to Richard Cordray, Director of the Consumer Financial Protection Bureau, Edith Ramirez Chair of the Federal Trade Commission, John Koskinen, Commissioner of the Internal Revenue Service, and Mary Jo White, Chair of the Securities and Exchange Commission - Investigating an Industry That May Be Preying on Recipients of Structured Settlements

Letter

Dear Director Cordray, Commissioner Koskinen, Chair Ramirez, and Chair White:

We write regarding a recent Washington Post article, which describes how individuals who settled lead-paint lawsuits in exchange for monthly future payments over the course of several years, may have sold the rights to these future payments for an immediate one time lump-sum payment that grossly undervalued the financial value of the original settlement. For example, the article alleges that the rights to a structured settlement of 420 monthly lead checks to be paid between 2017 and 2052, which totaled nearly $574,000 in aggregate and had a value of roughly $338,000 in today's dollars, was sold to a company for less than $63,000. In short, this company may have unfairly reaped a gain of more than $275,000. As such, we ask each of you to utilize your existing authorities to investigate these allegations and take steps to curb these unscrupulous activities.

Over the past several years, nearly every state has enacted some measure of protection when it comes to the sale of structured settlements, also known as factoring transactions. Congress has also acted, by passing in 2002 the Victims of Terrorism Tax Relief Act, which imposed an excise tax of 40% on the purchaser of these structured settlement transactions, unless the transaction itself is approved in advance by a state judge or in accordance with state law.

Several federal agencies also appear to have a potential role in protecting consumers in the sale of structured settlements. The Internal Revenue Service enforces the requirements under the Victims of Terrorism Tax Relief Act; the Securities and Exchange Commission and the Federal Trade Commission have published guidance on factoring transactions; and the Consumer Financial Protection Bureau is responsible for protecting against unfair, deceptive, or abusive practices in consumer financial products, such as payday loans. Though many agencies may have a role in policing these types of factoring transactions, it would be helpful to understand better how each of the agencies are working together to protect consumers from unscrupulous settlement purchasers.

With this in mind, we would appreciate responses from each of you to the following questions:

1. What existing authorities does your agency currently have with respect to factoring transactions?

2. What actions have been taken, to date, against purchasers of settlement rights who engage in abusive tactics? What further actions can your agency take?

3. To the extent you have jurisdiction over some aspect of factoring transactions, how does your agency coordinate with other federal and state agencies that may also have jurisdiction?

4. Are there any legislative proposals that would be helpful to your agency in protecting consumers in factoring transactions?

Thank you in advance for your attention to this request, and we would appreciate a response no later October 16, 2016.

Sincerely,

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