Sell Structured Settlement Consumer Protections and Rights

Question 1

What does IRC Section 5891 impose on factoring companies that purchase structured settlement payments without court approval?

Accepted Answer

A 40% excise tax on the transfer amount

Answer

A 25% penalty on the discount rate applied

Answer

A criminal fine of up to $50,000

Answer

Revocation of their business license

Question 2

What is the primary purpose of state Structured Settlement Protection Acts (SSPAs)?

Accepted Answer

To protect sellers by requiring court approval and full financial disclosure

Answer

To set maximum discount rates for all transfers

Answer

To prohibit the sale of structured settlements entirely

Answer

To regulate the investment activities of annuity issuers

Question 3

Which of the following disclosures must factoring companies typically provide to sellers under state SSPAs?

Accepted Answer

The present value of the payments being sold and the net amount offered

Answer

The company's annual profit margins on similar deals

Answer

The identity of all investors who will fund the purchase

Answer

The factoring company's credit rating

Question 4

What is a 'cooling-off period' in the context of structured settlement sales?

Accepted Answer

A window of time after signing during which the seller may cancel the agreement without penalty

Answer

The time a court takes to schedule a transfer review hearing

Answer

The delay between court approval and the seller's receipt of funds

Answer

The period a factoring company has to secure an investor

Question 5

What must a court find before approving a structured settlement transfer under most SSPAs?

Accepted Answer

That the transfer is in the best interest of the payee and their dependents

Answer

That the transfer financially benefits the factoring company's investors

Answer

That the annuity issuer has given written consent to the transfer

Answer

That the original tort defendant has been personally notified

Question 6

Which party is typically required to receive independent professional advice before completing a structured settlement transfer?

Accepted Answer

The payee (seller) of the structured settlement

Answer

The factoring company's underwriting team

Answer

A court-appointed special guardian

Answer

The original defendant in the underlying tort case

Question 7

What financial information about the transaction must typically be included in the court transfer petition?

Accepted Answer

The discount rate, all fees, and the net amount the seller will receive

Answer

Only the total dollar amount of future payments being sold

Answer

The seller's complete medical history and disability diagnosis

Answer

The factoring company's list of comparable transactions and other clients