BILL ANALYSIS �
Bill No: AB
1332
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2013-2014 Regular Session
Staff Analysis
AB 1332 Author: Hagman
As Amended: March 21, 2013
Hearing Date: June 11, 2013
Consultant: Paul Donahue
SUBJECT
California State Lottery: Assignment of prize payments
DESCRIPTION
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 1984, an initiative
measure, 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.
2)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 a
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)Provides that a prize winner, by entering into an
agreement to assign prize payments, as specified, is
AB 1332 (Hagman) continued
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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.
BACKGROUND
1)Purpose of the bill : According to the author,
approximately 87 percent of prize winners now select the
"Cash Value" option when they win. Thus, for those who
choose the 26-year or other long-term payment option,
there is no 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 an
unanticipated legal impediment.
2)Background : Consistent with other states that have a
lottery, California State Lottery prize winners may
assign parts or all of their winnings in exchange for a
lump sum payment, with the exception of the last three
years.
Before a prize assignment occurs, a court approval is
required and must meet the following standards:
a) Prize winners seeking and assignment agreement must
have independent legal representation.
b) The assignment must be executed on a form approved
by the Lottery Commission and made pursuant to a court
order.
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c) Marital status must be verified by the court.
d) All financial and legal obligations, such as child
support payments, shall not be evaded through
assignment or prize winnings.
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.
3)Statements by supporters : 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. Supporters say that
many of its 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.
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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. Supporters believe this is nonsensical and
appears to penalize those winners who select the
long-term payout.
PRIOR/RELATED LEGISLATION
AB 218 (Richter), Chapter 363, Statutes of 1995. Made
technical changes to the California State Lottery Act in
order to clarify protections in existing law relating 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.
SUPPORT:
Seneca One Finance
Stone Street Capital
OPPOSE:
None on file
FISCAL COMMITTEE: No.
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