Legislature(2005 - 2006)HOUSE FINANCE 519
03/15/2006 01:30 PM FINANCE
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HOUSE BILL NO. 446 An Act relating to the amount of a civil penalty for an unlawful act or practice in the conduct of trade or commerce. 1:44:58 PM CRAIG JOHNSON, STAFF, REPRESENTATIVE LESIL MCGUIRE, testified that the Federal Trade Commission recently reported that Alaska topped the nation in fraud complaints last year with 249 per 100,000 people. Unfortunately, Alaska's current consumer protection laws provide one of the lowest civil penalties of any state. To strengthen Alaska's consumer protection law and send a message to those who prey on Alaska consumers, HB 446 acts to increase civil penalties authorized under Alaska's Unfair Trade Practices and Consumer Protection Act. Under current law, when a person or company violates an injunction prohibiting unfair or deceptive business practices, they are subject to a maximum penalty of $25,000. HB 446 would increase that maximum to $50,000. Mr. Johnson continued, current law provides for a $5,000 civil penalty for each violation. The bill increases that amount to a range between $1,000 and $25,000 per violation. The current $5,000 penalty was established in 1970. By adjusting for inflation alone, the penalty should be $20,200. Obtaining injunctive relief and civil penalties are the tools that enable the attorney general to protect Alaska consumers against unfair and deceptive trade practices. The changes are vital enforcement tools and a court assesses all civil penalties after a violation has been proven. All penalty payments go directly to the State of Alaska. 1:47:21 PM Co-Chair Chenault inquired why the $5,000 penalty had been dropped. 1:48:58 PM ED SNIFFEN, (TESTIFIED VIA TELECONFERENCE), ASSISTANT ATTORNEY GENERAL, FAIR BUSINESS SECTION, CRIMINAL SECTION, DEPARTMENT OF LAW, ANCHORAGE, explained that there are a number of cases involving violation of the act that warrant some-kind of penalty. He provided an example of a business engaging in advertising violations but not realizing there has been some kind of violation causing consumer harm. However, in that type of case, the Department of Law works with the business to provide a meaningful penalty less than $5,000. Then the Department gets the business to change their practices so that future violations do not occur and those are the cases where fewer penalties are warranted. 1:50:27 PM Representative Hawker referenced the fiscal notes, pointed out increased penalties and thought the note should indicate that. Mr. Johnson hoped the note would be neutral, and would keep business from violating the law. It may be a bill that does nothing; with relationship to consumer fraud, doing nothing is a good thing. Representative Hawker asked how the fines were accounted for and which department would be indicating the note from fines collected. Mr. Sniffen advised that the funds collected by the Department for civil penalty efforts go to either the general fund or are earmarked to be used by the consumer agency for future consumer protection education and enforcement. The reason that a positive fiscal note cannot be identified is because the Department does not know what kind of activity might occur. Some cases do provide a windfall into the State's general fund. 1:53:15 PM Representative Hawker thought it would be more appropriate to have an indeterminate note from the Department of Law. Co-Chair Meyer agreed. 1:53:42 PM Representative Hawker MOVED a conceptual change to the Department of Law's note changing it to indeterminate for all years indicated. There being NO OBJECTION, the change was made. 1:54:33 PM Representative Joule recommended that the indeterminate note be indicated in the Department's budget next year. Co-Chair Chenault commented that their office would attempt to track some of the indeterminate notes. Vice Chair Stoltze MOVED to REPORT CS HB 446 (JUD) out of Committee with individual recommendations and with the accompanying fiscal notes. Representative Hawker did not think that the Alaska Court System note would be affected. There being NO OBJECTION, the bill moved from Committee. CS HB 446 (JUD) was reported out of Committee with a "no recommendation" and with a new indeterminate note by the House Finance Committee for the Department of Law and zero note #1 by the Alaska Court System.