Legislature(2019 - 2020)GRUENBERG 120
02/26/2020 01:00 PM House JUDICIARY
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| Audio | Topic |
|---|---|
| Start | |
| HB124 | |
| HB146 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 287 | TELECONFERENCED | |
| += | HB 146 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 124 | TELECONFERENCED | |
HB 146-MOTOR VEHICLE DEALERS: APPLIC.; INSURANCE
2:11:21 PM
CHAIR CLAMAN announced that the final order of business would be
SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 146, "An Act relating to
an application for a license to operate as a dealer in motor
vehicles; and requiring a dealer in motor vehicles to maintain
liability and property insurance."
CHAIR CLAMAN passed the gavel to Representative Kopp for the
duration of the presentation of SSHB 146.
2:11:51 PM
The committee took a brief at-ease at 2:11 p.m.
2:11:55 PM
REPRESENTATIVE KOPP announced that the bill's sponsor had
prepared a committee substitute (CS) for SSHB 146.
2:12:29 PM
CHAIR CLAMAN, as prime sponsor, introduced the proposed CS for
SSHB 146, Version 31-LS0818\S, Fisher, 2/19/20 (Version S). He
stated that the purpose of Version S would be to improve
consumer protections for those purchasing motor vehicles, by
strengthening requirements for motor vehicle dealers. He said
that under current law, biennial registration is required with
an application to the [Division] of Motor Vehicles (DMV), a $50
dollar registration fee, and a $50,000 surety bond. Applicants
are not required to furnish a certificate of liability
insurance, and there is no requirement to list a telephone
number on the initial application.
CHAIR CLAMAN expressed that the current requirements are lenient
compared to other states; for example, he said that Oregon
statute on motor vehicle dealership provides for the process of
applying for an automobile dealer license, grounds for
suspension and revocation of the license, and a full definition
of illegal practices and associated penalties. He said that
Delaware statutes require applicants to provide proof of the
location of the business, and they identify grounds for license
revocation. Texas statutes provide for automobile dealer
licensure, maintenance processes, and detailed procedures for
complaints, judicial review, and penalties.
CHAIR CLAMAN said that unlike these other states, there are no
Alaska statutes providing for a grievance process, grounds for
revocation, or proof of location. He said that these lenient
requirements can make it easier for rogue applicants to become
motor vehicle dealers and put consumers' safety and protection
at risk. He proposed a couple of scenarios that could
illustrate the need for the proposed changes. He said that when
a dealer obtains a license he/she are qualified to purchase
vehicles at dealer-only auctions at steep discounts, and
"curbstoning" can occur when the dealer is not required to
disclose the fact that he/she is a licensed car dealer or
whether a vehicle has a reconstructed title or has known defects
when selling a vehicle. If a vehicle is deemed to be a
"personal vehicle" it is not subject to a routine safety
inspection required under Alaska statutes. He explained that
often in these situations, the title is not placed in the
dealer's name, the contact information provided is not the
dealer's information, or the transaction takes place in cash;
this leaves very little information for a consumer to follow if
issues arise.
CHAIR CLAMAN stated that the proposed legislation also seeks to
provide better protection when a so-called "selling dealer"
sells multiple vehicles to a "buying dealer" and receives
payment but does not provide the titles. He explained that this
occurs when the titles are held by the bank that provided a line
of credit for purchasing the vehicles. The selling dealer
intends to pay for the vehicles and get the titles but runs into
financial problems with the bank and is unable to continue
payments, resulting in the repossession of the vehicles from the
buying dealer. He said that the buying dealer has now lost the
money and decides to seek recompense from the selling dealer's
bond. The current bond requirement under state law is $50,000,
which has been in place for decades; depending on the type and
quantity of vehicles this may only cover a fraction of what is
lost and owed. He expressed that raising the bond requirement
would strengthen protections in the event of problems that can
arise.
CHAIR CLAMAN summarized that the purpose of Version S is to
establish a more rigorous application process in the interest of
transparency and to reduce the potential for harm, through
increased bond amounts, mandatory insurance, and additional
disclosures that will hold automobile dealers more accountable
as business owners than under current statutes.
2:16:11 PM
DAVID CLARK, Staff, Representative Matt Claman, Alaska State
Legislature, presented the CS for SSHB 124 on behalf of
Representative Matt Claman, prime sponsor. He expressed that
Version S would strengthen automobile consumer protections by
requiring potential automobile dealers to follow a strengthened
application process.
MR. CLARK said that Section 1 of Version S would amend AS
08.66.030, by requiring: An applicant to provide a working
telephone number for the business listed on the application; a
written statement affirming that no person holding a 5 percent
or greater interest in the business has been convicted of a
felony involving fraud, embezzlement, or misappropriation of
property during the five years preceding the initial application
date; a statement acknowledging that the applicant has reviewed
the requirements for workers' compensation insurance if it is
applicable; and a copy of the liability policy certificate of
insurance, further detailed in Section 3.
MR. CLARK stated that Section 2 of Version S would raise the
current bond amount required of auto dealer applicants, as
outlined in AS 08.66.060(a), from $50,000 to $100,000. Section
3 of the proposed legislation would add a new section to AS
08.66 requiring dealers to maintain liability insurance of not
less than $50,000 for property damage, $100,000 for injury to a
single person, and $200,000 to more than one person.
2:18:24 PM
REPRESENTATIVE KOPP passed the gavel back to Chair Claman.
2:18:40 PM
REPRESENTATIVE KOPP moved to adopt the proposed CS for HB 282,
Version 31-LS0818\S, Fisher, 2/19/20, as a work draft. There
being no objection, Version S was before the committee.
2:19:03 PM
CHAIR CLAMAN opened public testimony on SSHB 146.
2:19:11 PM
STEVE ALLWINE, President, Mendenhall Auto Center; Board Member,
Alaska Automobile Dealers Association (AADA); Board Member,
National Automobile Dealers Association (NADA), offered
testimony in support of SSHB 146. He explained that he is a
member of the NADA and represents that association on the board
of AADA. He said that his wife and he own five different
franchises in their community and serve a lot of people in
Southeast Alaska.
MR. ALLWINE expressed that he has experienced recurring consumer
related issues due to the current regulations. He said that in
the automobile industry in Alaska it is easy for someone to
acquire a dealer's license. He expressed that the hope is that
the proposed legislation would "stiffen that up a little bit."
He remarked candidly that the proposed legislation would not
answer all the questions regarding current concerns. He pointed
out that a specific benefit of the proposed legislation is that
it would make the dealer's license a little more difficult to
get, which would narrow the bandwidth for those people who are
securing dealers' licenses in order to have access to closed
dealers' auctions. He said that those auctions involve banks,
insurance companies, and other automobile dealers. He explained
that if he had a car inventoried on the ground for 90 to 120
days, and for whatever reason he was unable to sell the car, he
would take the car to a dealer auction, turn it back into cash,
and go find something he could make some money on.
MR. ALLWINE explained that the other side of that would be if he
took a vehicle in on trade and it needed a new transmission or
engine, and he didn't want to invest the time into it, it might
go to the auction. He said that all those vehicles, including
those that are totaled and rebuilt and those that are totaled
and not reconstructed, tend to go through dealer-only auctions.
He said that the problem arises because it is so easy to get a
dealer's license, access the vehicles at dealers' auctions, and
sell the product with known defects on the Internet, via
Craigslist, as an individual and not a dealer. He expressed
that given the amount of recalls regarding airbags and other
safety issues, the implications of the problems for consumers
are significant in those scenarios. He expressed that that is
one of the things that he is hoping to stop and is the reason he
is speaking in support of SSHB 146.
2:22:16 PM
MARCUS WAEHLER, President, Red White & Blue Auto Sales; Board
Member, Alaska Automobile Dealers Association (AADA), offered
testimony in support of SSHB 146. He expressed that in the past
four to five years he has noticed a significant uptick in the
number of dealers attending dealers' auctions who do not have
stores where they sell vehicles. He explained that what has
been happening, which can be seen on Craigslist daily, is an
individual will buy vehicles at a dealer auction as a dealer,
get on Craigslist and post "outrageous stories" in order to sell
the car as a private seller to the public. He explained that in
these situations, there is no reconditioning done to the
vehicles and no disclosure of known defects.
MR. WAEHLER expressed that the current dealer's licensing
process allows for anyone to get a dealer's license for a simple
$550 bond and a $50 registration fee, creating the opportunity
for operating in a "bad manner." As an example, he said that an
81-year-old woman came into his dealership approximately 2 weeks
prior to purchase a vehicle; she wanted to trade-in a 2008
Subaru Tribeca. He explained that when a vehicle runs through a
dealership auction, he has a program that has a guidebook and
history reports, which get saved to his phone. He said that he
noticed this trade-in was already saved in his phone; it had
been run through an auction approximately two months prior. He
said that he took the car in for an inspection prior to resale,
and the check-engine lightbulb had been removed, the airbag
sensors had been cut, and the safety systems had been disabled
on the car. He stated that she had unwittingly purchased this
vehicle from a "private party," who was in fact a predatory
dealer who had sold the car for twice what it was worth. He
expressed that situations like this happen repeatedly in his
marketplace, and if dealer licensing requirements were
strengthened it would protect the citizens of Alaska from
predatory dealers.
2:25:41 PM
REPRESENTATIVE KOPP remarked that it sounded to him like there
is a significant issue of consumer protection, as well as market
competitiveness to bear in mind. He said that if he understands
the proposed legislation correctly, an entity could have a
dealer's license if it would provide workers' compensation
insurance for its employees, maintain a significant liability
policy on its vehicles in the case of an accident on a test
drive, and maintain some type of bond. He remarked that it was
obvious that the proposed legislation would raise the bond
because "$50,000 could be one car today." He asked whether
these minimal hurdle requirements would make it harder for an
"overnight shop" to be set up and make for a fair and even
playing field in industry competition.
MR. WAEHLER replied that a private party is required to have
proof of insurance when purchasing from a dealership in order to
have a vehicle's registration and title switched over to his/her
name. He said that a current quote indicated that a $50,000
bond could be purchased for $364, and a $250,000 bond for $1770;
he expressed that this is hardly an impediment to becoming an
active dealer in the used car sales market. In response to a
follow up question from Chair Claman he said that a quote for a
$100,000 bond was for a little over $700.
MR. WAEHLER said that the attorney for his dealership, Gary, had
represented a few dealers in the past year-and-a-half who had
gone out of business. He said that these dealers had flooring
lines with banks that loaned them money to purchase vehicles; in
exchange the banks would give the titles for the vehicles after
they are paid off. He said that these dealers where selling
vehicles to the public, and not long afterwards the dealers
filed for bankruptcy; the consumers never received titles to the
vehicles because technically the banks still owned the vehicles.
He said that the consumers then went after the bonds of these
dealers, but the $50,000 bond requirement only covered a couple
of vehicles at today's market prices, and there were dozens of
cars that needed to be covered by the bonds.
2:29:21 PM
REPRESENTATIVE KOPP asked what protects the consumer in a
situation where a dealer fails to pay off a vehicle and the
consumer trades the vehicle in, only to find out that there is
still a loan on the vehicle.
MR. WAEHLER replied that his understanding is that in lieu of
other assets, the consumer would hire an attorney and the bond
would be the last recourse for getting back his/her money for a
vehicle he/she had purchased. He said that normally this
happens in a situation where the dealer bought the vehicle from
a dealer auction, paid for it with proceeds from the bank which
were loaned in exchange for the title, and the dealer then sells
the vehicle to a consumer from the public; the consumer never
receives the title for the vehicle or transfer of ownership, and
that person is out the money he/she paid for the vehicle.
REPRESENTATIVE KOPP asked how long the $50,000 bond has "been on
the books."
2:31:00 PM
MR. ALLWINE answered that he thinks the $50,000 bond requirement
has been around since he was born in 1953; he expressed that it
has not changed in "decades and decades," but the value of
vehicles has changed significantly.
REPRESENTATIVE KOPP asked whether $100,000 would be too low of a
bond requirement and whether something twice that would create
outrage in the industry.
2:31:55 PM
CHAIR CLAMAN responded that the original version of the proposed
legislation had a $250,000 bond requirement, but some questions
arose comparing the requirement to other states and $100,000 was
the highest of any state, currently. He said that economically,
the case for a $250,000 bond is very sound, but the notion was
that Alaska would be putting in a bond requirement that is two-
and-a-half times higher than any other state. He said that he
thinks the bond provides more financial security when someone
isn't paid what he/she is owed, but the other key feature for
consumer protection is adding the liability insurance
requirement. He explained that in the situation in which the
car was knowingly sold without airbags, unbeknownst to the
buyer, the liability insurance would provide coverage for the
nondisclosure of the airbags. Similarly, if an individual were
test driving a car at a car lot without personal insurance, the
liability insurance requirement would cover that as well.
2:33:31 PM
REPRESENTATIVE KOPP asked whether there were any provisions in
the proposed legislation that the AADA did not support.
2:33:48 PM
MR. ALLWINE replied that the AADA voted on the proposed
legislation and was in support of it; he said it has been talked
about since 2011. He explained that he is a new vehicle
retailer, and Mr. Waehler was a used vehicle retailer, and the
proposed legislation was brought to their attention in 2011 by a
used vehicle retailer who had submitted a letter of support for
the proposed legislation, Carol Lyberger. He said that the used
vehicle retailers had recognized this was becoming an issue, and
the bill sponsor's guidance and assistance had helped to finally
have the proposed legislation where it is currently. He
expressed that this would not be self-serving legislation, he
said that there is no desire to deprive anyone of making a
living as an automobile dealer. He said that 99 percent of the
automobile retailers in the state are family businesses, even
the publicly held company was a family business.
2:35:26 PM
CHAIR CLAMAN, after ascertaining that there was no one else who
wished to testify, closed public testimony on SSHB 146.
2:35:44 PM
REPRESENTATIVE DRUMMOND remarked that the list of state bond
requirements [hard copy included in the committee packet] showed
only eight states, including Alaska, and she asked whether the
other 42 states have requirements for this type of dealer's
license.
CHAIR CLAMAN replied that his office could provide a list of all
50 states' bond requirements before the next hearing. In
response to a follow up question, he replied that he distinctly
remembers more states than Hawaii as having a $100,000 bond
requirement.
2:37:33 PM
REPRESENTATIVE EASTMAN asked what impact the proposed
legislation would have as a barrier of entry for someone trying
to enter the automobile dealer profession.
CHAIR CLAMAN replied that there would be two potential barriers
of entry: First, if the individual attempting to enter has a
felony conviction from the narrow list of felonies included in
the proposed legislation and has more than a 5 percent interest
in the business; this provision was taken from statute relating
to hearing aid dealers and is a narrower provision. Second,
there would potentially be the economic barriers to entry of an
insurance and bond requirement, which would cost money to have
in place in order to acquire the dealer's license. He expressed
that the main changes from existing statute to the proposed
legislation are the narrow felony provision, the doubled bond
requirement, which equates to approximately $360, and the
insurance requirement.
REPRESENTATIVE EASTMAN asked whether an individual hoping to
become an automobile dealer would be able to use his/her
personal telephone or cell phone number to meet the telephone
number requirement, as the language in the proposed legislation
reads "of the business".
CHAIR CLAMAN replied that the purpose of the telephone
requirement is for a consumer with an issue to be able to reach
the dealer, and in this modern age he expressed that he hoped
the dealer would list the phone he/she answers the most
frequently, which is most likely his/her personal cell phone.
2:40:14 PM
CHAIR CLAMAN announced that SSHB 146 would be held over for
further review.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 124 v. S 2.17.2020.PDF |
HJUD 2/24/2020 1:00:00 PM HJUD 2/26/2020 1:00:00 PM |
HB 124 |
| HB 124 Sponsor Statement v. S 2.20.2020.pdf |
HJUD 2/24/2020 1:00:00 PM HJUD 2/26/2020 1:00:00 PM SJUD 3/20/2020 1:30:00 PM |
HB 124 |
| HB 124 Sectional Analysis v. S 2.21.2020.pdf |
HJUD 2/24/2020 1:00:00 PM HJUD 2/26/2020 1:00:00 PM SJUD 3/20/2020 1:30:00 PM |
HB 124 |
| HB 124 Explanation of Changes v. A to v. S 2.21.2020.pdf |
HJUD 2/24/2020 1:00:00 PM HJUD 2/26/2020 1:00:00 PM SJUD 3/20/2020 1:30:00 PM |
HB 124 |
| HB 124 Supporting Document - Letters Receieved by 2.21.2020.pdf |
HJUD 2/24/2020 1:00:00 PM HJUD 2/26/2020 1:00:00 PM SJUD 3/20/2020 1:30:00 PM |
HB 124 |
| HB 124 Fiscal Note DNR-RO 2.14.2020.pdf |
HJUD 2/24/2020 1:00:00 PM HJUD 2/26/2020 1:00:00 PM |
HB 124 |
| HB 124 v. S Amendments #1-3 HJUD (Not offered) 2.26.2020.pdf |
HJUD 2/26/2020 1:00:00 PM |
HB 124 |
| HB 146 Work Draft Committee Substitute v. S 2.19.2020.pdf |
HJUD 2/26/2020 1:00:00 PM HJUD 2/28/2020 1:00:00 PM HL&C 3/18/2020 3:15:00 PM HL&C 3/20/2020 3:15:00 PM |
HB 146 |
| HB 146 Sponsor Statement v. S 2.25.2020.pdf |
HJUD 2/26/2020 1:00:00 PM HJUD 2/28/2020 1:00:00 PM HL&C 3/18/2020 3:15:00 PM HL&C 3/20/2020 3:15:00 PM |
HB 146 |
| HB 146 Sectional Analysis v. S 2.25.2020.pdf |
HJUD 2/26/2020 1:00:00 PM HJUD 2/28/2020 1:00:00 PM HL&C 3/18/2020 3:15:00 PM HL&C 3/20/2020 3:15:00 PM |
HB 146 |
| HB 146 Supporting Document - Alaska Automobile Dealers Association Bill Narrative 2.25.2020.pdf |
HJUD 2/26/2020 1:00:00 PM HJUD 2/28/2020 1:00:00 PM HL&C 3/18/2020 3:15:00 PM HL&C 3/20/2020 3:15:00 PM |
HB 146 |
| HB 146 Supporting Document - AS. 45.25.400-45.25.990 Motor Vehicle Dealer Practices 11.25.2019.pdf |
HJUD 2/26/2020 1:00:00 PM HJUD 2/28/2020 1:00:00 PM HL&C 3/18/2020 3:15:00 PM HL&C 3/20/2020 3:15:00 PM |
HB 146 |
| HB 146 Supporting Document - Dealer Licensing Requirements (WA, TX, HI, OR, MT, DE, OH, AK) 2.25.2020.pdf |
HJUD 2/26/2020 1:00:00 PM HJUD 2/28/2020 1:00:00 PM HL&C 3/18/2020 3:15:00 PM HL&C 3/20/2020 3:15:00 PM |
HB 146 |
| HB 146 Supporting Document - Letters Received by 2.25.2020.pdf |
HJUD 2/26/2020 1:00:00 PM HJUD 2/28/2020 1:00:00 PM HL&C 3/18/2020 3:15:00 PM HL&C 3/20/2020 3:15:00 PM |
HB 146 |
| HB 146 Supporting Document - Additional Letters Received by 2.26.2020.pdf |
HJUD 2/26/2020 1:00:00 PM HJUD 2/28/2020 1:00:00 PM |
HB 146 |
| HB 146 Fiscal Note DOA-DMV 2.22.2020.pdf |
HJUD 2/26/2020 1:00:00 PM HJUD 2/28/2020 1:00:00 PM |
HB 146 |