On November 21, the Consumer Financial Protection Bureau (CFPB) announced that it filed suit in the U.S. District Court for the District of Maryland against a structured settlement company and certain of the company’s principals, alleging that the company violated the Consumer Financial Protection Act (CFPA) by defrauding lead paint victims.
According to the complaint, the company provided cash advances to consumers who had been awarded structured settlements as a result of exposure to lead paint. Structured settlements provide periodic financial payments and are often used to compensate victims for personal injuries. The company operated as a “structured settlement factoring company,” which offers structured settlement recipients an immediate lump sum payment in exchange for the balance of their settlement payments. The company allegedly offered consumers a substantially discounted lump-sum payment in exchange for the right to collect the remaining payments to which they were entitled under the settlements. The CFPB alleged that the lump sum payment offered by this company typically represented around 30% of the present value of the future payments. Many of the affected consumers allegedly had cognitive impairments as a result of lead poisoning. Most of the structured settlement transfers occurred in Maryland. The company also allegedly steered consumers to an attorney who had ties to the company, and who failed to provide sufficient legal and other professional advice, and failed to disclose his relationship with the company, as required under state structured settlement protection acts. The CFPB requested that the Court enjoin the company and its principals from participating in the structured settlement industry, as well as order disgorgement and award restitution, damages, civil monetary penalties, and costs.