Legislature(2007 - 2008)BELTZ 211
02/20/2008 01:30 PM Senate JUDICIARY
| Audio | Topic |
|---|---|
| Start | |
| HB197 | |
| HB25 | |
| HB182 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 25 | TELECONFERENCED | |
| + | HB 182 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| = | HB 197 | ||
CSHB 182(JUD)-OFFERING PROMOTIONAL CHECKS
2:18:42 PM
CHAIR FRENCH announced the consideration of HB 182. Before the
committee was CSHB 182(JUD).
MIKE SICA, Aide to Representative Lynn read the following into
the record on behalf of the sponsor. [Original punctuation
provided.]
HB 182 is a small, one-page bill, about small dollar
checks that cause big headaches for Alaska consumers.
The checks are maybe for only three or four dollars
and, according to the Department of Law, the checks
are sent to thousands of businesses and individuals
throughout our state.
The good news? The checks are legitimate. The bad
news? The checks are "legitimate." In actuality,
cashing one of these checks can amount to an
unintended contract. Hundreds of Alaskans cash these
little checks, only to find themselves obligated by
contract for products and services they don't want and
never needed.
Let me give you one example. In 2006, the Alaska
Department of Law announced a settlement with a
California-based company that sent Alaskans what
appeared to be rebates from local yellow page
companies. Not so. Endorsement of a check for $3.49
was actually a contract for $179 in advertising
services - which they didn't want and didn't need.
Consumers, who thought they were getting a very small
windfall, got a much larger downfall. That's because
they didn't see the tiny, fine print, disclosure on
the back of the check. Or, if they did see it, they
didn't have a magnifying glass. And when the checks
are endorsed, consumers end up getting billed - and
sometimes hounded - by collection agencies, which can
damage their credit rating.
The Consumer Protection Unit of the Alaska Department
of Law considers these promotional checks to be a
classic example of deceptive acts or practices - and
believe that prohibiting these kinds of checks is the
only effective method of preventing these unintended
contracts, and subsequent charges, from occurring.
HB 182 makes these kinds of promotional checks an
unfair or deceptive act or practice, and makes it an
automatic violation of Consumer Protection laws.
Under this bill, companies that violate the law are
subject to a civil penalty of a minimum of $1,000 per
violation, and a maximum of $25,000 per violation.
Representative Lynn said he is honored that the Alaska
Department of Law let him know about these deceptive
checks, and he agrees with the department that HB182
is high priority consumer protection legislation.
2:21:55 PM
MR. SICA relayed that the sponsor and his chief of staff
received promotional checks but they didn't cash them. During
testimony in the other body a state lawmaker admitted to having
been fooled.
2:22:50 PM
SENATOR McGUIRE admitted that two years ago she endorsed and
deposited a $9.95 check from Citibank under the assumption that
she was redeeming points. She learned that she had enrolled
herself in a driver protection program that carried an ongoing
monthly fee of $29.95. It took a full two months and a lot of
headache to get out of the program. This could be devastating to
seniors in particular. She questioned why this doesn't violate
the interstate commerce clause.
MR. SICA replied the companies operate in Alaska so goods don't
cross the boarder. He deferred to the Department of Law for
further explanation. Small businesses, churches and schools
receive these checks and often they're just endorsed and
deposited so this protects more than just consumers. It also
sends a good message to the business community that it doesn't
have to compete with these people that cross that boundary.
2:25:06 PM
MARIE DARLIN, Coordinator, AARP Capital City Task Force
expressed support for HB 182 and noted that a letter from AARP
is in the packet. Older people are often the target of practices
such as this. This would be one more tool for the offices of the
attorney general and consumer protection to battle these scams.
2:27:01 PM
DALE LEHMAN, representing himself said he doesn't generally
believe it's government's role to protect people from making
stupid decisions, but he does urge the committee to pass HB 182.
He relayed that he is usually diligent about disregarding free
offers of any kind. Despite that and the fact that he's a
retired economics professor who lectures about consumer scams,
he deposited what appeared to be a free $10 check from a credit
card company that he'd done business with for years. Last year
all his credit cards were stolen so he canceled the cards and
subsequently began to examine his bills. The first one he looked
at had a line item for $39.99 from TLGHMPRT. After some research
he learned that the state attorney general's office and 16 other
states had reached a settlement with his credit card company for
these allegedly deceptive practices. He's embarrassed to admit
that he paid $39.99 for 18 months. He was fooled but this
company had to go far out of the way to do this. "This is not an
accidental thing that occurred." He never received any material
about what the National Home Protection Alliance is. "To this
day I really have no idea what services they provide." The
ultimate irony was that the only automatic payment that was
passed on to his new credit card was TLGHMPRT.
2:30:30 PM
MR. LEHMAN said HB 182 would do two constructive things. First,
it would make the attorney general's job easier in prosecuting
these sorts of cases because it would be an illegal practice.
Second, it would encourage businesses to compete by offering
better services rather than spending resources to fool consumers
in ever more subtle ways.
2:32:56 PM
JULIA COSTER, Assistant Attorney General, Civil Division,
Commercial/Fair Business Section, Department of Law (DOL)
testified in support of SB 182. She agreed with Mr. Sica that
these promotional checks have been a problem for individual and
business consumers in the state. SB 182 is an attempt to fix
that problem. Her office has received numerous complaints and
has interviewed numerous consumers that have received and cashed
these checks reasonably believing them to be a rebate or reward.
They have no idea that by cashing the check they have entered
into a contract to purchase goods or services. Oftentimes
endorsing the check unknowingly authorizes monthly charges to
the consumer's checking account, credit card, or telephone bill
to pay for the goods or services. Many consumers unwittingly pay
the charges for months until something brings it to their
attention or until they are contacted by the consumer protection
office.
MS. COSTER said her office has initiated a number of
investigations several of which have resulted in prosecutions
and settlement under the Alaska Consumer Protection Act. A
recent case was a coordinated multi-state investigation that
resulted in a settlement agreement that prohibited the use of
promotional checks in 34 states. Another case resulted in a
settlement for less than a total prohibition. Rather than
dealing with this issue on a piecemeal basis through litigation,
HB 182 deals with the problem on a more universal level. It
makes the use of promotional checks from Alaska an unfair or
deceptive practice under the Alaska Consumer Protection Act.
"This means that the use of the check is an automatic violation
of the Act." Making the promotional checks an unfair, deceptive
act or practice puts the check marketers on notice. Hopefully
this will stop the use of these checks in the state and it will
make enforcement easier in the future.
2:37:39 PM
CHAIR FRENCH asked her to respond to the interstate commerce
question.
MS. COSTER explained that the interstate commerce clause uses a
balancing test that looks at whether or not the burden on
commerce outweighs the benefit to the state or its interest. It
wouldn't be difficult to make a strong argument that the conduct
- the use of these promotional checks - is deceptive and that
outweighs any interest a person would have in continuing to use
such checks.
SENATOR WIELECHOWSKI asked if there are any preemption issues.
MS. COSTER replied she isn't aware of any federal law that
addresses the use of these checks.
CHAIR FRENCH referred to a question and answer interview between
some member of the DOL and the bill sponsor. He highlighted the
final question and answer, which asks why DOL considers this
bill a high priority. The DOL answer is that many hundreds of
Alaskan consumers have been harmed by the use of these
promotional checks. He asked if it can be verified that it's up
in the hundreds.
MS. COSTER replied, Absolutely. Many hundreds of Alaska
consumers have cashed these checks and unknowingly or
unwillingly paid because they were subject to coercive
collection tactics.
SENATOR WIELECHOWSKI asked if Alaska has been involved in any
class action lawsuits to stop this activity.
MS. COSTER replied she's unaware of private class action suits
but the State of Alaska has been involved in three multi-state
cases that were brought by state attorneys general offices. They
may be considered class action in that they involve more than
one state.
2:41:03 PM
CHAIR FRENCH referred to the bill packet and noted that in April
2006 the DOL Civil Division announced a $500,000 settlement with
Yellow Pages Inc. for having offered these checks in the state.
MS. COSTER added that that's the most recent settlement.
2:41:47 PM
SENATOR McGUIRE suggested the DOL look into the situation at
Citibank as well. She surmised that consumers are accustomed to
getting rebates and rewards as part of the incentive package
with their credit cards. She relayed that she was enrolled in
the Driver Edge Protection program that supposedly added $29.95
extra coverage on her vehicle. She never new exactly what it was
and didn't receive any information about it. "So add that to
your list," she said.
MS. COSTER agreed to do so.
2:42:46 PM
MR. SICA told the committee that he appreciates that getting a
bill passed is a long process and he believes that checks and
balances are important. Although the bill moved along very well
last year, he has to admit that during the Interim he worried
about all the people who would be getting and signing these
checks.
CHAIR FRENCH said HB 182 seems to be a very good bill and he
intends to bring it back soon and take action on it.
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