Structured Settlement Protection Act

All About The Structured Settlement Protection Act

There are federal and state laws that protect individuals who are receiving periodic payments. These laws add transparency and consumer protection to the structured settlement selling process. The structured settlement protection act protects the rights of structured settlement owners by enacting rules on receiving advice and requiring the full disclosure of the fees associated with the selling process.

This read offers information on the structured settlement protection act (SSPA).

Different states have their own version of the SSPA while the federal level of legislation was created soon after the 9/11 disaster. The state level as well as federal level legislation includes provisions to help the companies selling these types of payment understand their responsibilities in selling such payments.


Some of the major provisions included in the SSPA are:

  • The person buying the payment should receive professional advice on the pros and cons of the lump sum payment. In fact, the person buying the settlement has the right to change his/her mind within a predetermined time frame. This time frame may differ according to each state.
  • The buyer should receive a full disclosure of the payment information such as all the fees and charges that he/she may have to incur as a result of the transaction. There is also a requirement that the transaction should go to a state court for approval. A judge will determine if the conditions of the agreement are in the best interest of the buyer before he/she approves the sale.
  • If the transaction doesn’t get the approval of a state court, a 40% federal excise tax is applied to the transaction. The legislation also restricts the recipient’s ability to get the insurance company to convert a long-term structured settlement into a lump sum payout.


Structured settlements were introduced in the 1970s. In fact, they became quite popular as the preferred payment method in court cases that involve personal injuries and worker’s compensation cases. But, in the 1990s, there were some companies that were taking advantage of the ignorance of those who were receiving the payments.

Most people didn’t understand the present value of their future payments, the fees and charges of the transaction, and discounts taken from the payments. In 1997, most states began enacting laws to protect the innocent buyers from being exploited by predatory companies.

State laws introduced consumer protection clauses. The most important were the requirement of the sale to be approved by a judge. Other states jumped in, and the SSPA act was passed by the federal government in 2002. Since most states have enacted their own SSPA acts, some states have their own exceptions to these rules. This is the history of the Structured Settlement Protection Act.


In conclusion, legislation has been enacted by different states and the federal government of the United States to protect the rights of the structured settlement owners. The Structured Settlement Protection Act or the SSPA is a result of this process. This read offers information on the Structured Settlement Protection Act.