Companies prey on people with brain injuries. SC must fix inadequate settlement-sales laws

South Carolina needs change, and it needed it years ago to stop predatory companies from stealing people’s futures.

In McClatchy’s “Cashed Out” series, reporter David Weissman exposed the deplorable business model of companies that buy people’s structured settlements, which are set up to give victims of collisions and other incidents monthly payouts following lawsuits. These structured settlements, which can be worth millions of dollars, are meant to ensure these victims, who can be suffering from debilitating conditions, have income for life. But companies, known as factoring companies, are preying on desperate people, stacking legal factors against them and buying this income for pennies on the dollars at times.

You’ve probably seen the advertisements on television in which companies offer to give cash up front for a structured settlement. The ads usually go something like, “It’s your money. Get it when you need it” and offer relief for stacked-up bills, loans or to make a big purchase.

It may seem like an alright deal and they are legal. But what McClatchy showed was that factoring companies are practically robbing people.

Factoring companies came around in the 1990s and states, including South Carolina, created laws to help ensure the companies acted above board and that people got fair deals when selling their structured settlements.

In the decades since, factoring companies have found sinister means of getting at people’s structured settlements, such as bombarding settlement-owners with mailers and calls and finding lawyers and judges in the state that ask too few questions about the sales. Yet, South Carolina laws dealing with factoring companies have remained unchanged for 20 years, McClatchy reported.

One of the most reprehensible ways factoring companies can operate in South Carolina is through the nearly unfettered buying of structure settlements belonging to people with serious brain injuries.

South Carolina must protect people with brain injuries by amending its law regulating how factoring companies operate in the state. Lawmakers can do that by simply copying the template of another state that has already recognized this issue and taken action.

McClatchy told the story of a woman it called Grace, a pseudonym given to protect the woman from further harm. Grace was hit by a train at 12 years old and suffered a traumatic brain injury, requiring doctors to place her in a coma. After she came out, the brain injury caused violent outbursts, hallucinations and short-term memory loss, which she still deals with almost 20 years later.

South Carolina’s law requires that a judge approve the sale of any structured settlement. But judge approval is clearly not enough to protect people like Grace. Judges approved 17 deals for Grace to sell parts of her structured settlement, none seemingly knowing or asking about her traumatic brain injury, McClatchy reported.

Lawmakers in South Carolina need to look to Minnesota. It recently passed a law requiring judges in structure settlement transfers to appoint an independent investigator who is to act in the interest of the seller if the seller is known to have mental health issues. South Carolina could ensure better protection for people by requiring all sellers to have an attorney or a state-appointed representative who must act in their client’s best interest.

South Carolina should also follow the lead of eight other states that require sellers to receive professional financial advice. In some of those states, the factoring companies are required to pay for that advice. With the money that these companies are taking compared to what they’re giving, they can easily afford to pay for sellers’ financial advice.

No one was looking out for Grace, and that’s all too apparent. Someone looking out for Grace would have told her that she shouldn’t continue to sell parts of her settlement. Judges might have stopped approving the transfers if they were required to know if a person had sold parts of their settlement before. Yet again, South Carolina law is inadequate, leaving it up to the judge to ask if this is the person’s first time selling. Amended S.C. law should dictate that. Factoring companies have to know if it’s a person’s first sale and be made to disclose that. Judges should be required to ask if it’s a person’s first sale.

Such laws would also stop factoring companies from taking advantage of teenagers just out of high school — teens like Austin Clayton, who at 19 wanted to start a business and buy a house and was supposedly promised advice on how to do so by factoring companies. But he was left with nothing after selling portions of the settlement he received from a car collision while in middle school.

“This is shockingly predatory and screams for reform,” state Sen. Luke Rankin, a Horry County Republican who chairs the Senate Judiciary Committee, told McClatchy after being presented with its findings.

The time for that reform was years ago. Get on it now, Sen. Rankin and South Carolina lawmakers.