Legislature(2023 - 2024)ADAMS 519
04/24/2024 09:00 AM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB111 | |
| HB145 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 111 | TELECONFERENCED | |
| += | HB 145 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 145
"An Act relating to loans in an amount of $25,000 or
less; relating to deferred deposit advances; and
providing for an effective date."
9:34:11 AM
REPRESENTATIVE STANLEY WRIGHT, SPONSOR, gave an overview of
HB 145. He explained that the bill would protect consumers
by capping the annual percentage rate at 36 percent for all
loans under $25,000. The cap would be a significant step
towards preventing predatory lending practices that
exploited financial desperation and trapped individuals in
a perpetual cycle of debt by eliminating special exemptions
and allowing for annual percentage rates (APRs) as high as
521 percent. The bill aimed to promote fair lending
practices and enhance financial security for all citizens.
RACHAEL GUNN, STAFF, REPRESENTATIVE STANLEY WRIGHT, added
that almost 70 percent of payday loans in Alaska were taken
out online and the vast majority of the loans were from
out-of-state businesses. The arguments for historically
astronomical APRs were rooted in the idea that loans were
inherently risky and payback was not guaranteed, which
required that there be a high interest rate. She argued
that Alaska was unique in that the Permanent Fund Dividend
(PFD) was garnished by lenders and it became a guaranteed
loan. Every major payday lender had left a legacy of tens
of thousands of small claims court cases viewable on
CourtView in which lenders had garnished the PFD. She shard
that within the last couple of months, Representative
Wright's office had been contacted by a handful of out-of-
state lobbyists speaking in opposition to the bill and
representing banking interests. Almost every lobbyist with
whom she had a conversation decided to cease engagement in
Alaska after the lobbyists understood Alaska's unique
situation due to the PFD.
Co-Chair Edgmon noted that there were several invited
testifiers and public testifiers online but due to time
constraints, he requested that testifiers keep comments
concise.
9:37:27 AM
GRAHAM DOWNEY, ECONOMIC JUSTICE LEAD, ALASKA PUBLIC
INTEREST RESEARCH GROUP, ANCHORAGE (via teleconference),
explained that in 2023, the Alaska Public Interest Research
Group (AKPIRG) helped 25 Alaskan families escape payday
debt traps by paying down the families' loans. He had heard
many stories about how everyday Alaskans were impacted. He
emphasized that payday loans were immediately harmful to
Alaskan families and trapped families in financial
insecurity and debt for years. He relayed that AKPIRG was
helping families who had been struggling to pay off loans
for over two years and had at least $80 of interest
payments per month. The group had polled individuals across
the state and individuals universally advised against
taking out payday loans and thought that people would be
worse off by taking out the loans. The polled individuals
universally supported the bill and supported the
availability of repayable loans as opposed to non-repayable
loans.
9:39:03 AM
TRACY RENO, CHIEF OF EXAMINATION, DIVISION OF BANKING AND
SECURITIES, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC
DEVELOPMENT (via teleconference), supported the proposed
amendments to the bill that she thought would be heard in
the near future. She understood that there was an amendment
that would provide additional clarity for the exemptions
given to small loans and was consistent with language used
for other programs that were already administered by the
Division of Banking and Securities (DBS). Due to the
intense review that was required to obtain bank or credit
union charters, the increased regulatory oversight and
continued exemption was appropriate for national banks and
federal credit unions.
Representative Galvin asked for more information about how
the bill would impact the average Alaskan. Many Alaskans
did not know the difference between banks and credit
unions. She shared that she took out a payday loan when she
was 24 years old and had three children and the experience
was terrible. She explained that when she took out the
loan, she was not paying attention to the type of
institution.
Ms. Gunn responded that the amendment to which Ms. Reno was
referring had not yet been made public or introduced to the
committee. She explained that Representative Wright's
office had been working with DBS to clean-up the Small
Loans Act (SLA), which would not have any impact on the
consumer. She noted that SLA operated under a three-tiered
structure and the future amendment would flatten the
interest rate across the $25,000 in lieu of utilizing three
separate tiers. She assured the committee that there would
be more clarification once the amendment was finalized.
9:41:42 AM
MARGE STONEKING, ADVOCACY DIRECTOR, AARP ALASKA, ANCHORAGE
(via teleconference), shared that AARP had a strong
commitment to protecting financial resilience in older
adults, including fighting for consumer protection. She
relayed that AARP was requesting the support of the
committee to provide the same 36 percent maximum interest
rate protection to veterans and older Alaskans that was
afforded to active duty military members under the federal
Military Lending Act (MLA). For older and vulnerable
adults, costly installment loans were more likely to be a
hinderance than a help. Vulnerable individuals who fell
into a cycle of debt had few options to address the debt
and return to a sound financial situation without depleting
their limited assets. Some individuals may try to take on
additional jobs or work more hours while being physically
unprepared for the increased demand. She stressed that
older adults were attractive targets for lenders. She
appreciated the committee's time.
9:43:32 AM
TREVOR STORRS, PRESIDENT AND CEO, ALASKA CHILDREN'S TRUST,
ANCHORAGE (via teleconference), relayed that the Alaska
Children's Trust (ACT) strongly supported HB 145. He argued
that the bill would prevent long-term negative impacts on
families that could result from high interest payday loans.
The harmful impact on families was widely recognized as a
major risk factor of abuse and neglect. Parents were faced
with increased difficulty in providing for their children's
basic needs, such as food and housing. The scarcity of
resources and the pressure to become financially solvent
could lead to increased parental stress, which increased
the risk for abuse and neglect. To alleviate short term
financial hardships, families turned to payday loans
because of the appeal of "quick and easy cash," but the
loans could come with an interest rate of over 500 percent
and did not build any credit for the families. Payday loans
trapped many Alaskans in a cycle of debt and poverty and
caused worse credit.
Mr. Storrs understood that some testifiers in opposition to
the bill might say that payday loans helped families. He
argued that payday loans helped families like a glass of
salt water helped someone who was thirsty. He thought that
HB 145 would ensure responsible lending by requiring that
payday loans be subject to a reasonable maximum interest
rate of 36 percent. He emphasized that that no one should
be profiting off of the state's poorest and most vulnerable
families.
9:45:26 AM
Co-Chair Edgmon OPENED public testimony.
9:45:48 AM
ANDY BARTEL, REVEREND, ANCHORAGE (via teleconference),
testified in support of HB 145. He shared that the Alaska
United Methodist Conference, which comprised of all
methodists churches across the state and included people of
all political affiliations, unanimously adopted a
resolution in support of HB 145. He drew attention to the
fact that the resolution was passed unanimously and added
that the bill did not favor a particular political leaning.
The churches believed that financial institutions served a
vital role in society and must guard against abusive and
deceptive lending practices that took advantage of
vulnerable citizens for the gain of the richest citizens.
Banking regulations needed to prevent practices that kept
people in cycles of debt, which would be accomplished
through HB 145. Payday lending in Alaska was a predatory
practice and extracted millions of dollars from the most
impoverished citizens and the local economy.
Mr. Bartel understood that some people in opposition to the
bill would argue that payday loans were the only option for
some people, but he argued that was simply not true. There
were multiple credit unions in the state that had small-
dollar-amount short-term loan products that came in below
the proposed 36 percent cap. He thought that payday loans
were a scourge on society and legislators had the
opportunity to fix the problem. Before moving to Alaska, he
was a pastor in South Dakota. Although South Dakota was a
conservative state, it had enacted a similar cap on payday
loans. Subsequent studies had only shown that the economy
had only benefited from the cap. He relayed that South
Dakotans were saving $81 million per year on average as a
result of the legislation. Instead of being used for
interest payments on payday loans, the $81 million could be
used for housing, food, transportation, medicine, or other
necessities. He thought that the legislature had an
opportunity to make a real difference in the lives of the
most vulnerable Alaskans and he implored the committee to
pass the bill.
9:48:40 AM
BOB CAREY, EXECUTIVE DIRECTOR, NATIONAL DEFENSE COMMITTEE,
WASHINGTON, DC (via teleconference), shared that he was a
retired naval officer and combat veteran. He represented a
veteran's service organization committed to the civil and
legal rights of military and veteran personnel. He
understood the motivations of the bill, but argued that the
data consistently showed that MLA had not served the
military well and placed members in greater financial
distress by denying access to necessary credit. He thought
that veterans would be disproportionately impacted by the
legislation. Military members did not establish significant
credit and had significant periods of unemployment. He
understood that much of the data showed that a rate cap had
not helped the military. He had provided a letter to the
committee (copy on file) in which he referenced a West
Point study that showed that rate caps did not help the
military, in addition to other polls that showed that
military members were worse off after MLA than before the
act. There was an additional poll mentioned in the letter
that showed that half of all military personnel were denied
credit due to MLA. He argued that the only thing rate caps
did was cause military members to be denied credit. He did
not think that the $81 million saved in South Dakota was
due to individuals receiving lower-rate loans, but because
individuals were not receiving any loans at all. He added
that half of all Americans had less than $400 in the bank
and could not remain afloat in the case of an emergency. He
thought that a loan cap for veterans meant that the public
no longer trusted veterans to make decisions for themselves
once they were out of active duty. He reiterated his
opposition to HB 145.
9:52:09 AM
Representative Ortiz asked for the testifier to repeat his
name.
Mr. Carey responded with his name.
Representative Ortiz asked if Mr. Carey was the author of a
letter dated April 23, 2024 (copy on file) that was not
signed.
Mr. Carey responded that he had contributed to the letter
from the National Defense Committee and four other groups,
but he was not the sole author.
Representative Ortiz understood that Mr. Carey thought that
by adopting HB 145, there would be individuals who would
not be able to access credit. He did not understand why he
should not support the bill. He asked if Mr. Carey thought
that the legislature would prevent people from accessing
necessary credit and money if the bill were to pass.
Mr. Carey responded in the affirmative. The interest rates
were not set by an arbitrary measure and were necessary in
order to make a loan to a particular person. He thought the
narrative about interest rates was false. Military members
were already underpaid and were often young with children
and needed to figure out how to pay their bills.
9:54:39 AM
AT EASE
9:55:33 AM
RECONVENED
Co-Chair Edgmon explained that the plan was to keep public
testimony open and revisit it later.
Representative Josephson thought that the tone of Mr.
Carey's comments suggested that the situation would either
continue on in its current form or the bill would pass. He
asked Mr. Carey if he found that there was no foundation
for the claim that current same day payday loans were
usurious.
Mr. Carey responded that he was not a banker and suggested
that Representative Josephson consult with the industry to
talk about the issue. He clarified that there was a
narrative that if there were caps on loans, loan rates
would magically come down. After MLA was enacted, lenders
left the market and left the military "high and dry." Half
of military members were denied credit due to MLA and he
did not think it was a good practice. He could not say
whether the system was usurious and suggested that
Representative Josephson speak to bankers.
9:57:48 AM
TIM SULLIVAN, PRESIDENT, THE ALASKA CREDIT UNION LEAGUE,
ANCHORAGE (via teleconference), relayed that the Alaska
Credit Union League (ACUL) represented ten credit unions,
nine of which were based in Alaska. The league supported
the bill and thought it was a great action to take to
protect consumers. The one concern that the league had was
about Section 9 which included loan insurance in the
calculation for the lending percentage and was an
additional product that was not required by federal law. He
thought it should be stated that loan insurance was not
required in order to garner a loan and was protected under
the Fair Credit Reporting Act.
9:59:06 AM
Co-Chair Edgmon clarified that he planned to close public
testimony and reopen it at the next hearing of the bill to
include any additional testifiers.
Co-Chair Edgmon CLOSED public testimony.
9:59:27 AM
DAWN HANNASCH, DIVISION OPERATIONS MANAGER, DIVISION OF
BANKING AND SECURITIES, DEPARTMENT OF COMMERCE, COMMUNITY
AND ECONOMIC DEVELOPMENT, reviewed the previously published
fiscal impact note from the Department of Commerce,
Community, and Economic Development (DCCED) with the
control code znqFK. She explained that the department would
not need to add anything to its budget as it had seen that
similar licenses had declined over the last decade by 78
percent. There would be 19 licenses that would be impacted
if the bill were to pass. The department anticipated that
the Division of Banking and Securities would see a loss of
about $28,500 annually due to the loss of the biannual
renewal license fee of $3,000. She explained that licensees
would then have the opportunity to apply for the Alaska
Small Loans Act which had an annual renewal fee of $1,000.
The projected income from the licensees was not yet
determined.
10:01:09 AM
Co-Chair Edgmon set an amendment deadline for Monday, April
29, 2024, at 5:00 p.m.
HB 145 was HEARD and HELD in committee for further
consideration.
Co-Chair Johnson moved that Mr. Brodie Anderson, staff to
Co-Chair Foster, be wished a happy birthday.
Co-Chair Edgmon reviewed the agenda for the afternoon
meeting.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 145 Public Testimony Rec'd by 042324.pdf |
HFIN 4/24/2024 9:00:00 AM |
HB 145 |
| HB 145 Public Testimony Rec'd by 042424.pdf |
HFIN 4/24/2024 9:00:00 AM |
HB 145 |