58.1-4020.1 - Voluntary assignment of lottery prizes or pledge as collateral for a loan; requirements for the assignees and lenders.
§ 58.1-4020.1. Voluntary assignment of lottery prizes or pledge as collateralfor a loan; requirements for the assignees and lenders.
A. Lottery prizes, payable in installments over a period of time, excludingprizes payable for the winner's life, may be voluntarily assigned or pledgedas collateral for a loan, in whole or in part, by the person entitled to suchinstallments, by written contract affirming that the requirements of thissection have been met and endorsed by written order of a court of competentjurisdiction after a hearing. The order shall specify the name, address andsocial security number or tax identification number of the assignee or lenderand shall specifically describe the payments be assigned or pledged ascollateral by date and gross pre-tax amount. The Department shall be givennotice of any hearing held pursuant to this section and shall have the rightto appear and participate in such hearing. Venue for hearings held pursuantto this section shall be in the Circuit Court of the City of Richmond.
The rate charged for any such assignment or loan shall not exceed 15 percent.
The contract shall:
1. Be signed by the assignor and the assignee or the lender and the borrower,and the assignor or borrower shall affirm the assignment or loan has beenvoluntarily executed.
2. Include or be accompanied by a sworn statement attesting that the assignoror borrower (i) is of sound mind and not acting under duress; (ii) has beenadvised in writing by the assignee or lender to seek independent legalcounsel and independent financial counsel concerning the implications of theassignment or loan, including the tax consequences, and has either receivedsuch advice or knowingly waived such advice in writing; (iii) understandsthat he is relinquishing or limiting his rights to receive the lotteryproceeds; and (iv) has received from the Virginia Lottery, in response to awritten request therefor, confirmation of the assignee's or lender'sregistration with the Virginia Lottery in accordance with subsection E ofthis section.
3. Include a disclosure statement setting forth (i) the amounts assigned orloaned; (ii) the dates such amounts are payable; (iii) the purchase pricepaid for the assignment or loan; (iv) the rate of discount to present value,assuming daily compounding and funding on the contract date; (v) the amountof any fees associated with the assignment or loan and by whom such fees arepayable; and (vi) the tax identification number of the assignee.
4. Expressly state that the assignor or borrower has three business daysafter signing the contract to cancel the assignment or loan.
5. Expressly state that the assignee or lender is eligible to purchase, shareor receive prizes of the Virginia Lottery pursuant to §§ 58.1-4015, 58.1-4016and subsection A of § 58.1-4019, and that the Virginia Lottery has compliedwith subsection B of § 58.1-4019 in that the original prizewinner is (or ifdeceased, was) a natural person if and to the extent that the prize wasawarded on or after the effective date pursuant to subsection B of §58.1-4019.
6. Expressly state that no amounts assigned or loaned are subject to setoffpursuant to Article 21 (§ 58.1-520 et seq.) of Chapter 3 of this title.
B. The Commonwealth, the Virginia Lottery and any employee or representativeof either shall be indemnified and held harmless upon payment of amounts dueas set forth in the court order.
C. The Lottery may establish a reasonable fee to process the assignmentsprovided for in this section and to receive, review and file the registrationrequired by subsection E and confirm compliance with the registrationrequirements. The fee shall be reflective of the direct and indirect costs ofprocessing the assignments or registrations.
D. Notwithstanding the provisions of this section, the Commonwealth and theVirginia Lottery shall not accept any assignment if either of the followinghas occurred:
1. Federal law provides that the right to assign lottery proceeds is deemedreceipt of income in the year the lottery prize is won for all installmentlottery prize winners. "Federal law" includes statutory law, rulings ofcourts of competent jurisdiction, and published rulings by the InternalRevenue Service.
2. State law provides that the right to assign lottery proceeds is deemedreceipt of income in the year the lottery prize is won for all installmentlottery prize winners. "State law" includes statutory law, rulings ofcourts of competent jurisdiction, and published rulings by the Department ofTaxation.
E. An assignee, prospective assignee, lender or prospective lender shall notmake any representation in any written or oral communications with a lotterywinner that implies that the assignee, prospective assignee, lender orprospective lender is associated with or an agent of the Virginia Lottery.Every prospective assignee or prospective lender shall register with theVirginia Lottery, prior to contracting for any assignment or loan pursuant tothis section. The registration shall include (i) the assignee's or lender'sstandard information packet or materials given or sent to prospectiveassignees or borrowers, (ii) the assignee's or lender's standard form ofagreement, (iii) the assignee's or lender's federal tax identificationnumber, and (iv) where applicable, the assignee's or lender's most recentpublic financial statement. The Director may deny, suspend or revoke aregistration for a violation of this chapter or for such other reason as theBoard, by regulation, may establish.
(2003, c. 924; 2004, c. 630.)