Legislature(1999 - 2000)
04/13/1999 01:40 PM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 128-LEASE-PURCHASE OF PERSONAL PROPERTY CHAIRMAN MACKIE announced HB 128 to be up for consideration. REPRESENTATIVE LISA MURKOWSKI, sponsor of HB 128, said this is basically the "rent to own" bill; this is a fledgling industry in our state and is growing quickly throughout the country. It applies to renting personal property mostly for people who are temporary residents. This bill makes it clear for the consumer to know what his or her obligations are and the lease/purchase owner's disclosure requirements. There is nothing in the Alaska statutes which addresses lease purchase situations. There have been no specific problems in the industry; it's more preventative. Forty four other states have similar legislation that addresses the disclosure requirement. She said they looked at legislation from South Dakota and received input from people within the industry in Alaska. SENATOR HOFFMAN asked if in the description of rent purchase agreements, merchants don't require a security deposit or downpayment. He asked if that was true in this legislation. REPRESENTATIVE MURKOWSKI indicated that was true. SENATOR LEMAN asked if there was a table that would establish what a "fair market value" is and would it be the original purchase price or depreciated value, for instance. REPRESENTATIVE MURKOWSKI said she understands that the purpose of the fair market value disclosure is that there are no hidden agendas. If you're going to rent it, it's going to cost so much per week or month. If you want to purchase it, you want to know what the value of the T.V. will be. SENATOR LEMAN noted that there is a late fee of $5 and asked if there was a restriction on the amount of the fee and is there some other way for a business to recover the cost of someone's payment being late. Number 450 REPRESENTATIVE MURKOWSKI responded that the reason a nominal late fee was placed in there is because typically within the industry they don't charge a late fee. It came from the industry as being a reasonable sum. Usually, property is either returned voluntarily or it is repossessed. MR. BRAD DENISON, testifying from New Jersey, said this bill is very similar to what most of the other states have. It's based on suggested legislation from the Council of State Governments which is existing Virginia state law. As far as he knows, no one in the industry is charging a security deposit; and he didn't think this bill addressed that issue. Industry's position is that late fees should be left up to the individual dealer and should depend on the market place. There is no table of fair market value if the merchandise is damaged, but there is a formula that most dealers use to determine the value of the property at any time. It's based on the cash price of the goods at the outset of the transaction. For instance, if at the outset a T.V. is valued at $300, the customer can buy it by tendering an amount equal to the cash price less 50 percent of all the rent paid. The is the formula for determining fair market value. As a practical matter, when something happens to the goods, it turns out to be a loss for everyone, because many customers don't have the cash to pay for the T.V. It hasn't been a big issue in the industry. MR. DENISON explained the late fee of $5 is to recover the cost of having to either make phone calls or send letters. It also serves as an incentive for the customer to make on-time payments. Number 532 SENATOR LEMAN moved to pass HB 128 with individual recommendations. There were no objections and it was so ordered.