Legislature(2007 - 2008)CAPITOL 17
03/26/2008 03:00 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| SB149 | |
| HB258 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 149 | TELECONFERENCED | |
| *+ | HB 258 | TELECONFERENCED | |
HB 258-PAWNBROKERS 3:42:51 PM CHAIR OLSON announced that the final order of business would be HOUSE BILL NO. 258, "An Act relating to pawnbrokers; and providing for an effective date." 3:43:08 PM JOSH APPLEBEE, Staff to Representative Bob Roses, Alaska State Legislature, on behalf of the prime sponsor, Representative Bob Roses, explained that HB 258 will modernize, update, and regulate the pawnbroker industry. This bill would provide new provisions to create licensure, fee structure, and regulatory framework for the industry. The bill would provide a grace period for military members, standardize the fee structure, require a biennial report to the legislature, and would institute a 30 day grace period for customers to retrieve their personal belongings. He highlighted that the sponsor worked over the legislative interim with the Division of Corporations, Business, and Professional Licensing (DCBPL) and the industry on issues with HB 258. He noted that AARP supports HB 258. 3:46:45 PM REPRESENTATIVE LEDOUX referred to page 2, proposed AS 08.76.020 of HB 258. She expressed concern that the pawnshop's "book" will be open to the inspection of a peace officer at reasonable times since the book contains confidential information such as someone's name and address. She inquired as to the rationale for disclosing to the government, a person's name, address, description of the pledged property, and the amount loaned to the person. MR. APPLEBEE answered that there are several instances that might arise when a law enforcement officer may need to inspect the books such as with suspicion of theft or during an investigation. He pointed out that currently every financial institution has this requirement in place for their loans. 3:48:39 PM REPRESENTATIVE GARDNER referred to page 2, lines [1-12] of HB 258 that lists the information that must be compiled in the pawnbroker's book such as the date, name, and address of the customer. She inquired as to whether the customer must prove his/her age. MR. APPLEBEE answered that HB 258 requires that a person must be 18 years or older so it would be incumbent on the pawnbroker to check identification of the person pledging the property. 3:49:40 PM REPRESENTATIVE GARDNER referred to page 2, lines 14-16, that reads, "Blank lines may not be left between entries." She expressed concern that someone pledging property would have access to personal information of prior customers since blank lines may not be left between entries. She inquired as to whether the pawnbroker would need to maintain a log and also need to duplicate the information in an electronic format in order to submit it. MR. APPLEBEE explained that the provisions in proposed Section 4 are intended to establish a process in which the law enforcement personnel or auditor can verify that the pawn transaction was appropriately conducted. He surmised that a larger city, such as the Municipality of Anchorage, would likely connect pawnshops to the Anchorage Police Department or other public safety offices. Since some unincorporated boroughs or towns do not have the ability to submit data electronically, HB 258 provides for a manual system to accommodate them. He related that if property is stolen and reported to the police, that the police would have the ability to check by computer all pawnshop entries that may match the stolen item. REPRESENTATIVE GARDNER offered her belief that this provision may be an impediment for owners who may have to perform data entry to list items that are recorded in the book. She pointed out that scanning the information would render the data unsearchable. 3:53:11 PM CHAIR OLSON announced that it is not his intention to move HB 258 until the Department of Law is able to answer questions. 3:53:28 PM REPRESENTATIVE LEDOUX related her understanding that the pawnshop would be connected electronically to the police department and asked for clarification of that process. MR. APPLEBEE answered that it is possible to connect the pawnshops to the police departments since the software currently exists. In further response to Representative LeDoux, Mr. Applebee related that electronic programs are designed to track only the property, such as the serial number and description of the item, and not information on the person who pawned the item. He noted that the specific information on the seller would be held only at the pawnshop. REPRESENTATIVE LEDOUX inquired as to whether problems currently exist that HB 258 would remedy, such as preventing sale of stolen merchandise to pawnshops. MR. APPLEBEE answered that HB 258 would afford some level of certainty that pawnshops won't be used for that purpose. 3:56:54 PM REPRESENTATIVE BUCH referred to page 2, line 27, and inquired as to the method used to establish that a person has good character in order for the person to secure a license. He noted that he didn't need an immediate answer to the question, but wanted to know generally the process the agency would use to determine if a person had good character. REPRESENTATIVE GARDNER asked to add to the list of questions the reason to require that a person has prior business experience. REPRESENTATIVE BUCH referred to page 3, line 4, to the requirement for a nonrefundable initial investigation fee of $200, and inquired specifically what type of investigation the fee would entail. He referred to page 4, line 13, and further asked what limitations in AS 08.76.210 are pertinent to pawnshops. MR. APPLEBEE answered that payday lenders were separated out from other lenders in legislation that passed the legislature two years ago. He highlighted that the pawnbroker businesses are also required to be separated from other types of lending. 4:01:01 PM REPRESENTATIVE GARDNER referred to page 4, line 13, and related her understanding that this section would remove the $500 pawn cash limit currently in statute. MR. APPLEBEE agreed that the cash limit would be removed. REPRESENTATIVE GARDNER referred to proposed AS 08.76.170, under customer and transaction limitations, which states that a pawnbroker may not knowingly enter into a pawnbroker transaction with a person who is under the influence of alcohol or a controlled substance. She pointed out that this same restriction is not required for a sale. She inquired as to whether these elements are intentionally treated differently. MR. APPLEBEE answered that he doesn't know if it is realistic to prevent people from exercising their right to purchase goods even if the people are under the influence of alcohol. He noted that currently customers are not forbidden from entering any other store to make purchases while under the influence of alcohol or drugs. Thus, pawnshops are treated in the same manner as other stores. REPRESENTATIVE GARDNER related her understanding that under HB 258 that a person could not pawn a ring while under the influence of drugs or alcohol, but that the person could purchase one. MR. APPLEBEE answered that HB 258 provides some assurance that a customer will enter into financial transactions with a clear head. REPRESENTATIVE LEDOUX referred to page 4, and related her understanding that proposed AS 08.76.170 would only apply to incoming property but not to sales of merchandise. She inquired as to whether this section could be clarified so that it is clear that the person who purchases items is excluded. MR. APPLEBEE answered that with respect to the customer and transaction limitations, the intent of proposed AS 08.76.170 is to ensure that the pawnbroker doesn't have a customer under the influence of alcohol or drugs proceed into transactions under someone else's name. He further stated that this section could be amended for clarification. 4:06:32 PM REPRESENTATIVE LEDOUX inquired as to the purpose of the language of proposed AS 08.76.180 that specifies listing the name of the person purchasing property. She pointed out that she could purchase items at stores such as Nordstrom's and not have her name and address recorded. MR. APPLEBEE answered that under HB 248 if something goes wrong the bill provides assurance that the transaction can be traced. Further, if someone has a habit of pawning items, it may be an indicator that the person is selling stolen merchandise. REPRESENTATIVE LEDOUX pointed out that a person might habitually frequent pawnshops simply to find nice ivory and jewelry in the shops. She maintained her concern that a jeweler is not held to the same standard. MR. APPLEBEE said he believes that the intent is to establish a certain level of trustworthiness since pawnshops have a bad reputation, perhaps due to the way pawnshops are depicted in films. This bill attempts to make the process open and transparent and help remove any stigma for pawnshops. 4:08:58 PM REPRESENTATIVE NEUMAN related that from his own experiences that he has found some pawnshops to be "top notch" and noted he did not share the opinion depicted in some films. He expressed his concern with respect to keeping a record of all sales. He referred to page 3, [paragraph (e)] and expressed concern that a mid-level bureaucrat in the Department of Commerce, Community, & Economic Development (DCCED) would be in the position to judge the character of the licensee. He asked that clarification of the guidelines for judging a person's character be added to the list of questions. MR. APPLEBEE, in response to Representative Neuman said he believes that the application can be submitted electronically. 4:11:24 PM ALEX VAUGHAN, Vice-President, Governmental Relations, Cash America International, explained that his business is a publically traded company. He explained that Cash America International provides financial services to individuals across the United States in 942 locations. His company is the largest provider of pawn loans in the country, he opined. Of their 499 pawnshops, 5 stores are located in Anchorage, he noted. He offered that Cash America International supports HB 258 since it st creates a 21 century regulatory structure for the industry. He opined that HB 258 would protect consumers and customers. This bill provides licensing provisions, oversight, and regulation by a state agency, which he said he believes is important for the industry. This bill contains uniform standards for licensing, investigation fees to allow the state to ensure that pawnbrokers are legitimate, a requirement for a biennial report, and strengthens the reporting activities to police departments. This bill also creates consumer protections for military service, standardizes the fee structure for the initial 30 day loan period, and maintains the current finance rate. This bill allows a 30 day grace period to allow customers to retrieve their property. MR. VAUGHAN highlighted that HB 258 creates one of the most modern pawn statutes in the country. He opined that many Americans depend on pawnbrokers to help them meet their financial needs not offered by other financial institutions. He offered that pawn customers represent the working families who periodically experience unexpected needs for short term finances. He said, "Pawn loans help them keep the electricity on and the rents paid." He opined that Cash America International constantly works to enhance the image of pawnbrokers while offering needed services to the people in the community. He opined that their stores are attractive and welcoming places to conduct business. He noted that Cash America International is a member of the National Pawnbroker Association whose mission is to improve professional development and enhance the image of the industry by advocating for pawnbroker rights, responsibilities, and improving regulation of the industry. MR. VAUGHAN described the pawnbroker's process. He stated that a customer pledges his/her personal property as collateral for a loan. When the customer repays the loan and fees, the merchandise is returned. Pawn loans are made on products ranging from jewelry to electronics. If a customer does not redeem his/her property, there are no credit consequences, but the property becomes the property of the pawnbroker who sells the merchandise to retail customers. He noted that the average pawn loan in the United States is $75, and in Alaska is $85. Approximately 75 to 80 percent of the time, customers redeem their property, he noted. The redemption rate in Alaska is approximately 51 percent. The length of terms to redeem property varies between states, but typically a pawnbroker allows customers 30 days, with some states allowing an additional 30 day grace period. Currently, the Alaska statutes allow 30 days without a grace period for customers to redeem pawned property. The interest rates are set at 20 percent, which is comparable with other western states. He noted that under HB 258, all transactions would be reported to assist in property crime investigations. He opined that it is in the best interest of customers, coworkers, and investors to eliminate any potential transaction involving stolen merchandise. He acknowledged the perception in the media and in Hollywood is that pawnshops are pipelines used by criminals. However, he offered statistics that counter that perception. In the past 12 months ending in December 2007, Cash America International's 485 stores handled 9.6 million items and advanced $525 million in loans to customers on 6 million transactions. Of those, only 4,484 transactions involved police seizures, he opined. Of the 127,000 items in Alaska resulting in $5.7 million in loans on 7,976 transactions, only 32 resulted in police holds or seizure. Less than one percent of the overall transactions resulted in police holds or seizures, he offered. He noted that pawnbrokers have the responsibility to safeguard their customer's information under federal law. This bill would allow Cash America International to work with local law enforcement by submitting the pawn transaction information, but not the customer information. Under the bill, The pawn transactions would be held confidential and release of information would be limited to investigation of stolen property. This bill provides many improvements to the regulatory framework in which all pawnbrokers can operate profitably while providing the state regulatory oversight, he concluded. 4:19:56 PM REPRESENTATIVE LEDOUX inquired as to whether a pawnbroker would provide the name of the customer to the police department. MR. VAUGHAN answered that the police would be able to access the records when necessary in the course of conducting an investigation or an audit in electronic or paper form. The record provided to the police agencies would only be the description of the property and information such as the date the property was pawned, the amount of the loan, but would not include any customer information. Additionally, if information is sent electronically, it would be encrypted as required under federal standards. 4:21:28 PM REPRESENTATIVE LEDOUX referred to proposed section AS 08.76.010, and noted that provision refers to the types of information that must be maintained. She expressed concern that the name, age, and address of the customer is listed, and that proposed Section 4 states that the book shall be open to the inspection of a peace officer at reasonable times. MR. VAUGHAN answered that the records are maintained at the store. An officer or agent of the state would have access to records at his store to ensure that the pawnbroker is meeting the requirements. However, information transmitted to the police agencies would be solely transactional. 4:23:09 PM KENNETH GUDGEN, Market Manager, Cash America Alaska, stated that his company owns 5 stores in Anchorage. Cash America Alaska employs 48 people in Anchorage and offers employees a full benefits package that includes health benefits, life insurance, and a retirement plan. His company also offers employee training on sales and customer service. He offered that his company's purpose is to serve the community in a safe environment. He noted his pawnshops are well run, well maintained businesses that strive to provide a high level of service. The stores have been remodeled and are clean and well lit. Their core business is the pawn business, he offered. In 2007, 29,000 residents resulted in total sales of $5.7 million in the Anchorage pawnshops. He offered that Cash America Alaska offers loans for many purposes such as to provide expenses for fishermen in the off season, or to people who work in remote locations and don't receive their pay for several weeks. Other loans are made for emergencies such as for car repairs or surgeries, he offered. Customers offer their valuable possessions as collateral to secure the loans. He opined that HB 258 offers customers and his businesses many advantages. He advised that his stores currently report all pawn transactions to the police department including the make, model, and serial number of all items as well as the name, driver's license number, and birth date of the person pawning the item. He characterized his relationship with the Anchorage Police Department as a good working relationship. When Cash America Alaska receives stolen merchandise, the store provides police with information including surveillance videos. The Municipality of Anchorage requires mandatory reporting laws. This proposed legislation makes reporting mandatory for all license holders in Alaska, which provides consumer protections and protections for pawnshops. This bill also protects military customers by guaranteeing no interest on their pawned merchandise during the time the military person is overseas. He concluded that his goals are to take good care of the people that his stores serve. REPRESENTATIVE GARDNER referred to page 7, lines 17-26, and inquired as to how the pawnbroker can track the military personnel. She opined that unless the military personnel notified the pawn shop prior to leaving the country, that the pawned item could be inadvertently sold. MR. GUDGEN agreed that the pawnbroker would need to be notified prior to departure or the pawned goods would be sold. 4:30:01 PM MARK DAVIS, Director, Division of Corporations, Business, and Professional Licensing, Juneau Office. Department of Commerce, Community, & Economic Development (DCCED) explained that the division is in support of licensing pawnbrokers. He stated that the division supports HB 258, although he noted that the bill may need some refinement. He suggested one area that may need to be reviewed is the requirement for good character in proposed AS 08.76.110. 4:30:57 PM REPRESENTATIVE GARDNER referred to page 4, subsection (b) which describes the biennial report and inquired as to what is the state's interest in knowing the number and amounts paid since that information is proprietary information. MR. DAVIS answered that he interprets this subsection would require reporting only the aggregate amount, similar to the reporting requirement for banks, which is to inform the legislature the size of the industry and provide industry trends. MR. DAVIS, in response to Representative Gardner, explained that various reports require tracking items such as the number of licensees, aggregate size, assets under control. He surmised that the division would probably develop a reporting requirement in regulation designed to determine how the industry is performing. REPRESENTATIVE GARDNER opined that she is not convinced that the state needs to know the profitability of pawnbrokers. MR. DAVIS answered that the report would not divulge profitability, but would show items such as the number of transactions, number of items pawned, and number of redemptions. He pointed out the industry is currently recording this information. 4:33:18 PM MR. DAVIS, in response to Representative Neuman, noted that the division does not currently regulate pawnshops so the bill's sponsor projected an estimate of 30 new licensees. In further response to Representative Neuman, Mr. Davis advised that not everyone uses the name "pawnshop" in their business name so a search of business licenses would not provide the number of pawnbrokers operating in the state. 4:34:15 PM REPRESENTATIVE GARDNER inquired as to whether the requirement that the applicant be of good character and have the experience to engage is required of other professions. MR. DAVIS answered that some professions have similar requirements. He referred to AS 06.50.020, which establishes qualifications for deferred deposit lending licenses that requires applicants to, "demonstrate financial responsibility, financial condition, business experience, character, and general fitness." In further response to Representative Gardner, Mr. Davis answered that the experience to engage in business as a pawnbroker would require applicants demonstrate the ability to understand money lending, risk involved in lending money, and the ability to maintain records, which could be demonstrated by educational experience or prior work experience. He opined that it is important in lending businesses that the person has the necessary business acumen. 4:36:17 PM CHAIR OLSON, after first determining that no one else wished to testify, announced that he would keep public testimony open. 4:36:39 PM CHAIR OLSON announced that HB 258 would be held over.
| Document Name | Date/Time | Subjects |
|---|