ENGROSSED
COMMITTEE SUBSTITUTE
FOR
Senate Bill No. 18
(By Senator Bowman and Kessler)
________________
[Originating in the Committee on the Judiciary;
reported February 26, 1999.]
A BILL to amend chapter forty-six-a of the code of West Virginia,
one thousand nine hundred thirty-one, as amended, by adding
thereto a new article, designated article six-g, relating to
the business of purchasing the right to receive future
payments from an annuity, court settlement, lottery payoff,
sweepstakes payoff or other similar payment arrangement;
establishing legislative intent; defining terms; setting forth
disclosure requirements; requiring approval for certain
transfers; providing for a right of recision; establishing
operative date and remedies; prohibiting waiver; limiting
liability to consumer; and requiring companies to register
with secretary of state.
Be it enacted by the Legislature of West Virginia:
That chapter forty-six-a of the code of West Virginia, one
thousand nine hundred thirty-one, as amended, be amended by adding thereto a new article, designated article six-g, to read as
follows:
ARTICLE 6G. TRANSFERS OF RIGHT TO RECEIVE FUTURE PAYMENTS.
§46A-6G-1. Legislative findings and intent.
The Legislature hereby finds that it is sound public policy to
allow consumers to transfer future payments to companies in the
business of purchasing future payments in exchange for a lump sum
payment so long as a complete disclosure of all material terms and
conditions is provided to consumers before they make a decision to
transfer their future payments. The Legislature finds that
consumers should receive the disclosure prior to executing a
transfer agreement. The Legislature further finds that companies
in the business of purchasing future payments should be registered
to do business within this state and when the transfer involves
certain structured settlements, that a court determine whether such
transfer is fair, reasonable and in the best interests of the
consumer.
§46A-6G-2. Definitions.
(a) For the purposes of this article:
(1) "Closing date" means the date the transfer agreement is executed by the consumer and the transferee, and shall be at least
fourteen days after the requisite disclosures have been provided to
the consumer and interested parties.
(2) "Consumer" means any person entitled to receive periodic
future payments from an annuity issuer, settlement obligor or any
other party as the result of an annuity, settlement, lottery
winnings, sweepstakes payoff or other future payment arrangement.
(3) "Interested party" means an insurance company, an annuity
issuer, a structured settlement obligor, a lottery, a beneficiary
irrevocably designated in an agreement to receive future payments
following the consumer's death or other entity obligated to pay to
a consumer any future payments.
(4) "Structured settlement" means an arrangement whereby a
settlement obligor, an annuity issuer, or other person agrees to
make future payments to a consumer in settlement of a tort claim.
(5) "Structured settlement payment rights" means the right to
receive periodic payments, including lump sum payments, under a
structured settlement from a settlement obligor, annuity issuer, or
other person.
(6) "Transfer" means any sale, assignment, or other conveyance
of future payment rights by a consumer to a transferee for
consideration.
(7) "Transfer agreement" means an agreement providing for the
transfer of future payment rights from a consumer to a transferee.
(8) "Transferee" means any person or entity that becomes
entitled to receive a consumer's future payments as a result of a
transfer agreement and includes companies in the business of
purchasing future payments.
§46A-6G-3. Disclosure requirements prior to transfer.
(a) In order for any transfer by a consumer to a transferee to
be effective, the transferee shall provide the following
disclosures in writing, in bold, twelve point type, to the consumer
at least fourteen days prior to the closing date or the hearing on
the transfer when court approval is required by the provisions of
this article:
(1) The amount of each future payment to be transferred by the
consumer and the date such payments were due to the consumer;
(2) The aggregate amount of the future payments to be
transferred by the consumer;
(3) The discounted present value of the future payments to be
transferred by the consumer and the discount rate used in the
calculation;
(4) The discount rate used in subdivision (3) of this section
stated in terms of an annual percentage rate;
(5) The lump sum payable to the consumer in exchange for
transferring the future payments;
(6) A good faith estimate of all commissions, fees, rebates,
service charges, application fees, processing fees, closing costs,
filing fees, administrative charges and other commissions, fees,
costs, expenses and charges to be paid by the consumer from the
lump sum in connection with the transfer;
(7) The net amount payable to the consumer after the deduction
of all commissions, fees, costs, expenses and charges described in
subdivision six of this section; and
(8) A statement that there may be tax consequences affecting
the consumer as a result of the transfer and that the consumer is
advised to seek the advice of an attorney or accountant.
(b) The transferee shall also provide written notice to all
interested parties at least fourteen days prior to the closing date
of the transfer or the hearing when court approval is required
including:
(1) The closing date of the transfer, or the date, time and
place of the hearing;
(2) A copy of the disclosure statement required by subsection
(a) of this section; and
(3) The name, address and taxpayer identification number of the transferee.
(c) If the transfer requires court approval pursuant to
section five of this article, then the transferee shall also
provide the disclosure statement required by subsection (a) of this
section to the court and the guardian ad litem, if one is named by
the court.
§46A-6G-4. Requirement of court approval for certain structured
settlement transfers.
(a) In addition to the requirements of this article, when a
transfer of all or any portion of a consumer's structured
settlement payment rights from a tort claim exceeds forty thousand
dollars or the lump sum to be paid to the consumer by the
transferee exceeds twenty thousand dollars, or when the structured
settlement payment rights belong to an infant or an incompetent
person, the transfer shall be approved by a circuit court in the
county wherein the consumer resides or where the structured
settlement agreement was executed.
(b) The transferee shall commence the action by filing a
petition with the court seeking approval of the transfer, and
providing to the court the disclosure statement required by
subsection (a), section three of this article.
(c) The circuit court shall set a time and date for a hearing on the matter within twenty-one days of the date of the filing of
the petition. The transferee shall notify the consumer of the date
and time of the hearing, as well as any interested parties.
(d) The court may appoint a guardian ad litem to represent the
consumer when the consumer is not represented by counsel and when
the court believes it is necessary to protect the consumer's
interests. The guardian ad litem shall review the requisite
disclosures and make an independent inquiry to determine whether
the proposed transfer is fair, reasonable and in the best interest
of the consumer. Such information shall be reported to the court
during the hearing on the matter.
(e) If there are no interested parties, then the court may
review the petition and the answer of the consumer or guardian ad
litem, if appointed, on its own motion without a hearing on the
matter.
(f) An interested party has the right to appear and contest
the proposed transfer at the time of the hearing. If, after proper
notice, the interested party does not make an appearance, then the
interested party shall be bound by the court's ruling and shall
comply therewith irrespective of a provision restricting the right
of the consumer to assign or transfer the consumer's future payment
rights.
(g)After a hearing or upon its own motion, the court may
approve the transfer if court finds that:
(1) The transferee has complied with the provisions of
section four of this article; and
(2) The transfer is fair, reasonable and in the best interest
of the consumer.
(h) The court shall award the guardian ad litem reasonable
fees for representing the consumer. Such fees shall be paid by the
transferee.
(i) A consumer may request court approval for a transfer that
does not require court approval under this section. Such voluntary
petition shall then become subject to the provisions of this
section. The transferee shall be responsible for filing the action
pursuant to subsection (b) of this section, and the consumer shall
be responsible for attorney's fees or guardian ad litem fees.
§46A-6G-5. Right of recission.
(a) Any consumer who enters into a transfer agreement shall
have an absolute, nonwaiveable right of rescis-sion for five business
days following the closing date of the transfer. During the five- day rescission period, the consumer may rescind the transfer
agreement by phone, mail or facsimile, effective upon receipt,
without penalty or further obligation to the transferee, except that any amounts advanced by the transferee to the consumer in
contemplation of the transfer shall be immediately refunded to the
transferee.
(b) When a transfer requires court approval, the consumer may
rescind without penalty until the court order is entered appointing
a guardian ad litem. When the consumer dismisses the action after
the appointment of a guardian ad litem or rescinds the transfer
agreement within five business days of court approval of the
transfer, the consumer shall be responsible for the filing fee and
any guardian ad litem fees.
§46A-6G-6. Remedies; effective date; nonwaiver.
(a) This article shall apply to transfer agreements of future
payment rights executed after the effective date of this article.
Nothing in this article shall be construed to impair, limit, affect
or otherwise apply to any transfer agreement executed prior to the
effective date of this article.
(b) A violation of a provision of this article by the
transferee is an unfair or deceptive act or practice in the conduct
of commerce pursuant to the provisions of article six, section one
hundred four of this chapter. The remedy provided for in this
section is in addition to other remedies provided for by law.
(c) The provisions of this article may not be waived.
§46A-6G-7. Protection from liability to consumer.
When an interested party makes payments to the transferee
pursuant to a court order or a transfer agreement executed in
accordance with the provision of this article, the interested party
and the transferee are not liable to the consumer for the transfer
of the consumer's future payments.
§46A-6G-8. Registration with the secretary of state.
(a) A transferee, or other company in the business of
purchasing future payments, shall file a registration statement
with the secretary of state before advertising or arranging
transfers of consumer's future payment rights in this state. The
registration statement shall contain:
(1) The name and address of the transferee;
(2) The name and address of the transferee's agent for service
of process within the state, or if the company does not have one
within the state, a statement that the secretary of state will
serve as the agent for service of process; and
(3) A full and complete disclosure of any litigation or
unresolved complaint involving unfair or deceptive business
practices filed with a governmental authority of this state
relating to the operations of the transferee, or a notarized statement that there has been no litigation or unresolved complaint
filed with a governmental authority of this state relating to the
operations of the transferee.
(b) The transferee shall update the statement within thirty
days after a change of information occurs.
(c) Each transferee registering pursuant to the provisions of
this section shall maintain a copy of the registration statement.
The transferee shall allow a consumer, interested party or court to
inspect the registration statement on request.
(d) The secretary of state may charge each transferee that
files a registration statement with the secretary of state a
reasonable fee not to exceed one hundred dollars to cover the cost
of filing.
__________
(Note: The purpose of this bill is to provide consumers with
a complete disclosure of all material terms and conditions of a
transfer agreement prior to executing such agreement with a
transferee, which is a company in the business of purchasing future
payment rights. Consumers are given a five-day right of rescission.
The bill requires that transferees be registered to do business
within this state. Certain structured settlement transfers require
court approval and shall be approved only if the transfer is fair,
reasonable and in the best interests of the consumer.
§46A-6g is new; therefore, strike-throughs and underscoring
have been omitted.)