Legislature(1995 - 1996)
02/22/1996 01:41 PM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 319
"An Act relating to the regulation of small loan and
retail installment transactions."
GEORGE DOSIER, STAFF, REPRESENTATIVE PETE KOTT testified in
support of HB 319. He gave a brief overview of HB 319. He
noted that HB 319 addresses the Alaska's Small Loan Act and
the Retail Installment Sales Act. He observed that under
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the Small Loan Act HB 319:
* Increases the application fee from $400.0 hundred
dollars to $1.0 thousand dollars:
* Authorizes multiple office licenses and
establishes 10 offices as the maximum number of
offices eligible under one license;
* Increases the annual license fee from $200 to $500
hundred dollars in the case of a single office and
allows a multiple office license of $2.0 thousand
dollars;
* Increases liquid asset requirements from $20.0 to
$25 thousand dollars; and clarifies that an
equivalent amount must be available for each
office licensed under a multiple office license;
* Increases the bond requirement from $5.0 to $20.0
thousand dollars; and clarifies that only one bond
is required for a multiple office license;
* Allows licensees to maintain books and records
consistent with contemporary data processing and
accounting methods (the licensee would not have to
maintain separate books for associated business);
* Clarifies regulations regarding splitting of loans
(husbands and wives may receive separate loans);
and
* Broadens the scope of non-interest fees that
lenders may charge borrowers and increases the
amount of late payment fees that may be charged
from 10 percent or $15 dollars to 10 percent or
$25 dollars whichever is less.
Mr. Dosier explained that HB 319 would permit the charge of
reasonable costs and fees for appraisals, surveys, and title
insurance and reports on loans of $10.0 thousand dollars or
less where real property is taken as collateral. This would
also apply to loans over $10.0 thousand dollars even in
cases where real collateral is not taken for the loan. He
added that reasonable attorney fees, actual expenses and
costs would be allowed in connection to the collection of a
delinquent loan or foreclosure.
Mr. Dosier noted the effects of HB 319 on the Retail
Installment Sales Act:
* Clarifies and broadens the scope of fees and
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charges that may be imposed in connection with
transactions, including late fees, collection
charges and dishonored check charges which are not
currently allowed; and
* Amends current law to permit lenders to charge
interest rates at whatever rate the parties agree
to charge.
Representative Navarre referred to the increased bond
requirement. Mr. Dosier clarified that currently all
licensees pay a $5.0 thousand dollar bond. Representative
Navarre noted that a business with five offices currently
maintains a $25.0 thousand dollar bond. Under the bill they
would still need a $25.0 thousand dollar bond. He pointed
out that small operations would be penalized. He asked the
justification for the change.
Representative Brown noted that the legislation would remove
limits on interest. She questioned if the rate could be
changed without the agreement of both parties. Mr. Dosier
stated that notification of term changes would pertain to
future use of the card. The terms are established by
agreement.
WILLIS KIRKPATRICK, DIRECTOR, DIVISION OF BANKING,
SECURITIES AND CORPORATIONS, DEPARTMENT OF COMMERCE AND
ECONOMIC DEVELOPMENT stated that the Small Loan Act needs to
be addressed. He noted that the legislation is a
collaboration between the Division and businesses. He
observed that the Act was enacted at statehood. He observed
that the bond requirement was raised to reflect the maximum
personal loan a small loan company can make.
Representative Navarre pointed out that one bond could
pertain to 10 separate offices. Mr. Kirkpatrick observed
that currently each office has their own license and bond.
He noted that there has not been an action against a bond
since he began working with the Division in 1968.
Representative Navarre reiterated multiple licensees would
have an economic advantage.
Representative Brown asked Mr. Kirkpatrick to discuss
interest rates. Mr. Kirkpatrick maintained that if one side
of the balance sheet is deregulated that the other side of
the balance sheet should be deregulated. He noted that
interest rates are highly competitive. He observed that
interest rates are imported from other states. He
emphasized that the Division receives a lot of applications
from merchants that want to become small loan companies. He
maintained that Alaskan businesses want to compete in the
market place but cannot compete using the Alaska Retail
Installment Sales Act. He noted that one company in
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Anchorage offers computers at no money down with an
interest rate of 21 percent. He stressed that competition
determines the interest rate.
Representative Navarre asked why the fiscal note by the
Department of Commerce and Economic Development is zero. He
asked if the Division has any concerns.
Mr. Kirkpatrick told the Committee that he would provide
them with an updated fiscal note explaining why it is at
zero. He observed that application fees will be increased
from $400.0 to $1.0 thousand dollars. The legislation also
allows the Department to charge actual expenses. He stated
that he did not foresee any substantial increase in actual
expenses. He stated that any expected impact will be
positive. He could not estimate the actual impact of the
legislation.
Representative Navarre asked how many single offices would
have fees reduced by going to a multiple license and how
many offices would have their fees raised by 150 percent.
Mr. Kirkpatrick noted that there are 18 licensees. Norwest
is the only licensee which has multiple offices.
(Tape Change, HFC 96-48, Side 1)
Representative Navarre asked if the Division has suggestions
for improvement. Mr. Kirkpatrick responded that the
Department is in total agreement with the legislation. He
observed that some adjustments were made through the debate
process. He noted that the Division met with members of the
industry on several occasions.
JOHN HIGGINS, GENERAL MANAGER, NORTHLAND CREDIT CORPORATION
testified in support of HB 319. He noted that he is also
speaking on behalf of the Alaska Consumer Financial Services
Association. He explained that the difference between a
$5.0 and $25.0 thousand dollar bond is only $100.0 hundred
dollars a year in premiums. He maintained that the license
fee cost is reasonable and in line with other states. He
reviewed highlights of HB 319. He stressed that joint loan
provisions are currently restrictive. House Bill 319 would
allow more than one open account with the same party or a
spouse. He observed that currently only 30 day incremental
payment cycles are allowed between payments. He suggested
that this is restrictive to seasonal workers. He noted that
increased fees for insufficient fund checks will assure that
costs are passed on to non-payers. He restated that HB 319
will allow a competitive interest rate structure to meet
competition with outside companies that export their rates
into the state of Alaska. He requested that the Committee
add an immediate effective date.
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Mr. Higgins emphasized that HB 319 would create and retain
jobs in Alaska's financial industry and provide more
financing to local communities. He stressed that HB 319
would provide credit to a broader base of Alaskan consumers.
JOHN SHIBE, EXECUTIVE VICE PRESIDENT, NATIONAL BANK OF
ALASKA, NORTHLAND CREDIT CORPORATION spoke in support of HB
319. He noted that the material has been well represented.
In response to a question by Representative Therriault, Mr.
Kirkpatrick stated that an immediate effective date would
have no impact on the agency.
Representative Brown asked how the legislation would change
the late fee authorization. Mr. Higgins stated that
currently it is unclear if late fees are authorized. The
industry does not charge a late fee at this time. He
observed that Section 13 clarifies what can be done. He
clarified that Section 13 applies to the Retail Installment
Sales Act. Representative Brown noted that the legislation
allows for a "reasonable" charge. She questioned what is
reasonable. Mr. Higgins stated that a dollar amount was not
inserted because of the changing nature of the industry.
Representative Brown suggested that the Department could use
regulations to determine what is "reasonable".
Representative Brown asked what recourse a consumer would
have it they felt they were charged an unreasonable fee.
Mr. Higgins stated that they could contact the company. He
explained that it would not be under the Division's
regulation. He observed that the consumer has the ability
to go to the State Attorney General or other agencies to
voice their concerns. Mr. Shibe added that late fees have
to be disclosed.
SUSAN BIZE, GOVERNMENT RELATIONS, CREDIT DEPARTMENT, JC
PENNY INC. testified via the teleconference network. She
spoke in support of HB 319. She explained that late fees
are agreed to once the charge account has been used. She
restated that the purpose of HB 319 is to allow Alaskan
retailers to effectively compete with out-of-state vendors
who are importing rates into the State.
Representative Therriault MOVED to adopt an immediate
effective date. There being NO OBJECTION, it was so
ordered.
Representative Therriault MOVED to report CSHB 319 (FIN) out
of Committee with individual recommendations and with the
accompanying fiscal notes. There being NO OBJECTION, it was
so ordered.
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CSHB 319 (FIN) was reported out of Committee with a "do
pass" recommendation and with a zero fiscal note by the
Department of Commerce and Economic Development, dated
2/2/96.
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