03/02/1993 02:35 PM Senate L&C

  SENATOR KELLY  introduced SB  86 (FUND  TRANSFERS UNDER  THE                 
  UNIFORM COMMERCIAL CODE) and asked who was going  to explain                 
  the bill.   BILL KELDER,  Aide to SENATOR  KERTTULA, said  a                 
  copy of the  explanation had been delivered to the committee                 
  member offices, but he deferred to ARTHUR PETERSON, who is a                 
  Uniform Law Commissioner for Alaska.   GERALD KURTZ, who  is                 
  also a Uniform Law Commissioner for Alaska, was Off-Net from                 
  Anchorage on the teleconference network.                                     
                                                                               
  MR. PETERSON explained that although he  was now an attorney                 
  in private practice with Dillon & Findley, he  was appearing                 
  in  his role as  a Uniform Law Commissioner  for Alaska.  He                 
  testified in support  of SB  86 and urged  the committee  to                 
  favorably report it from committee.                                          
                                                                               
  Number 164                                                                   
                                                                               
  MR. PETERSON said the bill was supported by the American Bar                 
  Association,  the  American  Law   Institute,  the  American                 
  Bankers  Association,  and  was developed  by  the  National                 
  Conference of Commissioners and Uniform State Laws.                          
                                                                               
  MR. PETERSON said the  purpose of the bill was  to recognize                 
  modern electronic technology  and modern business practices.                 
  He said it  would provide legislative  answers to the  great                 
  number  of  questions that  arise in  the  new way  of doing                 
  business, is vastly  preferable to  the current system,  and                 
  has been  enacted by  44 states.   Enactment  by all  states                 
  would retain  this subject for  handling by  the states  and                 
  would preclude federal intervention.                                         
                                                                               
  MR. PETERSON said the bill covered two areas, wholesale wire                 
  transfers,  and non-consumer  automated payments,  which are                 
  similar.  He explained it parallels, and is consistent with,                 
  a related federal act and with the rules that govern the two                 
  principle national wire  systems, the FedWire and  the CHIPS                 
  (Clearing House Interbank Payment Systems).                                  
                                                                               
  MR. PETERSON said  he preferred to answer questions  at this                 
  point, and  he noted  another Uniform  Law Commissioner  for                 
  Alaska, GERALD KURTZ, who has a  great deal of experience in                 
  commercial law, was on the teleconference from Anchorage.                    
                                                                               
  Number 201                                                                   
                                                                               
  SENATOR RIEGER questioned the national act, and MR. PETERSON                 
  explained the federal act was  the Electronics Transfer Act,                 
  which  covers   only  consumer  transactions,  such   as  an                 
                                                                               
                                                                               
  automated teller machine  or credit  card transactions.   He                 
  also  explained this  act  is uniform  among  all the  other                 
  states and with  the two  national wire systems.   The  only                 
  changes he noted  were to comply with  Alaska's requirements                 
  of style  and numbering  adjustments; otherwise,  it is  the                 
  national version.                                                            
                                                                               
  SENATOR KELLY invited MR. KURTZ in Anchorage, to  testify on                 
  SB 86.                                                                       
                                                                               
  MR.  KURTZ  reviewed  some  of  the provisions  specific  to                 
  Alaska, and he thought it was important that 44 other states                 
  had adopted the act.  He explained it was  quite critical to                 
  those business people, who were trying to hold down the cost                 
  of business and  consumer transactions and keep  up with the                 
  rest of the world on the subject of both SB 86 and SB 112.                   
                                                                               
  PETE CRANDALL, representing the National  Bank of Alaska and                 
  the  Alaska  Bankers  Association,   urged  the  committee's                 
  support of SB 86.  He explained it would provide clear lines                 
  of responsibility for all parties utilizing electronic funds                 
  transfers  and would  reduce, or  eliminate,  legal disputes                 
  between all parties  that conduct  business in this  manner.                 
  He said  it could also  eliminate disputes that  could arise                 
  between  the  State of  Alaska  and other  states,  since it                 
  provides clear, fair, and sound rules  for all parties - not                 
  just bankers.                                                                
                                                                               
  Number 269                                                                   
                                                                               
  SENATOR KELLY asked  WILLIS KIRKPATRICK  if the Division  of                 
  Banking supported  the bill, and  MR. KIRKPATRICK  responded                 
  they supported the bill - and it had no fiscal note.                         
                                                                               
  SENATOR RIEGER asked  MR. CRANDALL what happened  when funds                 
  were  erroneously sent, and who was responsible for the loss                 
  of interest in the transaction.                                              
                                                                               
  MR. CRANDALL explained  both the  senders and the  receivers                 
  have some responsibilities, but the act would clearly define                 
  the rules, and he gave an example.                                           
                                                                               
  SENATOR RIEGER said  he was looking  from the standpoint  of                 
  the owner of  the funds,  who directs the  bank to  transfer                 
  some funds, if  the deal goes wrong.   He asked if  he would                 
  still get his interest, and at  what rate of interest, while                 
  the problem is being sorted out.                                             
                                                                               
  MR.  PETERSON  assured SENATOR  RIEGER  he would  not suffer                 
  because the bank, or whoever made  the error, would bear the                 
  burden of his loss, but the rate of  interest would be under                 
  law of the state.  He  quoted the supporting Alaska statute,                 
  AS 45.45.10, which is essentially market rate.                               
                                                                               
                                                                               
  SENATOR KELLY asked for further questions.                                   
                                                                               
  SENATOR  LINCOLN quoted  SENATOR KERTTULA  as expecting  the                 
  bill to bring  the state laws  into compliance with  federal                 
  law,  otherwise, the  federal  government  will perform  the                 
  regulatory  and  enforcement  duties  related  to  the  fund                 
  transfers.  She asked for a meaning of his quote.                            
                                                                               
  Number 299                                                                   
                                                                               
  MR. PETERSON  referred to  his previous  testimony that  the                 
  federal government wishes to be assured that all states deal                 
  with  fund transfers  in  the  same  way for  a  nation-wide                 
  system.   He explained  if the  states  don't conform,  then                 
  either  Congress  or   the  appropriate  federal  regulatory                 
  agencies  would  intervene.    He   also  explained  it  was                 
  important for Alaska to have a model version of the act, and                 
  he  said  the two  federal  wire  services  had adopted  the                 
  language produced by the Uniform Law Commissioners.  He said                 
  the  state statute  is consistent  with federal  law on  the                 
  books, but he  expressed the fear  that if the states  don't                 
  act,  the  federal  government  would  expand  its  area  of                 
  regulation.                                                                  
                                                                               
  SENATOR  LINCOLN,  in  reference  to  those  states  without                 
  similar  legislation, asked  if their  regulations would  be                 
  replaced by the federal government.                                          
                                                                               
  MR. PETERSON explained if the states fail to act, they would                 
  place their commercial climate at a great  disadvantage.  He                 
  explained that if  all states  cannot implement the  Uniform                 
  Act, that encourages the federal government to intervene, if                 
  they feel it is required.                                                    
                                                                               
  SENATOR KELLY noted a list of those 45 states who have acted                 
  on the Uniform  Commercial Code, and  he asked why this  has                 
  happened so quickly.                                                         
                                                                               
  MR. PETERSON explained the UCC had swept the country because                 
  of the great  push to make uniform  all of the laws  to keep                 
  pace with the strides in the business world, and he reviewed                 
  the bill from last session on this subject.                                  
                                                                               
  Number 347                                                                   
                                                                               
  SENATOR RIEGER asked about  the rate of interest on  page 37                 
  of  the  bill, as  to  whether  it referred  to  the various                 
  financial  institutions.    MR.  PETERSON  explained,  as  a                 
  depositor, a  rate would  be set  in the  contract with  the                 
  bank.                                                                        
                                                                               
  After a few more questions on the subject,                                   
                                                                               
  SENATOR RIEGER  moved  to  pass  SENATE  BILL  NO.  86  from                 
                                                                               
                                                                               
  committee   with   individual   recommendations.     Without                 
  objections, so ordered.