Consumer Protections and Rights Flashcards
7 cards from real Sell Structured Settlement practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Consumer Protections and Rights flashcards as text
What does IRC Section 5891 impose on factoring companies that purchase structured settlement payments without court approval?
Answer: A 40% excise tax on the transfer amount
IRC Section 5891 imposes a 40% excise tax on factoring companies that complete a structured settlement transfer without obtaining a qualified court order, deterring unapproved deals.
What is the primary purpose of state Structured Settlement Protection Acts (SSPAs)?
Answer: To protect sellers by requiring court approval and full financial disclosure
SSPAs protect payees by mandating court approval of transfers and requiring disclosure of key financial terms before any sale is finalized.
Which of the following disclosures must factoring companies typically provide to sellers under state SSPAs?
Answer: The present value of the payments being sold and the net amount offered
SSPAs require disclosure of the present value of the payments and the net advance the seller will receive, enabling the seller to understand what they are giving up.
What is a 'cooling-off period' in the context of structured settlement sales?
Answer: A window of time after signing during which the seller may cancel the agreement without penalty
A cooling-off period gives the seller a specified number of days after signing to rescind the transfer agreement, protecting against hasty or pressured decisions.
What must a court find before approving a structured settlement transfer under most SSPAs?
Answer: That the transfer is in the best interest of the payee and their dependents
Courts must affirmatively find that the transfer serves the payee's best interest, considering their financial situation and the welfare of any dependents before granting approval.
Which party is typically required to receive independent professional advice before completing a structured settlement transfer?
Answer: The payee (seller) of the structured settlement
Many SSPAs require the payee to obtain independent professional advice from an attorney or financial advisor unconnected to the transaction before signing a transfer agreement.
What financial information about the transaction must typically be included in the court transfer petition?
Answer: The discount rate, all fees, and the net amount the seller will receive
Transfer petitions must disclose the discount rate applied, all fees charged, and the net amount the seller will receive so the court can assess whether the deal is fair.