Legislature(2021 - 2022)BELTZ 105 (TSBldg)
04/13/2021 01:30 PM Senate TRANSPORTATION
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| Audio | Topic |
|---|---|
| Start | |
| HB36 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 36 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 36-MOTOR VEHICLE DEALERS: APPLIC.; INSURANCE
1:38:23 PM
CHAIR MYERS announced the consideration of HOUSE BILL NO. 36 "An
Act relating to an application for a license to operate as a
dealer in motor vehicles; and requiring a dealer in motor
vehicles to maintain liability and property insurance."
1:38:40 PM
REPRESENTATIVE MATT CLAMAN, Alaska State Legislature, Juneau,
Alaska, paraphrased the sponsor statement:
[Original punctuation provided]:
The purpose of House Bill 36 is to strengthen Alaska's
motor vehicle dealer license requirements by
modernizing the statute and incorporating reasonable
standards for obtaining a motor vehicle dealer's
license without creating barriers to entry into the
field or restricting competition.
Alaska's current requirements for obtaining a motor
vehicle dealer's license are some of the least
stringent in the nation. Under current law, a motor
vehicle dealer in Alaska must register biennially by
filling out an application, pay a $50 registration
fee, and maintain a surety bond of $50,000. By way of
comparison, the requirements for a motor vehicle
dealer's license in other states are more stringent.
1:39:18 PM
Many states provide for a grievance process, ground
for revocation and proof of a physical location. Many
states also require dealers to obtain liability
insurance covering bodily harm and property damage.
Alaska's more lenient requirements make it easy for
unscrupulous actors to obtain dealer licenses and gain
access to dealer-only auctions where used cars are
sold at discounted rates.
House Bill 36 ensures that reasonable standards for
becoming a dealer are in place as well as adequate
financial protections for purchasers should the sale
not work out.
1:39:54 PM
REPRESENTATIVE CLAMAN continued to paraphrase the sponsor
statement:
House Bill 36 updates the surety bond requirement
which hasn't been changed in 20 years to $100,000 to
stay in line with the current economics of the
automobile industry. Furthermore, it requires that
dealers obtain liability insurance. There is currently
no requirement that dealers carry liability insurance
even though Alaska requires drivers to have liability
insurance for their vehiclesand dealers may allow
uninsured drivers to take cars for test drives. It
also limits ownership of persons who have been
convicted of felonies for fraud or embezzlement within
five years of the application date. Finally, it
requires dealers with employees to confirm that they
are aware of associated workers comp coverage
requirements.
1:40:39 PM
REPRESENTATIVE CLAMAN continued:
The purpose of HB 36 is to establish reasonable
standards for car dealer licensing and to reduce the
potential for harm through increased bond amounts,
mandatory insurance and additional disclosures that
will hold automobile dealers more accountable as
business owners than under current statute.
1:40:59 PM
SOPHIE JONAS, Staff, Representative Matt Claman, Juneau, Alaska,
stated that HB 36 strengthens automobile consumer protection by
requiring potential automobile dealers to follow an improved
application process. She reviewed a sectional analysis of HB 36.
[Original punctuation provided]:
Section 1 AS 08.66.030. Form of application
Adds the following requirements to dealer registration
applications:
• a valid telephone number for the business;
• a statement that no person holding a five percent or
greater interest in the business has been convicted of
a felony involving fraud, embezzlement, or
misappropriation of property within five years
preceding the date of application;
• a statement acknowledging that the applicant has
reviewed the requirements for workers' compensation
insurance and will maintain workers' compensation
insurance under AS 23.30, if applicable; and
• a copy of the liability insurance policy in
compliance with section 3 of this bill.
1:41:57 PM
MS. JONES continued to read the sectional analysis:
Section 2 AS 08.66.060. Bond. Raises the amount of the
bond required for dealer registration applicants from
$50,000 to $100,000.
Section 3 AS 08.66.085. Insurance requirements. Adds a
new section to AS 08.66 that requires dealers maintain
public liability and property damage insurance of not
less than $50,000 for property damage, $100,000 for
injury to a single person, and $200,000 for injury,
including death, to more than one person.
MS. JONES noted invited testifiers.
1:42:55 PM
CHAIR MYERS turned to invited testimony.
1:43:02 PM
MARTEN MARTINSEN, Owner, Continental Automobile Group,
Anchorage, Alaska, spoke in support of HB 36. He stated he is a
member of the Auto Dealers Association.
He stated that most auto dealership businesses had brick and
mortar locations thirty years ago. Since then, Alaska has
experienced a large influx of dealers. He offered his belief
that this bill should level the playing field and update the
state's standards with realistic but minimum standards. He
offered his view that the surety bond rates for dealers would
likely increase between $500 to $1,000, depending on the
dealer's credit rating but it would be the only additional cost.
1:45:31 PM
MARCUS WAEHLER, Owner, Red, White, and Blue Auto Sales, Board
Member, Alaska Automobile Dealers Association (AADA), Anchorage,
Alaska, spoke in support of HB 36. He said he initially brought
his concerns to the AADA's board. He has been in business for 25
years. Over 20 years ago, all the dealers at auction had brick
and mortar stores and knew one another. Dealers would bid on
vehicles, recondition them, and sold them. About seven years
ago, in part due to the lax registration process, new dealers
started attending auctions. He began noticing vehicles he had
seen at auction advertised on craigslist being sold under the
guise of being private party sales. Some of these cars would
later be sold to him. He discovered dealers selling used cars on
craigslist were ones without storefronts. He researched the
dealer registration requirements and by far, Alaska has the most
lackadaisical ones in the country. He related that dealers could
start their business by paying a $500 bond and $150 registration
fee. This will allow the dealers to attend auto auctions. Many
of these dealers do not disclose that they are dealers, do not
have storefronts and create a consumer protection issue. He said
it also hurts legitimate auto dealers, so the goal is to bring
minimum standards to the industry.
1:48:44 PM
MR. WAEHLER related a personal experience to illustrate the type
of unscrupulous practices that occur. About a year ago an older
woman brought in a Subaru Tribeca to his shop as a trade-in. he
told him that she paid $6,500 for Craigslist car from a private
party, but it was not running well. He said he uses an app at
auction to take notes on specific vehicles, which allows him to
scan in the Vehicle Identification Number (VIN). Thus, he was
able to identify her car was sold at auction. His auction notes
showed the vehicle had low oil pressure, which essentially meant
it needed a new engine. He ran the vehicle through tests and
discovered the someone had removed the oil indicator light. As
he suspected, the vehicle needed a new engine, so it was worth
about $2,000, he said.
1:50:34 PM
SENATOR MICCICHE asked for the insurance requirement increases.
MR. WAEHLER answered that insurance costs would depend on the
amount of inventory and the number of employees. HB 36 would
formalize the coverage and make dealers acknowledge they are
responsible for insurance coverage but the exact insurance
amounts would vary.
1:52:00 PM
REPRESENTATIVE CLAMAN, in terms of insurance, advised members
Lori Wing-Heier from the Division of Insurance will testify at
the next meeting. He recalled that she estimated that typical
costs for coverage most dealers would have would run about
$1,000 per year. He stated that his 26-year-old legislative
staff pays $750 per six months for liability insurance so the
$1,000 per year seemed reasonable. Ms. Wing Heir can elaborate
more on costs, he said.
1:53:18 PM
SENATOR KIEHL asked him to expand on the value of dealers having
storefronts and if it was to provide consumer protection.
MR. MARTENSEN answered that the storefront was a reference.
Twenty-five years ago, dealers all had stores with cars on the
lot. If any issues arose, people could go back to the store and
have some recourse. As Mr. Waehler described, some dealers
purchase cars, list them on craigslist and run their businesses
from home. When problems arise, people do not have any way to
contact the seller, who often does not identify himself as a
dealer. Dealers need to present themselves as dealers, he said.
1:55:41 PM
SENATOR KIEHL highlighted that he knows a small reputable auto
dealer with a website specializing in a niche in the car market.
He pointed out that HB 36 does not appear to address
storefronts. He pointed out that HB 36 does not appear to
address storefronts. He asked whether the sponsor was
comfortable that consumers would have adequate recourse when
issues arose.
REPRESENTATIVE CLAMAN responded that the bill would create some
protections. The bonding requirement is essentially a
performance bond so the consumer can collect on the bond.
Ideally, the dealer would pay and never use the bond, which
provides the guaranty. When the bond requirement was set,
$50,000 equated to three used cars so increasing it to $100,000
more accurately represents the market value. Secondly, the
insurance requirement will provide public protection if an
uninsured driver has an accident test driving a vehicle.
Overall, the bill should give the public with confidence that
people selling cars provide a basic level of service to their
customers.
1:58:32 PM
SENATOR MYERS noted that some people flip cars as a hobby. He
asked him to provide the benefits and detriments for dealers as
compared to not becoming licensed.
REPRESENTATIVE CLAMAN answered that the current statute defines
a dealer as someone who sells five or more cars per year with
some exceptions. The bill would not change that provision. One
exception would be that the business was not the person's
primary income source. He offered his view that the dividing
point was that a person going to auction must have a dealer's
license regardless of the number of vehicles being bought or
sold. Hobbyists would not be affected since they can show that
car sales were not their primary source of income.
2:00:43 PM
CHAIR MYERS opened public testimony and after first determining
no one wished to testify, closed public testimony on HB 36.
[HB 36 was held in committee.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 36 Sponsor Statement 4.9.2021.pdf |
STRA 4/13/2021 1:30:00 PM |
HB 36 |
| HB 36 Sectional Analysis v. A 2.23.2021.pdf |
STRA 4/13/2021 1:30:00 PM |
HB 36 |
| HB 36 Testimony - Received as of 2.23.2021.pdf |
STRA 4/13/2021 1:30:00 PM |
HB 36 |