HD44 - Report on Borrowing and Assignment Activity by Virginia Lottery Winners Following Enactment of House Bill 1564 (2003)


Executive Summary:
During the 2003 session of the Virginia General Assembly, legislation (HB 1564, Delegate Vincent F. Callahan, Jr., Chief Patron) was enacted, which substantially expanded the circumstances under which a winner of a lottery prize payable in installments over a period of time could assign his rights to that prize or pledge the anticipated prize payment stream as collateral for a loan.

Prior to enactment of HB 1564 (Chapter 924, 2003 Acts of Assembly, included with this report as Attachment 1), the right to a lottery prize was not assignable except under specified circumstances. Va. Code § 58.1-4013, see Attachment I' Generally, those circumstances were limited to assignments necessitated by the death, divorce or child support obligations of the winner. Otherwise, the winner of a lottery prize payable over a period of time was bound by the election he made at the time he claimed the prize -either installment payments over a period of time determined by the Lottery or an immediate lump sum payment from the Lottery, discounted to present day value.

House Bill 1564 amended Va. Code § 58.1-4013 and added a new provision, Va. Code § 58.1-4020. 1. The effect of those changes is to allow, upon performance of several enumerated pre-conditions, the assignment of lottery payments due over a period of time or the pledging of those payments as collateral for a loan. The legislation does not limit the purpose of, or reason for, an assignment or pledge as collateral.

The Virginia Lottery has established procedures by which entities wishing to be the assignee of prize winnings or the lender of loans for which prize winnings will act as collateral, may be registered to do so. See Va. Code § 58.1-4020.1 E. In addition, as permitted by the statute, the Lottery has also determined an appropriated fee structure for both the registration of assignees or lenders and the cost of processing assignments.

To date, five (5) companies are registered with the Virginia Lottery and approved to receive assignments and twenty-one (21) Lottery prize winners have assigned all or a portion of their remaining winnings. As of the date of this report, the Lottery has not been advised that any winner has sought to pledge his future payments as collateral for a loan.

Based upon the Lottery's experience in reviewing and processing the assignments, several clarifications were recommended to the General Assembly during the 2004 session and were contained in House Bill 1027offered by Chief Patron Delegate David B. Albo. In addition, the courts by which these cases are heard have offered two recommendations for consideration by the General Assembly:

1. Amend the language in § 58.1-4020.1 A. relating to the necessity of the hearing on a petition for assignment to clarify that in those cases where all statutory requirements have been met and the Virginia Lottery indicates no objection, the Order for assignment may be entered without a court appearance; and

2. Clarify within the statute that a subsequent reassignment of the lottery winnings by the original assignee to another entity is not subject to the approval requirements of the statute.