BILL ANALYSIS �
AB 1332
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Date of Hearing: May 8, 2013
ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
Isadore Hall, Chair
AB 1332 (Hagman) - As Amended: March 21, 2013
SUBJECT : California State Lottery: assignment of prize
payments
SUMMARY : Allows California State Lottery prize winners to
assign any portion of their last three years of prize winnings
to another person or entity.
EXISTING LAW
1)The California State Lottery Act of 1994 authorizes the
California State Lottery and provides for its operation and
administration by the California State Lottery Commission and
the Director of the California State Lottery, with certain
limitations.
2)The act prohibits the assignment of the right of any person to
a prize, except that the payment of any lottery prize may be
assigned under specified circumstances, including as
collateral to secure certain loans and for future payments to
another person designated pursuant to an appropriate judicial
order of a California superior court, or a federal court
having jurisdiction over properly located in California, if
the court makes a specified determination.
3)The act provides that a prize winner, by entering into an
agreement to assign prize payments, as specified, is deemed to
have waived any statutory period of limitation as to the State
of California enforcing any rights against annual prize
payments due after the last assigned payment is paid or
released, if assigned as collateral, from the lien granted the
secured creditor.
4)Provides that these assignments of prize payments as
collateral to secure loans or for future payments to another
person designated pursuant to a judicial order, as described
above, are not valid or allowed for the final three annual
prize payments from the lottery to the prize winner.
FISCAL EFFECT : This bill is keyed non-fiscal by the
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Legislative Counsel.
COMMENTS :
Purpose of the bill : According to the author, approximately 87
percent of prize winners now select the "Cash Value" option when
they win. For those who choose the 26-year or other long-term
payment option, there really is not a compelling reason to
withhold the right to assign prize winnings.
Companies that specialize in purchasing lottery payments streams
desire certainty in their dealings. As a result, their
pre-contract searches are quite comprehensive, because of the
implications of purchasing a future payment stream in exchange
for a cash payment, only to have that future prize be contested
due to some sort of unanticipated legal bind.
Background : Consistent with other states that have a lottery,
prize winners, since 1995, of the California State Lottery, may
assign parts or all of their winnings in exchange for a lump sum
payment, with the exception of the last three years.
Before such assignment occurs, a court approval is required and
must meet the following standards:
1) Prize winners seeking and assignment agreement must
have independent legal representation.
2) The assignment must be executed on a form approved
by the Lottery Commission and made pursuant to a court
order.
3) Marital Status must be verified by the court.
4) Any other financial/legal obligations, such as child
support payments, may not be evaded through assignment.
However, the last three years were withheld from the
authorization for assignment at the time. This was due in large
part to the more limited capacity of government agencies, law
firms and lottery purchasing businesses in tracking down tax
liens and other legal obligations, such as child support
payments. This has changed dramatically as technological
advances have made information more readily available.
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Arguments in support : According to Stone Street Capital, LLC,
Stone Street is the oldest company in the nation in the business
of buying installment lottery prize payments from lottery
winners. We have done business in California and have many
California customers. Many of these customers have expressed
frustration over the restriction currently in the California
lottery law that does not permit winners receiving their prize
in installments to sell the last three years of payments.
Supporters further argue that AB 1332 is necessary to correct an
out-of-date statute, and one that discriminates against those
lottery winners (roughly 10 percent of winners) who elect to
receive their winnings in installment payments rather than as a
lump sum.
Almost 20 years ago, when the California State Lottery Act first
allowed for the assignability of payments, the State Legislature
included a ban on the assignability of the last three years in
large part because of the limited search capabilities that
government agencies and other entities had at the time, which
made it difficult to track down tax liens and other legal
obligations (e.g. child support payments).
But today the CA State Controller's Office, other government
agencies and originators like Seneca One can find this
information in mere seconds. Seneca One and other originators
will not purchase payments unless these obligations are
satisfied. Unfortunately, only those who elect to receive their
prize winnings as installments payments are impacted by this
three-year carve-out. All winners who elect to receive their
winnings as a lump sum (roughly 90 percent of winners) do not
have any restrictions on the timing of their payout. This does
not make sense and seems to penalize those winners who select
the long-term payout.
Supporters also believe this bill is good for both consumers and
the State of California for several reasons. First, the lottery
consumer benefits because he or she is able to receive his or
her money in today's dollars to satisfy immediate and urgent
needs. Indeed, as a matter of individual property rights, the
current restrictions make no sense. Second, the State of
California benefits because the lottery winner must satisfy all
outstanding liens and judgments before assigning any portion of
their remaining winnings. This means that the State will be
paid much sooner than if the winner had to wait several years
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before receiving his or her final three annual payments.
Prior Legislation : AB 218 (Richter), Chapter 363, Statutes of
1995. Made technical changes to the California State Lottery
Act of 1984, as amended by AB 3543 (Richter), in order to
clarify protections in existing law relative to prizewinners.
AB 3542 (Richter), Chapter 890, Statutes of 1994. Provided that
the right of any person to a prize shall not be assignable
except that the payment of any prize may be paid to another
person, paid to a person designated pursuant to an appropriate
judicial order, or assigned as collateral for an obligation owed
to another person, as specified. The bill further specified
that any loan secured by the assignment of a lottery prize shall
not apply to the last three annual prize payments from the
lottery to the prizewinner.
REGISTERED SUPPORT / OPPOSITION :
Support
Seneca One Finance, Inc.
Stone Street Capital, LLC
Opposition
None on file
Analysis Prepared by : Felipe Lopez / G. O. / (916) 319-2531