Legislature(2003 - 2004)
04/21/2004 08:43 AM House FIN
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
April 21, 2004
8:43 A.M.
TAPE HFC 04 - 91, Side A
TAPE HFC 04 - 91, Side B
CALL TO ORDER
Co-Chair Williams called the House Finance Committee meeting
to order at 8:43 A.M.
MEMBERS PRESENT
Representative John Harris, Co-Chair
Representative Bill Williams, Co-Chair
Representative Kevin Meyer, Vice-Chair
Representative Mike Chenault
Representative Eric Croft
Representative Hugh Fate
Representative Richard Foster
Representative Mike Hawker
Representative Reggie Joule
Representative Carl Moses
Representative Bill Stoltze
MEMBERS ABSENT
None
ALSO PRESENT
Representative Bruce Weyhrauch; Representative Tom Anderson;
Greg O'Claray, Commissioner, Department of Labor & Workforce
Development; Patrick Luby, Legislative Director, Alaska
Association of Retired Persons (AARP), Juneau; Josh
Applebee, Staff, Representative Tom Anderson; Mario Lim,
Juneau; Sal Lumba, Immigration Group, Juneau; Guy Bell,
Director, Division of Administrative Services, Department of
Labor & Workforce Development; Deborah Fink, Cash Alaska,
Anchorage
PRESENT VIA TELECONFERENCE
Ed Sniffen, Assistant Attorney General, Department of Law,
Anchorage; Mark Davis, Director, Division of Banking,
Securities and Corporations, Department of Community &
Economic Development, Anchorage; Angela Liston, Alaska
Catholic Conference, Eagle River; Steve Clary, Executive
Director, Alaska Public Interest Research Group (AkPIRG),
Anchorage; Jim Davis, Alaska Legal Services, Attorney,
Anchorage; Bud Wilson, Cash Alaska, Anchorage
SUMMARY
HB 379 An Act establishing an office of citizenship
assistance in the Department of Labor and
Workforce Development.
HB 379 was reported out of Committee with a "do
pass" recommendation and with a new fiscal note by
the Department of Labor & Workforce Development.
HB 389 An Act relating to certain monetary advances in
which the deposit or other negotiation of certain
instruments to pay the advances is delayed until a
later date; and providing for an effective date.
HB 389 was HEARD and HELD in Committee for further
consideration.
HCR 28 Relating to the socioeconomic impacts of salmon
harvesting cooperatives.
HCR 28 was SCHEDULED but not heard.
HOUSE BILL NO. 379
An Act establishing an office of citizenship assistance
in the Department of Labor and Workforce Development.
REPRESENTATIVE BRUCE WEYHRAUCH, SPONSOR, stated that HB 379
would create an office to assist naturalized citizens and
citizen candidates in Alaska. HB 379 would establish the
Office of Citizenship Assistance in the Department of Labor
and Workforce Development. Naturalized citizens and people
who are actively pursuing United States citizenship could
receive help navigating through State employment and federal
immigration agencies.
The Office of Citizenship Assistance would also act as a
liaison between individuals, the Office of the Commissioner
and State and federal agencies as well as the private
sector. Under the legislation, the Office would assist in
immigration services, employment services, affordable legal
service, medical services, and educational opportunities.
Information would be available regarding job discrimination,
sexual harassment and unsafe working conditions.
Representative Weyhrauch noted that Alaska has a rich
history of immigration. Through the legislation, the Office
would be sensitive to the diverse cultural backgrounds of
those it would serve and the Office would bridge the
transition of adjustment for incoming new citizens to
Alaska.
Representative Fate asked at this time how many citizens
could use the service. He noted the fiscal impact and was
concerned that the State would be assuming the "job" of the
federal government. Representative Weyhrauch responded that
the work of the bill would not be in doing the job of the
U.S. government. He emphasized that the federal government
has not been helpful with these types of issues. The
federal government is the problem by continually placing
impediments before these people who are attempting to get
immigration status. He pointed out that they are very
unresponsive, mentioning that his office has written
numerous letters for six-month periods and received no
response. They do not address the work in a timely manner.
The proposed State agency would not be providing free legal
services, immigration or naturalization. The legislation
proposes an Office to facilitate discussion and
communications between individuals who want to work in a
free society and the situations that impede them. He
stressed that the Office is intended to assist and
facilitate communication in employment opportunities. That
is not the work of the federal government.
Representative Fate inquired if the intent was primarily to
help with citizenship and/or jobs. He was concerned that it
might create competition for local residents attempting to
get jobs. Representative Weyhrauch acknowledged that was a
possibility, however, the intent is citizenship assistance.
A State employee would not be allowed to discriminate over
race or color, noting that some of these people have
difficulty even speaking English.
Vice Chair Meyer inquired if such an office has ever
existed. Representative Weyhrauch explained that Senator
Kelly from Fairbanks previously introduced a bill, which
went nowhere. Vice Chair Meyer understood that there had
been a similar position within Legislative Affairs.
Representative Weyhrauch clarified that in 2000, Senator
Halford, then the Senate President, created a job service
through legislative funding to help with that type of
concern and at that time, the Legislature saw it as
valuable.
Vice Chair Meyer asked if it should be relocated in
Legislative Affairs Agency and then it could be helped
through Legislative influence. Representative Weyhrauch
commented that placing it there would not necessarily remove
the struggles of bureaucracy. The intent of the bill is to
guarantee that the position is created.
In response to Vice Chair Meyer's query, Representative
Weyhrauch commented that it is important to have the Office
as a matter of policy within State government. There is an
understanding in the Executive Branch that it is important
for such an agency to act in a cohesive, consistent and
ongoing manner. Vice Chair Meyer agreed that the position
should exist, however, thought that it should remain under
legislative jurisdiction.
Representative Hawker pointed out that presently, there is
the State Ombudsmen's Office. He thought that the service
proposed in HB 379 could be performed within that Office
with the existing budget. Representative Weyhrauch
responded that was possible, however, that Office does not
approach the same issues addressed by the legislation. The
State Ombudsmen's Office is generally staffed by an American
U.S. citizen and most often deals with issues of the
Executive Branch. The proposed Office would help those that
need assistance with either employment or interpretive
services to assist in dealing with employment problems. He
acknowledged that it does have an "ombudsmen's flavor" and
noted that had been considered as a potential option but it
became obvious that it was different and did not fit for
those specific specialized services.
Representative Hawker referenced the fiscal note, which
would fund one range 17 employee and office supplies. The
largest line item is interpreter fees. He asked if
directing the Ombudsmen's Office to undertake the mission,
then instead of a $112 thousand dollar fiscal note, allocate
them $24 thousand dollars for the interpreter fees and the
use of their office supplies. Representative Weyhrauch
noted that he did question the assumptions of the fiscal
note. He recommended that the fiscal costs be directed to
the Department of Labor & Workforce Development.
Co-Chair Harris asked if the position had ever been seated
within the Department of Labor & Workforce Development
before. Representative Weyhrauch stated that the Department
has worked hard to accommodate these types of issues and
requested that Commissioner O'Claray address that.
Representative Weyhrauch interjected that it is not just one
particular nationality or group of people involved, noting
that he was astonished at how many foreigners come to
Alaska. Most often these people work extremely hard,
sometimes having three jobs.
GREG O'CLARAY, COMMISSIONER, DEPARTMENT OF LABOR, commented
on the bill and requested that Mr. Bell address the fiscal
concerns identified by the Committee members.
GUY BELL, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES,
DEPARTMENT OF LABOR & WORKFORCE DEVELOPMENT, commented that
the fiscal note had been modeled after the bill sponsored by
Senator Kelly from three years ago. That note was
substantially larger than the proposed note. It had two or
three positions associated with it and included
substantially higher travel and operating costs because it
would have established offices in both Juneau and Anchorage.
That note was used as the starting point. Mr. Bell reminded
members that there is very restrictive use of monies that
the Department receives from the federal government. The
request had to become a general fund cost, as it is a
special service beyond what is authorized in the federal
program. It was determined that one position would be
needed and located in Juneau with a limited travel budget
for a few trips to Anchorage and other parts of the State, a
contractual budget for basic office costs, and the
interpreter service costs. He called that service a "soft"
item as it is not known what services will be required. He
noted the possibility that the Office might be able to find
volunteers for that service. Mr. Bell thought that they
could lower the interpreter service portion of the note from
$24 thousand dollars to $4 thousand dollars.
Mr. Bell concluded that the position would be located in the
Commissioners Office on the basis that it should report
directly to the Commissioner rather than a division
director, given the broad range of responsibilities.
Co-Chair Williams asked if the note would be reduced. Mr.
Bell responded that the Department would reduce it by $20
thousand dollars.
Co-Chair Harris inquired if an interpreter would be making
$120 dollars an hour. Mr. Bell replied that the dollar
number of the proposed note had been taken from the previous
bill and the assumption was not questioned. He reiterated
that it was a soft cost.
Co-Chair Harris thought the bill was a good idea, noting
that he would support the bill with the reduction to the
fiscal note. Representative Weyhrauch inquired if the
supply and furnishing dollar amount had come from the
Legislative Affairs note. Mr. Bell replied that had been
the Department's own internal determination for a personal
computer, a printer and basic phones. The Department felt
it would be appropriate to have some basic information
material printed and produced and a description of services
the office would offer. He added that those are the cost
components that are standard when creating any type of
Office. Representative Weyhrauch pointed out that there
currently are desks and cubical spaces in the office
buildings. He thought that since they already exist, why
could they not be moved.
Representative Chenault proposed that HB 379 might be
special legislation. He referenced the total operating
costs for FY06, which are different from what is requested
in the funding source. Mr. Bell embarrassingly noted that
the Department had made an addition mistake and that the
cost should have been $106.1 thousand dollars.
Representative Chenault indicated his support of the bill
acknowledging the difficulty that these people experience.
Representative Hawker referenced language indicating what
the Office intends to accomplish. He asked if there already
were operations in the State system that could address these
concerns. Commissioner O'Claray acknowledged that each job
center does offer a wide array of resources on a limited
basis. The Office proposed in the legislation would be
focused on particular problems.
Representative Hawker pointed out that this is a statewide
issue. He inquired if spreading the mission to the outline
job centers throughout the State could further reduce the
fiscal note. He warned that since the problem is statewide,
how would the remote sites access the information.
Commissioner O'Claray responded that with the installation
of a fax machine and email systems, the Office could be
specifically focused.
Representative Hawker asked if there were federal or any
other source funds available for this activity.
Commissioner O'Claray replied that there are not and that
the services mostly are intended to deal with Immigration
and Naturalization Service (INS).
Representative Fate asked if there were ways to identify
people seeking citizenship in other areas of the State and
outside of Juneau. Commissioner O'Claray replied that they
could absolutely handle those cases. The bill provides
additional services beyond what is normally addressed in the
job centers and is intended to provide more intensive core
services rather than routine employment services.
MARIO LIM, JUNEAU, commented that he had been the first
person who manned the Office through Legislative Affairs.
He stressed that the need is enormous. There is a comradery
within the minorities with a deep dislike of the white
people because of how difficult things have been in the
past. Mr. Lim pointed out that there is no one in the State
supporting the people with these types of concerns. He
pointed out that these people are also helping to support
the State. He emphasized that there is an enormous need for
the people that cannot speak English and as a minority,
there is a tremendous amount of discrimination. He urged
that the bill be adopted, as it is a statewide issue.
Vice Chair Meyer asked where his work is done. Mr. Lim
replied that his work is done statewide. Vice Chair Meyer
questioned if the position would be better located in
Anchorage where the larger population lives. Mr. Lim
responded that in the age of technological assistance, the
position could be located anyplace statewide.
SAL LUMBA, IMMIGRATION GROUP, JUNEAU, urged support for the
legislation.
Representative Foster MOVED to report HB 379 out of
Committee with individual recommendations and with the
adjusted new fiscal note. There being NO OBJECTION, it was
so ordered.
HB 379 was reported out of Committee with a "do pass"
recommendation and with a new fiscal impact note by the
Department of Labor & Workforce Development.
HOUSE BILL NO. 389
An Act relating to certain monetary advances in which
the deposit or other negotiation of certain instruments
to pay the advances is delayed until a later date; and
providing for an effective date.
Co-Chair Harris MOVED to ADOPT the work draft #23-LS1341\U,
Bannister, 4/20/04, as the version of the legislation before
the Committee. There being NO OBJECTION, it was adopted.
REPRESENTATIVE TOM ANDERSON, SPONSOR, noted that the bill
would create a framework for regulatory oversight of an
industry that is currently doing business and serving
consumers across the State. HB 389 does not create an
industry; it is simply providing oversight to current
practices to ensure some level of consumer protection. He
commented that if the practice was banned from the State,
consumers would then take advantage of the offers online or
from banks with out-of-state branches that offer the product
and often at higher fees.
Representative Anderson stated that these are not standard
loans, they do not fall into the same category either in
amount or in length. They would best be described as short-
term conveniences.
Representative Anderson commented that his office has worked
with the Department of Law and the Division of Banking and
Securities to come up with HB 389, which adheres to two
important principals:
· Consumer protection - shielding citizens from
unconscionable fees and predatory lending
tactics; and
· Business protection - allowing businesses
that are filling a legitimate need for the
Alaskan consumer to operate without
unreasonable regulatory burdens that would
force them out of business.
Representative Anderson added that HB 389 provides:
· Minimum standards for licensure;
· Maximum loan amount;
· Maximum number of "roll overs";
· Bonding requirements;
· Penalties; and
· Framework for oversight and examination.
ED SNIFFEN, (TESTIFIED VIA TELECONFERENCE), ASSISTANT
ATTORNEY GENERAL, DEPARTMENT OF LAW, ANCHORAGE, offered to
answer questions of the Committee.
ANGELA LISTON, (TESTIFIED VIA TELECONFERENCE), ALASKA
CATHOLIC CONFERENCE, EAGLE RIVER, spoke against the
legislation. She commented that the bill would legalize an
industry that makes a profit on the working poor. It would
charge huge interests rates on that group of people. She
noted that it had been compared to a credit card cash
advance; however, she pointed out that no credit card
charges 490% on its cash advances. She stressed that HB 389
was poor public policy. She requested that if the
legislation is passed, that it be amended to allow a minimum
term of 30-days on any loan with a maximum of $50-$100 fee.
TAPE HFC 04 - 91, Side B
Ms. Liston continued discussing the repercussions of the
interest, which could be addressed by amending the bill to a
30-day term rather than the 14-day term.
STEVE CLARY, (TESTIFIED VIA TELECONFERENCE), EXECUTIVE
DIRECTOR, ALASKA PUBLIC INTEREST RESEARCH GROUP (AKPIRG),
ANCHORAGE, testified that AkPIRG opposes the bill in its
current form. To charge vulnerable consumers in need for
short-term loans over 400% interest is unconceivable. Other
states have been addressing similar legislation placing a
limit on the interest rates that can be charged. He
proposed a compromise in attempting to figure out how to
keep the industry around for those that do need a short-term
loan and a way to protect the consumers.
Mr. Clary discussed that there are two ways to reduce the
annual percentage rates by either reducing the amount of
money charged or increase the time. AkPIRG supports the
idea of extending the amount of the loan time from 14 days
to 30 days, which would divide the interest rate charged to
consumers in half. Another change that would protect the
consumer would be to limit the amount of rollovers.
Mr. Clary was pleased to see the industry will now have to
report to the Division of Banking, however, if that Division
does not have more staff to adequately review these
documents, will result in another cause of concern for the
consumer.
Representative Croft asked the status of the current
lawsuit. Mr. Clary advised that Alaska Legal Services
Corporation has a case before the bar which challenges that
payday loans not be granted an exemption from the Small Loan
Act. That General Usury Act usually caps interests rates at
10.25%; the Small Loan Act caps it at 36%. The Alaska Legal
Services Corporation is representing the consumer who
believes that payday lenders should fall under those caps.
BUD WILSON, (TESTIFIED VIA TELECONFERENCE), CASH ALASKA,
ANCHORAGE, offered to answer questions of the Committee.
JIM DAVIS, (TESTIFIED VIA TELECONFERENCE), ALAKSA LEGAL
SERVICES, ATTORNEY, ANCHORAGE, addressed issues of concern
in the bill. He noted that there is a pending lawsuit
before the court against a payday lender chain known as
Alaska First Cash. He pointed out that those businesses are
already regulated through the Alaska Small Loans Act and
that they have been violating that act for some years. The
case will be decided by the Superior Court in June.
Mr. Davis claimed that the legislation has been brought
forward because the lawsuit points out that these business
are violating that Act. HB 389 is a means to create
legality for some business that are already illegal in
Alaska. He pointed out that the legislation would allow
people that have needs to get loans at a 400% interest. The
question is not whether people have needs but rather that
there should be some sort of regulation on the interest.
Loan sharking is illegal and the bill would make it legal.
Mr. Davis maintained that the legislation is not in the
consumer's interest and that it would not meet the rollover
and cap intent.
Mr. Davis pointed out that there is concern whether or not
the Division of Banking could monitor the data. If honest
data is reported to the Division, the only way that it would
be meaningful is if there was enough staff in that Division.
The number of lenders would not be reported. There will be
societal problems resulting from the small suits with no
legal representation. Mr. Davis emphasized that payday
lenders are asking for authorization for a lending rate used
by crime families. The legislation has been brought forward
only to end a lawsuit currently before the courts.
Representative Croft questioned if other lawsuits have held
that they were exempted from the usury exception. Mr. Davis
replied not to his knowledge. Alaska is unique because of
the Small Loan Act.
Representative Croft asked what would be the appropriate
regulation of the industry. Mr. Davis responded that
consumer groups should be considered when making that
determination. He understood that the legislation only
addresses what would work for the payday lenders. The
consumer groups have had no opportunity for input.
DEBORAH FINK, CASH ALASKA, ANCHORAGE, testified in support
of the legislation. She noted that there currently is a
lawsuit and that presently, 44 states are regulated in a
more liberal manner than proposed in the legislation. She
stressed that HB 389 is one of the stronger consumer
protection bills dealing with the industry in the United
States. The lawsuit was based on the premise that past
legislative groups in 1955 before statehood, and in 1981 &
1993 were "too dumb to figure out" when they increased the
small loan exemption that meant there would not be any
interest requirements or limits on those people. She
maintained that the legislatures involved clearly understood
that small loans would not be available if the market was
not allowed to regulate the amounts, because no one would
provide the service. Under the consumer rate proposed, the
lenders would be able to charge less than 50 cents per $100
loan without the proposed provisions. The legislative
bodies meant to exempt the loans from any regulated interest
rate. The exemption was raised to keep up with inflation.
She maintained that consumers love these loans. Those that
argue against the loans don't use them. The industry is
happy to do the loans at $15 per $100 for a couple week
period of time.
Ms. Fink maintained that some of the numbers mentioned in
previous testimony were incorrect. She referred to the
recommendation that there be a compromise and extend the
terms to 30 days. Ms. Fink pointed out that would be
cutting their income in half. Money does not grow on trees.
At the present configuration, there is only a 10% profit
margin. It would be impossible to continue lending under
that type of term except for the Internet dealers. Internet
is operating in all states, legally, with no regulations.
That industry will grow if there is no legislation in Alaska
that permits the industry to provide service for the public
to utilize.
Ms. Fink advised that the bill puts forth a lot of consumer
protections. She stated that only six people have
complained. It is a service that only the people that
utilize it understand. It is not a traditional bank
situation. Annual percentage rates are based on making
payments over twelve months and what happens in the industry
are two-week loans. She claimed that these are not
desperate people getting the loans. Payday loans cost less
than a bouncing a check which can amount to $43-$48 per one
bad check. She reiterated that these are not dumb people.
They are usually young people in the collection phase of
their lives. Statistics show that 56% of these borrowers
have some sort of college education. Ms. Fink emphasized
that the service is important and that it must stay
available.
PATRICK LUBY, LEGISLATIVE DIRECTOR, ALASKA ASSOCIATION OF
RETIRED PERSONS (AARP), JUNEAU, testified on behalf of the
76,000 AARP members in Alaska, in strong opposition to HB
389 regarding deferred deposit advances, also known as
payday loans, sponsored by the House Labor and Commerce
Committee. Under the plain language of Alaska's general
usury statute and small loans act, the maximum interest rate
of 36% under the usury statute should apply to payday
lending. HB 389 would eliminate the cap on interest rates
for those loans and allow usurious lending.
There are reasons why the federal government, the Consumer
Federation of America, Consumer's Union, the National
Consumer Law Center and AARP consider payday loan operators
as predatory lenders. Payday loans usually affect the most
vulnerable segment of the population - those that cannot
secure credit or a small loan from traditional financial
institutions, often because the loan amount is small or they
do not have the necessary collateral. Those who live from
paycheck to paycheck must resort to "fringe" banking
services such as payday loans if an emergency arises.
Mr. Luby continued, cash-strapped consumers rarely have the
ability to repay the entire loan when their payday arrives
because that would leave them with little to nothing to live
on until the next paycheck. Lenders then encourage
consumers to rollover or refinance one payday loan with
another. The result is that the consumer pays another round
of charges and obtains no additional cash in return. If the
consumer cannot repay the loan in two weeks, however, the
loan is rolled over into a new payday loan, and the annual
percentage rate jumps to a staggering 917%.
Mr. Luby pointed out that the legislation would legalize
payday loans, thereby, authorizing interest rates that
exceed State usury limits more than ten times. At minimum,
HB 389 would allow loans of up to $500 be made at a 15%
interest rate, which translates to an annual percentage rate
(APR) of 391%. It would also allow payday lenders to charge
an origination fee, with no limit set. Although the
origination fee is not considered interest in the bill, in
fact, it would have the identical effect, as the consumer
must repay the fee to renew the loan.
In addition, the legislation allows what are known as "touch
and go" loans, where borrowers can take out a new loan
immediately after paying off an old loan, resulting in
borrowers entering a never-ending cycle of using two lenders
to continually pay off each other, while plunging the
borrower into ever-deeper debt.
Mr. Luby stated that as indicated, to renew the loan,
consumers would have to repay the origination fee as well as
the $15 per $100 loan charges. Research in several states,
such as Illinois, Indiana, and Wisconsin, show that
consumers typically take out 10-12 payday loans a year. The
consumer repays the interest over and over again to extend
the loan term, as they do not have the money to repay the
principal. The limit on renewals in the bill would not end
the practice in any way. There is no limit on the number of
loans that could be taken out by the consumer, just a limit
on the dollar amount from one lender or its affiliates.
Consumers often have multiple loans outstanding from
multiple lenders, using one loan to pay off another.
AARP, in collaboration with the Consumer Federation of
America, Consumer's Union, and the National Consumer Law
Center, has been working on predatory lending issues for
several years. As part of the effort on predatory lending,
the organizations have developed a model bill recognizing
that consumers, particularly those who are "unbanked," may
have a need for small loans but they should not pay usurious
rates to receive them. Further, the repayment terms of the
loan must be reasonable so consumers are not trapped in
debt. The model bill calls for a repayment period of two
weeks for every amount borrowed, which allows consumers to
pay back their loans without having to go deeper into debt.
AARP also advocates a 36% annual interest rate cap, which is
consistent with Alaska's existing Small Loan Act. The model
also prohibits lenders from extending loans to consumers who
already have $300 outstanding in payday loans, either from
the same lender or any other lender. Payday loans are
heavily marketed in low-income areas and near military bases
as "fast, easy, credit" with no credit checks, a practice
considered predatory. AARP has found payday lenders who
market to older persons who have high medical costs or high
prescription costs by encouraging retirees to treat their
Social Security check like a paycheck.
Mr. Luby pointed out that many of the AARP members are
veterans. It is particularly onerous that payday lenders
target young military families who, because of deployment
overseas, may find themselves cash-strapped. Consumers who
are considered high-risk borrowers often have a difficult
time getting credit on reasonable terms, but they deserve
protection from deceptive and unfair lending practices. Mr.
Luby strongly urged that the bill not be moved from
Committee.
HB 389 was HELD in Committee for further consideration.
ADJOURNMENT
The meeting was adjourned at 10:05 A.M.
| Document Name | Date/Time | Subjects |
|---|