HF 3768

as introduced - 92nd Legislature (2021 - 2022) Posted on 04/26/2022 08:08pm

A bill for an act
relating to civil law; amending process for and approval of transfer of structured
settlement; providing for enforcement of violations of prohibited practices;
amending Minnesota Statutes 2020, sections 549.30, subdivisions 3, 6, 15, 19, by
adding subdivisions; 549.31; 549.32; 549.34; proposing coding for new law in
Minnesota Statutes, chapter 549.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2020, section 549.30, subdivision 3, is amended to read:

Subd. 3.

Applicable law.

"Applicable law" means: (1) the laws of the United States; (2)
the laws of this state, including principles of equity applied in the courts of this state; and
(3) the laws of any other jurisdiction: (i) which is the domicile of the payee deleted text begin or any other
interested party deleted text end ; (ii) under whose laws a structured settlement agreement was approved by
a court or responsible administrative authority; or (iii) in whose courts a settled claim was
pending when the parties entered into a structured settlement agreement.

Sec. 2.

Minnesota Statutes 2020, section 549.30, is amended by adding a subdivision to
read:

new text begin Subd. 3a. new text end

new text begin Assignee. new text end

new text begin "Assignee" means a person acquiring or proposing to acquire
structured settlement payment rights from a transferee.
new text end

Sec. 3.

Minnesota Statutes 2020, section 549.30, is amended by adding a subdivision to
read:

new text begin Subd. 5a. new text end

new text begin Effective equivalent annual interest rate. new text end

new text begin "Effective equivalent annual
interest rate" means the annualized rate of interest on the net advance amount, calculated
by treating the transferred settlement payments as if they were installment payments on a
loan, with each payment applied first to the accrued unpaid interest and then to the principal.
new text end

Sec. 4.

Minnesota Statutes 2020, section 549.30, subdivision 6, is amended to read:

Subd. 6.

Independent professional advice.

"Independent professional advice" means
advice of an attorney, certified public accountant, actuary, new text begin financial adviser, new text end or other new text begin licensed
new text end professional adviser: (1) who is engaged by a payee to render advice concerning the legal,
tax, and financial implications of a transfer of structured settlement payment rights; (2) new text begin to
whom the payee is not referred directly or indirectly and new text end who is not in any manner affiliated
with or compensated by the transferee of the transfer; and (3) whose compensation for
providing the advice is not affected by whether a transfer occurs or does not occur.

Sec. 5.

Minnesota Statutes 2020, section 549.30, subdivision 15, is amended to read:

Subd. 15.

Structured settlement payment rights.

"Structured settlement payment
rights" means rights to receive periodic payments, including lump-sum payments, under a
structured settlement, whether from the settlement obligor or the annuity issuer, where: (1)
the payee deleted text begin or any other interested party deleted text end is domiciled in the state; (2) the structured settlement
agreement was approved by a court or responsible administrative authority in the state; or
(3) the settled claim was pending before the courts of this state when the parties entered
into the structured settlement agreement.

Sec. 6.

Minnesota Statutes 2020, section 549.30, subdivision 19, is amended to read:

Subd. 19.

Transferee.

"Transferee" means a person deleted text begin who is receiving or will receive deleted text end new text begin
acquiring or proposing to acquire new text end structured settlement payment rights deleted text begin resulting from a
transfer deleted text end .

Sec. 7.

Minnesota Statutes 2020, section 549.31, is amended to read:

549.31 CONDITIONS TO TRANSFERS OF STRUCTURED SETTLEMENT
PAYMENT RIGHTS AND STRUCTURED SETTLEMENT AGREEMENTS.

Subdivision 1.

Generally.

No direct or indirect transfer of structured settlement payment
rights is effective and no structured settlement obligor or annuity issuer is required to make
a payment directly or indirectly to a transferee of structured settlement payment rights unless
the transfer has been authorized in advance in a final order of a court of competent jurisdiction
or responsible administrative authority, based on the court's or responsible administrative
authority's written express findings new text begin , after notice and hearing, new text end that:

(a) the transfer complies with the requirements of sections 549.31 to 549.34 and will
not contravene other applicable law;

(b) not less than ten days before the date on which the payee first incurred an obligation
with respect to the transfer, the transferee has provided to the payee new text begin , an attorney representing
the payee or advising the payee, or any other professional known to be advising the payee new text end
a disclosure statement in bold type, no smaller than 14 points, specifying:

(1) the amounts and due dates of the structured settlement payments to be transferred;

(2) the aggregate amount of the payments;

(3) the discounted present value of the payments, together with the discount rate used
in determining the discounted present value;

(4) the gross amount payable to the payee in exchange for the payments;

(5) an itemized listing of all brokers' commissions, service charges, application fees,
processing fees, closing costs, filing fees, referral fees, administrative fees, legal fees, notary
fees, and other commissions, fees, costs, expenses, and new text begin any other new text end charges payable by the
payee or deductible from the gross amount otherwise payable to the payee new text begin and verification
that the total fees and charges do not exceed two percent of the total compensation payable
to the payee new text end ;

(6) the net amount payable to the payee after deduction of all commissions, fees, costs,
expenses, and charges described in clause (5);

(7) the quotient, expressed as a percentage, obtained by dividing the net payment amount
by the discounted present value of the payments; deleted text begin and
deleted text end

(8) the amount of any penalty and the aggregate amount of any liquidated damages,
including penalties, payable by the payee in the event of a breach of the transfer agreement
by the payee;

new text begin (9) the effective equivalent annual interest rate, disclosed in the following form: "Based
on the net amount that you will receive from us and the amounts and timing of the structured
settlement payments you are transferring to us, in effect you will be paying us at an interest
rate of ....... % per year"; and
new text end

new text begin (10) that the payee is advised to obtain independent professional advice about the transfer,
disclosed in the following form: "Before agreeing to sell any of your payment rights, you
should seek guidance from an attorney, accountant, actuary, financial adviser, or tax or
other licensed professional adviser who is not associated with the buyer. It is illegal for the
buyer to refer you to anyone for this advice and for anyone associated with or paid for by
the buyer to give you advice.";
new text end

(c) new text begin based on the files, records, disclosures, and evidence presented at the hearing, new text end the
deleted text begin payee deleted text end new text begin court new text end has established that the new text begin financial terms of the proposed new text end transfer new text begin are fair and
reasonable and the proposed transfer new text end is in the best interests of the payee and the payee's
dependents deleted text begin ; deleted text end new text begin after considering:
new text end

new text begin (1) the payee's age, legal knowledge, and apparent maturity level, and any other relevant
factors and the stated purpose of the transfer;
new text end

new text begin (2) whether the payee has the capacity to fully understand the financial terms and
implications of the transfer agreement;
new text end

new text begin (3) whether the payee is employed or employable;
new text end

new text begin (4) the ability of the payee to meet ongoing and known future living expenses, including
medical expenses, and the current and future financial obligations of the payee and the
payee's dependents, including child support and spousal maintenance;
new text end

new text begin (5) whether the payee completed previous transactions involving the payee's structured
settlement payments, and the timing, size, stated purpose, and actual use of the proceeds;
new text end

new text begin (6) the impact of the proposed transfer on current or future eligibility of the payee or
the payee's dependents for public benefits; and
new text end

new text begin (7) any other factors or facts the court determines are relevant and should be considered;
new text end

(d) the payee has new text begin or has not new text end received independent professional advice regarding the
legal, tax, and financial implications of the transfer;

(e) the transferee has given written notice of the transferee's name, address, and taxpayer
identification number to the annuity issuer and the structured settlement obligor and has
filed a copy of the notice with the court or responsible administrative authority; and

(f) that the transfer agreement provides that any disputes between the parties will be
governed, interpreted, construed, and enforced in accordance with the laws of this state and
that the domicile state of the payee is the proper place of venue to bring any cause of action
new text begin in district court new text end arising out of a breach of the agreement. The transfer agreement must also
provide that the parties agree to the jurisdiction of any court of competent jurisdiction located
in this state new text begin and that no predispute arbitration is required by the agreement new text end .

deleted text begin If the transfer would contravene the terms of the structured settlement, upon the filing
of a written objection by any interested party and after considering the objection and any
response to it, the court or responsible administrative authority may grant, deny, or impose
conditions upon the proposed transfer as the court or responsible administrative authority
deems just and proper under the facts and circumstances in accordance with established
principles of law. deleted text end Any order approving a transfer must require that the transferee indemnify
the annuity issuer and the structured settlement obligor for any liability including reasonable
costs and attorney fees arising from compliance by the issuer or obligor with the order of
the court or responsible administrative authority.

new text begin Subd. 1a. new text end

new text begin Appointment of evaluator. new text end

new text begin The court may, in its discretion in any case,
appoint an attorney to make an independent assessment and advise the court whether the
financial terms of the proposed transfer agreement are fair and reasonable, and whether the
transfer is in the best interests of the payee and the payee's dependents. The evaluator must
present the findings of the evaluation to the court at or prior to a hearing on the application.
All costs and reasonable fees for the evaluator shall be borne by the transferee.
new text end

new text begin Subd. 1b. new text end

new text begin Obligations of annuity issuers and structured settlement obligors; liability
of transferees. new text end

new text begin (a) The annuity issuer and the structured settlement obligor may rely on the
court order approving the transfer of structured settlement payment rights in redirecting
periodic payments and, as to all parties except the transferee or an assignee, be discharged
and released from any and all liability for the redirected payments. The failure of any party
to the transfer to comply with sections 549.30 to 549.34 or with the court order approving
the transfer has no effect on the discharge and release.
new text end

new text begin (b) The transferee is liable to the structured settlement obligor and annuity issuer:
new text end

new text begin (1) if the transfer contravenes the terms of the structured settlement, and for any taxes
incurred by the structured settlement obligor or annuity issuer resulting from the transfer;
or
new text end

new text begin (2) for any other liabilities or costs, including reasonable attorney fees, arising from
compliance by the annuity issuer or the structured settlement obligor with the court order
approving the transfer, or from the failure of any party to the transfer to comply with sections
549.30 to 549.34.
new text end

new text begin (c) Compliance with the requirements set forth in sections 549.30 to 549.34 regarding
any transfer of structured settlement payment rights is solely the responsibility of the
transferee, and neither the annuity issuer nor the structured settlement obligor bears any
responsibility for, or any liability arising from, the failure to comply with the requirements
or failure to fulfill the conditions of the transfer.
new text end

new text begin (d) Neither the annuity issuer nor the structured settlement obligor shall be required to
divide any periodic payment between the payee and any transferee or assignee or between
two or more transferees or assignees.
new text end

Subd. 2.

Unenforceable confessions of judgment.

A provision in a transfer agreement
giving a transferee power to confess judgment against a payee is unenforceable deleted text begin to the extent
the amount of the judgment would exceed the amount paid by the transferee to the payee,
less any payments received from the structured settlement obligor or the payee deleted text end .

Subd. 3.

Initial disclosure of structured settlement terms.

In negotiating a structured
settlement of claims brought by or on behalf of a claimant who is domiciled in this state,
the structured settlement obligor shall disclose in writing to the claimant or the claimant's
legal representative all of the following information that is not otherwise specified in the
structured settlement agreement:

(1) the amounts and due dates of the periodic payments to be made under the structured
settlement agreement. In the case of payments that will be subject to periodic percentage
increases, the amounts of future payments may be disclosed by identifying the base payment
amount, the amount and timing of scheduled increases, and the manner in which increases
will be compounded;

(2) the amount of the premium payable to the annuity issuer;

(3) the discounted present value of all periodic payments that are not life-contingent,
together with the discount rate used in determining the discounted present value;

(4) the nature and amount of any cost that may be deducted from any of the periodic
payments;

(5) where applicable, that any transfer of the periodic payments is prohibited by the
terms of the structured settlement and may otherwise be prohibited or restricted under
applicable law; and

(6) that any transfer of the periodic payments by the claimant may subject the claimant
to serious adverse tax consequences.

Sec. 8.

new text begin [549.315] DISCOUNT RATE.
new text end

new text begin The discount rate used in determining the net amount payable to the payee under the
transfer agreement may not exceed an annual percentage rate of prime plus five percentage
points calculated as if the net amount payable to the payee was the principal of a consumer
loan made by the transferee to the payee, and if the structured settlement payments to be
transferred to the transferee were the payee's payments of principal plus interest on such
loan. For purposes of this subdivision, the prime rate shall be as reported by the Federal
Reserve Statistical Release H.15 on the first Monday of the month in which the transfer
agreement is signed by both the payee and the transferee, except when the transfer agreement
is signed prior to the first Monday of that month then the prime rate shall be as reported by
the Federal Reserve Statistical Release H.15 on the first Monday of the preceding month.
new text end

Sec. 9.

Minnesota Statutes 2020, section 549.32, is amended to read:

549.32 deleted text begin JURISDICTION deleted text end new text begin APPLICATION new text end ; PROCEDURE FOR APPROVAL OF
TRANSFERS.

Subdivision 1.

Jurisdiction new text begin ; venue new text end .

deleted text begin The district court has nonexclusive jurisdiction
over deleted text end new text begin (a) new text end An application for authorization under section 549.31 of a transfer of structured
settlement payment rights new text begin must be filed in the district court in the county in which the payee
resides new text end .

new text begin (b) The payee must appear in person at the hearing unless the court determines that good
cause exists to excuse the payee from appearing in person.
new text end

Subd. 2.

Notice.

Not less than 20 days before the scheduled hearing on an application
for authorization of a transfer of structured settlement payment rights under section 549.31,
the transferee shall file with the court or responsible administrative authority and serve on:
any other government authority that previously approved the structured settlement; and all
interested parties, a notice of the proposed transfer and the application for its authorization.
The notice must include:

(1) a copy of the transferee's application to the court or responsible administrative
authority new text begin , which must contain the payee's name and age new text end ;

(2) a copy of the transfer agreement;

(3) a copy of the disclosure statement required under section 549.31, subdivision 1,
paragraph (b) new text begin , and proof that the disclosure statement has been delivered to the payee, to
an attorney representing or advising the payee, and to any other professional known to be
advising the payee new text end ;

(4) notification that an interested party is entitled to support, oppose, or otherwise respond
to the transferee's application, either in person or by counsel, by submitting written comments
to the court or responsible administrative authority or by participating in the hearing;

(5) notification of the time and place of the hearing and notification of the manner in
which and the time by which written responses to the application must be filed, in order to
be considered by the court or responsible administrative authority. Written responses to the
application must be filed within 15 days after service of the transferee's notice; and

(6) notification of the date and deleted text begin judicial district deleted text end new text begin court, and details new text end of any prior application
for transfer filed by the transferee new text begin , an affiliate or assignee of the transferee, or any other
transferee new text end relating to a prior proposed transfer with the payee, including whether the prior
application was granted or denied. If any prior application was granted, the notice shall
provide the amount and due dates of any structured settlement payments that were transferred,
the aggregate amount of the payments, the discounted present value of the payments, and
the gross amount that was payable to the payee in exchange for the payments.

Sec. 10.

new text begin [549.325] PROHIBITED PRACTICES.
new text end

new text begin Subdivision 1. new text end

new text begin Prohibitions. new text end

new text begin No transferee shall:
new text end

new text begin (1) represent the payee;
new text end

new text begin (2) intervene in a pending structured settlement transfer proceeding, if the transferee is
not a party to such proceeding or an interested party relative to the proposed transfer that
is the subject of the pending structured settlement transfer proceeding;
new text end

new text begin (3) offer or provide any gift, loan, extension of credit, or advance as an inducement to
enter into a transfer agreement or pay a fee to any person to refer a potential payee to the
transferee or any affiliate of the transferee;
new text end

new text begin (4) communicate with a payee or a person associated with the payee with excessive
frequency, at unusual hours, or in any other manner as reasonably may be expected to abuse
or harass the payee in connection with a proposed transfer;
new text end

new text begin (5) solicit a prospective payee through the conveyance of a document in any way
resembling a check or other form of payment;
new text end

new text begin (6) provide in a transfer agreement or related document that gives to the transferee the
first choice or option to purchase any remaining structured settlement rights belonging to
the payee; or
new text end

new text begin (7) solicit or petition for a transfer of a structured settlement from a minor or a parent
or guardian of a minor.
new text end

new text begin Subd. 2. new text end

new text begin Enforcement. new text end

new text begin A violation of this section is a deceptive practice in violation of
section 325F.69.
new text end

Sec. 11.

Minnesota Statutes 2020, section 549.34, is amended to read:

549.34 CONSTRUCTION.

new text begin (a) new text end Nothing contained in sections 549.30 to 549.34 may be construed to authorize the
transfer of workers' compensation payment rights in contravention of applicable law or to
give effect to the transfer of workers' compensation payment rights that is invalid under
applicable law.

new text begin (b) No transfer of structured settlement payment rights shall extend to any payments
that are life contingent unless, prior to the date on which the payee signs the transfer
agreement, the transferee has established and has agreed to maintain procedures reasonably
satisfactory to the annuity issuer and the structured settlement obligor for:
new text end

new text begin (1) periodically confirming the payee's survival; and
new text end

new text begin (2) giving the annuity issuer and the structured settlement obligor prompt written notice
in the event of the payee's death.
new text end