Often our society tries to balance between protections and liberty. Generally speaking, people can do as they please. This applies to financial transactions as well. Assuming a willing party on the other side, you can buy or sell what you want, when you want. Just a glance at eBay will prove that.

Obviously, there are some constraints to this general liberty. For instance, you cannot buy or sell illegal narcotics. Even buying or selling legal drugs requires proper licensing and prescriptions. Likewise, the buying and selling of securities has various restrictions associated with it. For various reasons, some protections have been built in.

As any reader of this blog is well aware, selling structured settlement payments is also encumbered with restrictions. For instance, under the regulatory scheme contemplated by federal law (IRC 5891) and its related state transfer laws, future structured settlement payment rights can only be sold with prior written disclosure of the key terms of the sale, and with the approval of a court, finding the sale to be in the seller’s best interests, taking into account the welfare and support of any dependents. Most state transfer laws also require the seller to be advised in writing to seek professional advice, and to either obtain such advice or waive the right in writing.

In the balance between financial freedom and protectionism, structured settlement factoring is far off on the protectionism side of the scale. In what must be the most regulated financial transaction in the free world, someone who wants to sell structured settlement payments must negotiate with a willing buyer and reach an accord, then receive all the required written disclosures, be admonished to seek independent professional advice, and then appear before a judge. At the hearing, in open court and in front of whomever may be there that day, the judge may inquire into the finances of the seller, ask about the reasons for wanting to sell, and any other sort of personal information.

Some today insist that the laws should be changed so that a seller must receive independent professional advice (as opposed to simply being advised to seek it), pushing this transaction even further toward the protectionist pole. A small number of state transfer laws currently do require this. Can you think of any other financial transaction where you must have a legal or financial advisor? You can buy or sell a house or a car without mandated professional representation. You can sue or be sued without hiring a lawyer. You can even settle a lawsuit and enter into a structured settlement without independent professional advice. What does this level of protectionism say about the people it purports to protect? Apparently, there is a built-in assumption that tort victims really can’t take care of themselves. I find that characterization enraging. No one chooses to be a tort victim. Car accidents, toxic torts, and other common personal injuries (for which structured settlements are often the right answer) can impact anyone. Why should we assume that such tort victims, after settling the case and entering into a structured settlement, cannot thereafter make financial decisions? If that presumption is correct, why should we stop with protecting them from structured settlement factoring companies? Should these people really be allowed access to a paycheck, or buy a house or car without supervision? What about the lump sums they receive from the structured settlements themselves – are these funds somehow different and less likely to be squandered than factoring company lump sums?

The choice to hire a professional advisor, and pay for such, should be the seller’s alone.  Independent professional advice, from lawyers, accountants and other licensed professionals, may be prudent. To be clear, neither Settlement Captial nor I would ever advise someone to not seek counsel or professional advice. However, in our society, we should not force people to do what we may objectively think is appropriate. These decisions are essentially subjective. We should be cautious of the corrosion of liberty in making financial choices, and even more cautious of the underlying presumptions which are the catalysts of this corrosion.

“If you want to be free, there is but one way; it is to guarantee an equally full measure of liberty to all your neighbors. There is no other.” Carl Schurz