Legislature(2007 - 2008)CAPITOL 17
03/19/2007 03:00 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| Confirmation Hearing(s)|| Commissioner, Department of Labor & Workforce Development|| Commissioner, Department of Commerce, Community, & Economic Development | |
| HB182 | |
| HB136 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 136 | TELECONFERENCED | |
| *+ | HB 182 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 182-OFFERING PROMOTIONAL CHECKS CHAIR OLSON announced that the next order of business would be HOUSE BILL NO. 182, "An Act making the offering of certain promotional checks an unfair or deceptive act or practice." 3:07:54 PM REPRESENTATIVE BOB LYNN, Alaska State Legislature, Sponsor, stated that HB 182 deals with promotional checks. He explained that these checks are often for as little as $3 or $4, and are sent to thousands of businesses and individuals across the state. Hundreds of these checks are cashed. These checks are legitimate, which he opined is both good and bad. Unsuspecting individuals endorse these checks, and are then obligated for unwanted products and services. Last year, the Department of Law (DOL) announced a settlement with a California based company, Yellow Pages, Inc. He explained that Yellow Pages, Inc. sent what appeared to be a rebate check for $3.49, but was actually a contract for advertising services totaling $179. Consumers did not see the financial disclosure in fine print on the reverse of the check. Alaska, along with 27 other states, eventually settled with the aforementioned company, which was forced to give refunds to consumers, in addition to covering attorney costs and consumer protection enforcement costs. These checks are sent out to individuals and businesses. When cashed, consumers are billed, and may be "hounded" by collection agencies. The [Commercial/Fair Business Section] of the DOL considers these checks to be a classic example of an unfair or deceptive act of practice, as defined in state law. AS 45.50.471 defines an "unfair or deceptive trade practice" as "Conduct that creates a likelihood of confusion or misunderstanding, which misleads, deceives, or damages a buyer or competitor with a sale or advertisement of goods or services." He stated that these checks fit this definition, and opined that HB 182 "is a fitting answer to this ... poor business practice." The DOL believes that prohibiting the use of these checks is the only effective way to prevent these accidental agreements from occurring. He stated that HB 182 makes these "promotional checks" an unfair or deceptive act or practice in violation of the Unfair Trade Practices and Consumer Protection Act (Consumer Protection Act). This would enable the Attorney General to enforce the remedies afforded in the Consumer Protection Act. Companies that violate this law would be subject to a civil penalty of a minimum of $1,000 per violation, and a maximum of $25,000 per violation. 3:12:19 PM REPRESENTATIVE NEUMAN stated that he has been affected by the aforementioned promotional checks issued by Yellow Pages, Inc. He inquired as to whether HB 182 applies to blank checks stating that an individual has been approved for $30,000 or $50,000, which can be signed and taken to the bank. REPRESENTATIVE LYNN replied that the aforementioned checks are not affected by this legislation. REPRESENTATIVE NEUMAN asked if the sponsor has considered adding this. REPRESENTATIVE LYNN shared his wish that this be considered as a separate piece of legislation, as he would prefer not to extend the scope of this bill. The committee took an at-ease from 3:13 PM to 3:14 PM. REPRESENTATIVE LYNN explained that there is an amendment addressing the aforementioned checks, which will be offered in the next committee of referral. 3:14:26 PM REPRESENTATIVE LEDOUX expressed appreciation for this legislation. She then shared an experience with receiving this type of check, and how she dealt with it. REPRESENTATIVE LYNN stated that he introduced the bill after the issue was brought to his attention by the DOL. He expressed his appreciation for this being brought forward by the department. 3:15:11 PM REPRESENTATIVE GARDNER stated that she has also seen these checks. She opined that this is a clear attempt to "trick people." She expressed appreciation for the comprehensive scope of the information contained in the committee packet. REPRESENTATIVE LYNN said that the question and answer sheet was developed by his staff. REPRESENTATIVE GARDNER commented that the aforementioned question and answer sheet addressed all of her questions. She stated that there may be legitimate practices, as well, such as credit card companies that are attempting to get a consumer to switch companies. She opined that while this may not be in the consumer's best interest, it is not "as deceptive." There may be a way to make this type of offer to a consumer that is not deceptive, she said, and inquired as to whether Representative Lynn would agree. REPRESENTATIVE LYNN replied that he has seen these types of offers from credit card companies. REPRESENTATIVE GARDNER reiterated that there is a legitimate way to do this, and there is a way that is an attempt to defraud, by having consumers sign a contract without being aware of it. She expressed hope that HB 182 does not attack those businesses that are trying to get new customers to sign on by using legitimate practices. REPRESENTATIVE LYNN assured the committee that this is not the intent of the bill. He opined there are honest and dishonest ways to do business, and that the promotional checks in question are dishonest. 3:17:51 PM REPRESENTATIVE GATTO questioned whether simply cashing a check is a contract. 3:18:48 PM REPRESENTATIVE BUCH shared his understanding that the contract agreement is on the back of the check, and is considered a legal binding contract. REPRESENTATIVE GATTO surmised, then, that this contract is enforceable, and the signature on the check is considered the signature on the contract. CHAIR OLSON noted that the DOL is online to answer questions. REPRESENTATIVE LYNN commented that this could be considered and "illusory contract." 3:20:02 PM CLYDE (ED) SNIFFEN, J.R., Assistant Attorney General, Commercial/Fair Business Section, Civil Division (Anchorage), Department of Law, explained that his duties include enforcement of Alaska's consumer protection statutes. He thanked Representative Lynn for introducing this legislation. The DOL is concerned about this issue, which occurs often in Alaska. He stated that these checks have generated many complaints. He stated that while those who are sending the checks out could argue that the terms were clear, the question is whether or not the terms of the agreement were adequately disclosed. Promotional checks may look like a refund or a rebate, and once signed, bills may appear on a credit card statement, phone bill, or may be deducted from the individual's bank account. The DOL feels that this is a deceptive practice. Consumers do not understand nor have the intent to enter into a contract; therefore, these contracts are not enforceable. These checks are a "headache" for the DOL, and having a specific provision in the Consumer Protection Act will make it very clear that this is a misleading and deceptive practice. 3:23:00 PM MR. SNIFFEN, in response to a question from Representative Neuman, said that he is unsure where Yellow Pages, Inc. initially gets address and phone information. He surmised that this may simply be from looking through the yellow pages in the phone book. He explained that Yellow Pages, Inc. is an online yellow page service, which has no affiliation with the local yellow pages. However, when people see "Yellow Pages, Inc." on the letterhead, they often assume this is connected with a business ad they have placed in the local yellow pages. He opined that not many people use the online service offered by Yellow Pages, Inc. REPRESENTATIVE GARDNER restated her earlier question regarding legitimate offers versus attempts to defraud. MR. SNIFFEN stated that this legislation is not intended to apply to legitimate offers. He explained that there is a legal distinction between the two. An example of a legitimate offer would be a blank check from a credit card company, which are an extension of an existing line of credit. These are a form of convenience, and are not obligating the consumer to anything that he or she is not aware of. An additional example would be checks received from a mortgage lender that are intended to open up a line of credit against home equity. This bill would not apply to these offers. Whether the language of this bill would encompass the mortgage lending checks is "a tricky question." He opined that the language could be read as including the mortgage lending checks, but would not apply to credit card company checks. He stated that an amendment may be introduced to address this. 3:27:33 PM MR. SNIFFEN, in response to a question from Representative Gatto, explained that consumers have called the DOL after receiving calls from collection agencies. He relayed a story involving a business in Kodiak that had experienced this. The DOL wrote to the company and the money is being refunded. He explained that it can be difficult to clear up the credit, once this occurs. The perpetrating business must write a letter to the credit agency and explain that this was an inadvertent reporting. In response to an additional question, he stated that the Fair Credit Reporting Act requires that the business have a "good faith reason" for reporting an individual to the bureau. If this is abused, the ability to report is taken away. This is in federal statute. 3:30:37 PM MARIE DARLIN, Coordinator, Capital City Task Force, Alaska AARP, stated that AARP is in support of the bill. 3:32:19 PM REPRESENTATIVE GARDNER moved to report HB 182 out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, HB 182 was reported from the House Labor and Commerce Standing Committee. The committee took an at-ease from 3:32 PM to 3:35 PM.
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