ENROLLED
COMMITTEE SUBSTITUTE
FOR
Senate Bill No. 18
(Senators Bowman and Kessler, original sponsors)
________________
[Passed March 13, 1999; in effect ninety days from passage.]
AN ACT 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-h, relating to
companies that purchase the right to receive a person's future
payments from an annuity, court settlement, lottery payoff,
sweepstakes payoff or other similar payment arrangement;
defining terms; setting forth disclosure requirements;
establishing a threshold amount for the applicability of the
article; requiring court approval for certain transfers;
prohibiting transfers that are otherwise prohibited by law;
restricting transfers where the structured settlement contains
a provision limiting the right to assign or transfer;
providing for a right to recision; establishing operative date
and remedies; prohibiting waiver; limiting liability to
consumer; and requiring companies to register with the
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-h, to read as
follows:
ARTICLE 6H. TRANSFERS OF RIGHT TO RECEIVE FUTURE PAYMENTS.
§46A-6H-1. Definitions.
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) "Discounted present value" means the fair present value of
future payments, as determined by discounting such payments to the
present using the most recently published applicable federal rate
for determining the present value of an annuity, as issued by the
United States Internal Revenue Service.
(4) "Favorable tax determination" means, with respect to a
proposed transfer of structured settlement payment rights, any of
the following authorities that are applicable to the parties to such transfer and on the parties to the structured settlement
agreement and any qualified assignment agreement and establish that
the federal income tax treatment of the structured settlement for
the parties to the structured settlement agreement and any
qualified assignment agreement, other than the consumer, will not
be adversely affected by such transfer:
(i) A United States Treasury regulation;
(ii) A published ruling by the United States Internal Revenue
Service;
(iii) A private letter ruling by the United States Internal
Revenue Service with respect to such transfer; or
(iv) Other applicable legal authority that is binding on the
United States Internal Revenue Service.
(5) "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 or any other party that has
continuing rights or obligations under the structured settlement
agreement.
(6) "Qualified assignment agreement" means an agreement
providing for a qualified assignment within the meaning of section
130 of the United States Internal Revenue Code, United States Code
Title 26, as amended from time to time.
(7) "Structured settlement" means an arrangement whereby a
settlement obligor, an annuity issuer or other person agrees to
make future payments to a consumer in resolution of a personal
injury or other claim.
(8) "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.
(9) "Transfer" means any sale, assignment or other conveyance
of future payment rights by a consumer to a transferee for
consideration.
(10) "Transfer agreement" means an agreement providing for the
transfer of future payment rights from a consumer to a transferee.
(11) "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-6H-2. 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 earlier of 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, as determined by discounting the payments to the
present using the most recently published applicable federal rate
for determining the present value of an annuity as issued by the
United States Internal Revenue Service;
(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 or deducted
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 (6) of this section; and
(8) A statement that there may be adverse 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 earlier of
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 three 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-6H-3. Requirement of court approval for certain structured
settlement transfers.
(a) In addition to the requirements of this article, the
transfer agreement shall be approved by the circuit court of the
county wherein the consumer resides or where the structured
settlement agreement was executed when:
(1) The structured settlement payment rights belong to an
infant or an incompetent person; or
(2) The structured settlement payment rights arise from a
personal injury or other claim and:
(i) The aggregate of the structured settlement payment rights
exceeds forty thousand dollars; or
(ii) The structured settlement agreement contains a provision
restricting the right of the consumer to assign or transfer the
consumer's future payment rights.
(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 two 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 and all
interested parties of the date and time of the hearing and provide
them with a copy of the petition.
(d) The court shall appoint a guardian ad litem in cases where
the structured settlement payment rights belong to an infant, an
incompetent person or a ward of the court. 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 interests of the consumer. Such
information shall be reported to the court during the hearing on
the matter.
(e) 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.
(f)After a hearing or upon its own motion, the court may
approve the transfer if the court finds that:
(1) The consumer has demonstrated that: (A) He or she, or his or her family, is facing a financial hardship and that the transfer
would not subject the consumer or the consumer's family to undue
financial hardship in the future; or (B) the transfer is in the
best interest of the consumer: Provided, That the judge shall
disclose the possible adverse tax consequence to the consumer;
(2) The transferee is in compliance with the provisions of
section two of this article; and
(3) The transfer agreement does not contravene the terms of
the structured settlement agreement, including any restrictions on
the right of the consumer to transfer his or her structured
settlement payment rights, unless the annuity issuer and structured
settlement obligor have consented to the transfer. However, the
approval of the annuity issuer and the structured settlement
obligor shall not be required if, at the time the consumer and the
transferee entered into the transfer agreement, a favorable tax
determination was in effect.
(g) The court shall award the guardian ad litem reasonable
fees for representing the consumer. Such fees shall be paid by the
transferee.
(h) A consumer may request court approval for a transfer that
does not mandate court approval under this section. Such voluntary petition by the consumer 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-6H-4. Prohibiting transfer agreements of worker's'
compensation claims and other transfer agreements that
contravene law.
Any agreement to transfer future payments arising under a
worker's' compensation claim is prohibited as is any other agreement
to transfer future payments that would contravene existing law.
§46A-6H-5. Right of recision.
(a) Any consumer who enters into a transfer agreement shall
have an absolute, nonwaiveable right of recision for five business
days following the closing date of the transfer. During the five- day recision 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.
(c) Notice of the right of recision shall be provided to the
consumer in writing by the transferee prior to the time of closing.
§46A-6GH-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-6GH-7. Protection from liability to consumer.
When an interested party makes payments to the transferee
pursuant to a court order of approval or a transfer agreement
executed in accordance with the provisions of this article, the
interested party and the transferee are not liable to the consumer
or other interested party for the transfer of the consumer's future
payments.
§46A-6GH-8. Registration with the secretary of state.
(a) A transferee or other person in the business of soliciting
or 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 prior or pending
litigation involving alleged violations of this article's
provisions or consumer complaints filed with the attorney general's
office of this state that allege violations of this article's
provisions, or a notarized statement that there has been no such litigation or unresolved complaint 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.