Legislature(2005 - 2006)CAPITOL 17
04/26/2006 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| Confirmation Hearing(s) || Regulatory Commission of Alaska | |
| SB300 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 300 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
April 26, 2006
3:23 p.m.
MEMBERS PRESENT
Representative Tom Anderson, Chair
Representative Pete Kott
Representative Gabrielle LeDoux
Representative Bob Lynn
Representative Norman Rokeberg
Representative Harry Crawford
Representative David Guttenberg
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
CONFIRMATION HEARING(S)
Regulatory Commission of Alaska
Janis Wilson - Anchorage
- CONFIRMATION(S) ADVANCED
CS FOR SENATE BILL NO. 300(L&C)
"An Act relating to the handling of negative equity in motor
vehicle transactions; and relating to the contents of retail
installment contracts."
- MOVED CSSB 300(L&C) OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: SB 300
SHORT TITLE: MOTOR VEHICLE NEGATIVE EQUITY/CONTRACTS
SPONSOR(s): SENATOR(s) SEEKINS
02/14/06 (S) READ THE FIRST TIME - REFERRALS
02/14/06 (S) TRA, L&C
02/23/06 (H) TRA AT 1:30 PM CAPITOL 17
02/23/06 (H) -- Meeting Canceled --
03/09/06 (S) TRA AT 1:30 PM BUTROVICH 205
03/09/06 (S) Moved SB 300 Out of Committee
03/09/06 (S) MINUTE(TRA)
03/10/06 (S) TRA RPT 2DP 1NR
03/10/06 (S) DP: HUGGINS, KOOKESH
03/10/06 (S) NR: FRENCH
03/16/06 (S) L&C AT 1:30 PM BELTZ 211
03/16/06 (S) Heard & Held
03/16/06 (S) MINUTE(L&C)
03/28/06 (S) L&C AT 1:30 PM BELTZ 211
03/28/06 (S) Moved CSSB 300(L&C) Out of Committee
03/28/06 (S) MINUTE(L&C)
03/29/06 (S) L&C RPT CS 4DP NEW
TITLE
03/29/06 (S) DP: BUNDE, DAVIS, ELLIS, SEEKINS
04/05/06 (S) TRANSMITTED TO (H)
04/05/06 (S) VERSION: CSSB 300(L&C)
04/06/06 (H) READ THE FIRST TIME - REFERRALS
04/06/06 (H) TRA, L&C
04/25/06 (H) TRA AT 1:30 PM CAPITOL 17
04/25/06 (H) Moved Out of Committee
04/25/06 (H) MINUTE(TRA)
04/26/06 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
JANIS WILSON, Appointee
to the Regulatory Commission of Alaska (RCA)
Anchorage, Alaska
POSITION STATEMENT: Testified as appointee to the Regulatory
Commission of Alaska.
SENATOR RALPH SEEKINS
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Spoke as the sponsor of SB 300.
CLYDE (ED) SNIFFEN, JR., Assistant Attorney General
Commercial/Fair Business Section
Civil Division
Department of Law (DOL)
Anchorage, Alaska
POSITION STATEMENT: Expressed support and answered questions
during hearing on SB 300.
ACTION NARRATIVE
CHAIR TOM ANDERSON called the House Labor and Commerce Standing
Committee meeting to order at 3:23:15 PM. Representatives
Rokeberg, LeDoux, Kott, and Anderson were present at the call to
order. Representatives Lynn, Guttenberg, and Crawford arrived
as the meeting was in progress.
3:23:36 PM
^CONFIRMATION HEARING(S)
^Regulatory Commission of Alaska
3:23:52 PM
CHAIR ANDERSON announced that the first order of business would
be the confirmation of Janis Wilson to the Regulatory Commission
of Alaska (RCA).
3:24:19 PM
JANIS WILSON, Appointee to the Regulatory Commission of Alaska
(RCA), began by saying that she has been an Administrative Law
Judge (ALJ) for first the Alaska Public Utilities Commission
[and later] the RCA. She noted that her position as ALJ was the
first position [of this type] in the state; however, at this
time there are many ALJ positions. She explained that this
position was created in 1981, when the Alaska Pipeline
Commission merged into the Alaska Public Utilities Commission.
She noted that she has held this position since its creation.
She said "I've had the same job for 25 years. What I want you
to conclude from that ... is ... that the job is a very, very
interesting and varied job." She stated that she has presided
over all of the concurrent hearings of the Federal Energy
Regulatory Commission (FERC), the Alaska Pipeline Commission,
the Alaska Public Utilities Commission, and the RCA since she
first held the position, in addition to presiding over utility
matters.
The committee took an at-ease from 3:26 p.m. to 3:28 p.m.
3:28:04 PM
CHAIR ANDERSON commented that the RCA deals with a number of
different issues, and opined that Ms. Wilson has expertise in
the various areas, and would be able to address these issues.
3:28:52 PM
MS. WILSON replied that while she does not have much experience
in telephones, she does have some expertise in all of the
required areas.
REPRESENTATIVE KOTT made a motion to advance the confirmation of
Janis Wilson to the Regulatory Commission of Alaska (RCA), to
the joint session for consideration. There being no objection,
the confirmation of Janis Wilson was advanced. He noted that
each members' signature does not reflect the member's vote
during the joint floor session.
3:29:46 PM
SB 300-MOTOR VEHICLE NEGATIVE EQUITY/CONTRACTS
3:29:55 PM
CHAIR ANDERSON announced that the final order of business would
be CS FOR SENATE BILL NO. 300(L&C), "An Act relating to the
handling of negative equity in motor vehicle transactions; and
relating to the contents of retail installment contracts."
3:30:00 PM
SENATOR RALPH SEEKINS, Alaska State Legislature, speaking as the
sponsor of SB 300, noted that SB 300 was introduced by request.
He explained that national banks and credit unions are regulated
under federal law. He said that acceptance companies such as
Ford Motor Credit and GMAC are required to follow both federal
and state laws. He noted that he has been in the industry for
36 years, and is familiar with the issue of negative equity. He
said it is necessary to ensure that the federal requirements and
restrictions regarding contracts and "negative equity" under
state law line up with the requirements and restrictions under
federal law. He stated that, in the industry, this is referred
to as "upside down." He explained that there are advertisements
claiming that for "zero down" a person can finance a car,
provided that he/she is creditworthy. He said that finance
contracts can run up to 84 months, with the average being 72
months. As a result of not making a down payment, many people,
he said, will find themselves in a position in which the trade-
in value is less than the amount of money owed. He said "the
lines crossing between equity and what you owe extend farther
out today than they ever did before."
3:32:58 PM
SENATOR SEEKINS went on to say that the Federal Reserve Board
provided guidance on this issue in Regulations M and Z, which
control the manner in which lease and credit transactions are
disclosed. He explained that state law has never addressed
where to disclose negative equity on a financing document. A
dealer, he said, would be able to work with a federal bank or
credit union on its contract and meet all of the necessary
regulations; however, this may not meet all regulations and laws
of the State of Alaska. This issue, he said, is addressed by SB
300. Referring to a handout in members' packets, he explained
an "upside down" situation. He pointed out different areas in
which federal law requires the negative equity be shown. He
said SB 300 would bring state laws into compliance with federal
laws regarding negative equity. He stated that the Attorney
General's office was involved in the [drafting process].
3:36:28 PM
SENATOR SEEKINS, in conclusion, stated that once federal and
state law are in compliance, there will be no "gray area," and
everyone in the industry will be on "equal footing."
3:37:15 PM
REPRESENTATIVE CRAWFORD asked if there is a cap on how much
negative equity can be borrowed.
SENATOR SEEKINS replied that there is no cap, although a
person's ability to repay is taken into consideration. He said
that he does not recommend doing this, adding that it is not
favored in the industry as it takes the person out of the market
for a longer period of time; however, this is an economic
reality.
REPRESENTATIVE CRAWFORD asked if there are any guidelines
regarding the maximum percentage.
SENATOR SEEKINS replied that he is not aware of any guidelines.
He stated that in his experience, the most negative equity he
has seen is $19,000. He noted that this individual was not able
to finance on the next contract. Years ago, he said, if a
person did not have enough money for a down payment, they would
borrow the money from a second lender. This was referred to as
a "Mickey mouse loan," and resulted in two loan payments.
3:40:00 PM
REPRESENTATIVE GUTTENBERG said "Much of it goes back to what the
banks will ... finance."
SENATOR SEEKINS said that this is correct. He said that Ford
Credit uses a computer program that assigns a risk to the loan,
and if this does not fit into the "risk profile," the loan will
not get financed.
3:41:12 PM
CLYDE (ED) SNIFFEN, JR., Assistant Attorney General,
Commercial/Fair Business Section, Civil Division, Department of
Law (DOL), informed the committee that his obligations include
enforcement of the consumer protection statutes. He said that
he has looked over the bill and the division is in support. The
division looked at the bill from a consumer disclosure
perspective to ensure that consumers involved in this type of
transaction are fully informed of the cost of refinancing.
Under the current federal regulations, he said, these
disclosures are made very clear; [on a state level], SB 300
adequately makes these disclosures.
REPRESENTATIVE GUTTENBERG asked if the passage of state
guidelines would supersede "tighter" federal restrictions.
MR. SNIFFEN replied no. He said that the state cannot regulate
any institutions that fall under federal jurisdiction;
therefore, there is no conflict. This legislation would only
affect entities that fall under state jurisdiction, which
includes the acceptance corporations that do not fit into the
federal definition of a bank or credit union.
REPRESENTATIVE GUTTENBERG asked if, because the banks have
federal restrictions that differ from the lending institutions,
the state should have more restrictions on the amount of
negative equity allowed or the amount of times the negative
equity can be "rolled over."
MR. SNIFFEN replied that he is not certain that this is
necessary. He said that the [Division of Banking, Securities &
Corporations] regulates the majority of the state's banking
institutions, which are not federally chartered, and has
comprehensive regulatory control over the aforementioned
institutions. In regard to limiting the amount of "roll overs,"
he said that he has not considered this, although this is
interesting idea and may be something to consider in the future.
SENATOR SEEKINS, in regard to limiting the amount of negative
equity and "roll over," noted that it is allowed in 49 other
states and opined that individuals would go elsewhere to
purchase a vehicle if this was limited.
3:45:01 PM
REPRESENTATIVE ROKEBERG noted that this is self-regulating,
adding that the banks will deny the loan if the amount of
negative equity is too high. He remarked that a person's
"creditworthiness" would drive the transaction.
SENATOR SEEKINS agreed that this is correct. He reiterated that
the industry is in support of the legislation.
The committee took an at-ease from 3:45 p.m. to 3:49 p.m.
3:49:41 PM
REPRESENTATIVE LYNN moved to report CSSB 300(L&C) out of
committee with individual recommendations and the accompanying
fiscal notes. There being no objection, CSSB 300(L&C) was
reported from the House Labor and Commerce Standing Committee.
3:50:12 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
3:50:21 PM.
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