Legislature(2001 - 2002)
04/25/2001 03:30 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
April 25, 2001
3:30 p.m.
MEMBERS PRESENT
Representative Lisa Murkowski, Chair
Representative Andrew Halcro, Vice Chair
Representative Kevin Meyer
Representative Pete Kott
Representative Norman Rokeberg
Representative Harry Crawford
Representative Joe Hayes
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 106
"An Act relating to the authorizations for state financial
institutions; relating to confidential financial records of
depositors and customers of certain financial institutions;
relating to the Alaska Banking Code, Mutual Savings Bank Act,
Alaska Small Loans Act, and Alaska Credit Union Act; and
providing for an effective date."
- MOVED CSHB 106(L&C) OUT OF COMMITTEE
HOUSE BILL NO. 184
"An Act relating to the business of insurance, including changes
to the insurance code to implement federal financial services
reforms for the business of insurance and to authorize the
director of insurance to review criminal backgrounds for
individuals applying to engage in the business of insurance;
amending Rule 402, Alaska Rules of Evidence; and providing for
an effective date."
- MOVED CSHB 184(L&C) OUT OF COMMITTEE
HOUSE BILL NO. 227
"An Act instructing the State Board of Registration for
Architects, Engineers, and Land Surveyors to adopt minimum
technical standards relating to the practice of surveying."
- HEARD AND HELD
HOUSE BILL NO. 226
"An Act relating to the employment of persons 14 years of age or
older and under 19 years of age on licensed premises, including
hotels, restaurants, or eating places; and relating to hours of
work of minors under 16 years of age."
- SCHEDULED BUT NOT HEARD
PREVIOUS ACTION
BILL: HB 106
SHORT TITLE:FINANCIAL INSTITUTIONS
SPONSOR(S): RLS BY REQUEST OF THE GOVERNOR
Jrn-Date Jrn-Page Action
02/05/01 0236 (H) READ THE FIRST TIME -
REFERRALS
02/05/01 0236 (H) L&C
02/05/01 0237 (H) FN1: ZERO(CED)
02/05/01 0237 (H) GOVERNOR'S TRANSMITTAL LETTER
03/14/01 (H) L&C AT 3:15 PM CAPITOL 17
03/14/01 (H) Bill Postponed
03/19/01 (H) L&C AT 3:15 PM CAPITOL 17
03/19/01 (H) Heard & Held
03/19/01 (H) MINUTE(L&C)
03/28/01 (H) L&C AT 3:15 PM CAPITOL 17
03/28/01 (H) Bill Postponed
04/04/01 (H) L&C AT 3:15 PM CAPITOL 17
04/04/01 (H) Scheduled But Not Heard
04/20/01 (H) L&C AT 3:15 PM CAPITOL 17
04/20/01 (H) Scheduled But Not Heard
04/23/01 (H) L&C AT 3:15 PM CAPITOL 17
04/23/01 (H) Scheduled But Not Heard
04/25/01 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 184
SHORT TITLE:INSURANCE CODE AMENDMENTS
SPONSOR(S): RLS BY REQUEST OF THE GOVERNOR
Jrn-Date Jrn-Page Action
03/14/01 0588 (H) READ THE FIRST TIME -
REFERRALS
03/14/01 0588 (H) L&C, JUD
03/14/01 0589 (H) FN1: ZERO(CED)
03/14/01 0589 (H) GOVERNOR'S TRANSMITTAL LETTER
04/04/01 (H) L&C AT 3:15 PM CAPITOL 17
04/04/01 (H) Heard & Held
MINUTE(L&C)
04/20/01 (H) L&C AT 3:15 PM CAPITOL 17
04/20/01 (H) Heard & Held
MINUTE(L&C)
04/25/01 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 227
SHORT TITLE:LAND SURVEY STANDARDS
SPONSOR(S): REPRESENTATIVE(S)HARRIS
Jrn-Date Jrn-Page Action
04/02/01 0809 (H) READ THE FIRST TIME -
REFERRALS
04/02/01 0809 (H) L&C
04/02/01 0809 (H) REFERRED TO LABOR & COMMERCE
04/25/01 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
FRANKLIN TERRY ELDER, Director
Division of Banking, Securities and Corporations
Department of Community and Economic Development
P.O. Box 110807
Juneau, Alaska 99811-0807
POSITION STATEMENT: Testified on HB 106; explained changes in
Version F and proposed amendment F.1. Testified that he has not
reviewed HB 184.
JOE SCHIERHERN, Senior Vice President
Northrim Bank
P.O. Box 241489
Anchorage, Alaska 99524
POSITION STATEMENT: Testified in support of HB 106, Version F;
concurred with Mr. Elder's testimony.
LAURA WALDON
Alaska Public Interest Group
4120 Resurrection Drive
Anchorage, Alaska 99504
POSITION STATEMENT: Testified on HB 106.
LISA BELL, Senior Vice President
Chief Operating Officer
Alaska Pacific Bank
2094 Jordan Avenue
Juneau, Alaska 99801
POSITION STATEMENT: Testified in support of HB 106 on behalf of
the Alaska Bankers Association.
STEVE CONN
Alaska Public Interest Research Group
618 West 18th Avenue
Anchorage, Alaska 99503
POSITION STATEMENT: Testified on HB 106.
BOB LOHR, Director
Division of Insurance
Department of Community and Economic Development
3601 C Street
Anchorage, Alaska 99503
POSITION STATEMENT: Testified on HB 184.
KATIE CAMPBELL, Life and Health Actuary
Division of Insurance
Department of Community & Economic Development
PO Box 110805
Juneau, Alaska 99503
POSITION STATEMENT: Answered a question concerning written
consent on HB 184.
JOHN MANLY, Staff
to Representative John Harris
Alaska State Legislature
Capitol Building, Room 513
Juneau, Alaska 99801
POSITION STATEMENT: Testified on behalf of the sponsor of HB
227.
JIM COLVER
PO Box 427
Palmer, Alaska 99645
POSITION STATEMENT: Testified on behalf of himself on HB 227.
PATRICK KALEN, Land Surveyor
Alaska State Board of Registration for Architects, Engineers and
Land Surveyors
Division of Occupational Licensing
Department of Community & Economic Development
PO BOX 110806
Juneau, Alaska 99811
POSITION STATEMENT: Testified on HB 227.
BARBARA HUFF, Legislative Director
Teamsters Local 949
PO Box 110806
Juneau, Alaska 99811
POSITION STATEMENT: Testified in support of HB 227.
ACTION NARRATIVE
TAPE 01-67, SIDE A
Number 0001
CHAIR LISA MURKOWSKI called the House Labor and Commerce
Standing Committee meeting to order at 3:30 p.m. Members
present at the call to order were Representatives Murkowski,
Halcro, Crawford, and Hayes. Representatives Meyer, Kott, and
Rokeberg joined the meeting as it was in progress.
HB 106 - FINANCIAL INSTITUTIONS
[Contains discussion of HB 184 and SB 66]
Number 0081
CHAIR MURKOWSKI announced that the first order of business would
be HOUSE BILL NO. 106, "An Act relating to the authorizations
for state financial institutions; relating to confidential
financial records of depositors and customers of certain
financial institutions; relating to the Alaska Banking Code,
Mutual Savings Bank Act, Alaska Small Loans Act, and Alaska
Credit Union Act; and providing for an effective date."
CHAIR MURKOWSKI reminded members that during a previous hearing
she had emphasized the necessity of working on HB 106 in concert
with HB 184, to ensure uniformity with regard to the related
privacy issues including financial disclosures and certain
health information disclosures.
Number 0255
REPRESENTATIVE HALCRO made a motion to adopt the proposed
committee substitute (CS), version 22-GH1026\F, Bannister,
4/19/01, as a work draft. There being no objection, Version F
was before the committee.
Number 0290
FRANKLIN TERRY ELDER, Director, Division of Banking, Securities
and Corporations, Department of Community and Economic
Development, stated that he understands that [Version F]
reflects much of the work done in the Senate Labor and Commerce
Standing Committee on SB 66. However, a large exception
regarding policy is that the reference to the Gramm-Leach-Bliley
Act (GLBA) was removed in HB 106 from the privacy section, AS
06.01.028, making it essentially an opt-in bill. That removal
is the department's preference, he indicated, and although it
also was requested of the Senate Labor and Commerce Standing
Committee [regarding SB 66], that change wasn't made. Mr. Elder
expressed hope that the change could be done on the Senate side
as well.
MR. ELDER highlighted two small "nonpolicy" differences between
HB 106 and SB 66. First, [Version F of HB 106] adds the
reference to the National Credit Union Administration (NCUA),
which didn't make it into the Senate bill. Mr. Elder remarked,
"As a policy, we work with both the FDIC [Federal Deposit
Insurance Corporation] and the NCUA when we do examinations; and
so I was, I guess, a little surprised that didn't make it in, in
the Senate bill, but you've taken care of that ... in this
committee substitute." He noted that second, [Version F] takes
care of the slight difference in the ATM [automated teller
machine] section on credit unions, with the small wording change
being the same as for ATMs at banks.
Number 0502
MR. ELDER informed members that the other major event from the
department's viewpoint, in conjunction with the committee's work
on Version F, has been to have further discussions with the
Alaska Bankers Association to find common ground for protecting
Alaskans' privacy while still making the everyday work of
financial institutions run smoothly, while at the same time
considering the differences between small banks, which may have
few or no affiliates, and larger ones.
MR. ELDER pointed out that when talking about sharing or selling
information for banks and credit unions covered by the Fair
Credit Reporting Act (FCRA), the FCRA regulates the sharing of
information among affiliates. It preempts any state
restrictions on sharing among affiliates until January 2004,
after which time [the legislature] needs to pass a bill that
references the FCRA in order to overcome the preemption. By
contrast, the Gramm-Leach-Bliley Act only deals with the sharing
of information with nonaffiliates.
Number 0655
MR. ELDER reported on the department's further conversations
with the Alaska Bankers Association. He said it is his
understanding that the department and the association had agreed
upon some clarifying language in subsection (d) of AS 06.01.028,
which allows for financial institutions to share information
necessary to provide services. In testimony on that section,
both on the Senate side and in a letter to Representative
Halcro, Mr. Elder said he had stated that he thought that would
also cover joint marketing efforts. He expressed the belief
that the language agreed upon by the department and the Alaska
Bankers Association clarifies that it includes joint marketing
efforts.
CHAIR MURKOWSKI asked Mr. Elder whether he had a copy of
proposed amendment F.1 [22-GH1026\F.1, Bannister, 4/23/01],
which read:
Page 3, lines 24 - 25:
Delete all material and insert:
"(1) the disclosure is necessary to
(A) provide the services of the
financial institution to a depositor or customer; or
(B) market financially related products
or services of the financial institution and its
marketing partners; and"
MR. ELDER affirmed that Amendment F.1 is the language agreed
upon by the department and the bankers association. He pointed
out that the specific clarifying language is in subparagraph
(1)(B).
Number 0775
MR. ELDER emphasized that [under Amendment F.1] the information
to be shared must be necessary, not just extraneous.
Furthermore, it must be financially related services of the
financial institution and its marketing partners. He noted that
subsection (d) requires a contractual relationship, in writing,
between the financial institution and the marketing partner,
saying that the marketing partner will be subject to the privacy
restrictions of AS 06.01.028. Mr. Elder characterized that
provision as "fairly powerful," emphasizing that it truly would
be a marketing partner, rather than a telemarketer, who might
not be willing to enter into such an [agreement].
Number 0840
REPRESENTATIVE HALCRO asked whether an unaffiliated mortgage
company having a brochure in a bank is "sharing information" or
whether Mr. Elder is talking about the banks giving out
information about a specific customer.
MR. ELDER suggested that a decision to allow a company to put a
brochure in the lobby, which anyone could pick up, probably
wouldn't be contemplated here. Rather, this relates to privacy
in terms of providing, for marketing purposes, information that
is in the possession of a financial institution. It may have
been obtained from a variety of sources, he noted, including
directly from the consumer, or indirectly from credit reports or
other reports. Amendment F.1 limits it to "financially
related," and there would have to be a contractual agreement if
one company were receiving any of that nonpublic information.
REPRESENTATIVE HALCRO said one argument for the "opt-out" is
that the current law is so strict that it doesn't provide for a
mortgage company to put a brochure in the lobby. He expressed
concern that privacy should relate to the sharing of account
information, for example, or payees on checks.
MR. ELDER concurred.
Number 1031
REPRESENTATIVE CRAWFORD referred to subparagraph (A), Amendment
F.1. He inquired about defining the term "services"; he said it
seems very broad.
MR. ELDER reported that he had come to agree with the bankers'
position that ten people, when making a list of services, would
provide ten different lists; a month from now, those lists would
change. Therefore, it would be difficult to lock in a specific
list of services of a financial institution. Changing that list
later would require either a regulatory action or a statutory
change. Mr. Elder also expressed his belief that if there were
an issue regarding this - whether in front of a hearing officer
if the department had brought an action, or before a court - the
court [or hearing officer] could look at something and determine
whether it is a service offered by the institution.
REPRESENTATIVE CRAWFORD noted that the committee is trying to go
with opt-in, and this is an exception. He asked whether it
shouldn't, therefore, be the fewest services that are
exceptions, such as check-printing and other services that had
been discussed previously.
MR. ELDER answered that he believes this language is more
workable than having a list, and that it is sufficiently limited
by the word "necessary". He said subparagraph (A) isn't talking
about marketing in that regard, because these people already are
customers, including depositors. Furthermore, it relates to
providing services of the institution for which people have
chosen to have a customer relationship.
REPRESENTATIVE CRAWFORD asked whether, for example, a bank or
credit union would be able to share with its insurance company
how timely a customer had been regarding payments for a car
loan. He asked whether that could be construed as a service.
MR. ELDER replied, "Not under (A), because under (A) it's
talking about the financial institution, and so ... it wouldn't
be sharing ... the information for somebody else to provide the
services." He said it is more limited than one might think. He
cited as obvious examples the statement-printing and check-
printing. He restated his concern about coming up with a list
of all the possible services of an institution.
Number 1345
REPRESENTATIVE CRAWFORD turned the committee's attention to
subparagraph (B) of Amendment F.1, noting that it says "market
financially related products". He asked whether an institution
would be able to share without a customer's opting in.
MR. ELDER answered that under (B), he would say that "insurance
product" is a financially related service - if the two were
affiliated, there could be sharing anyway. If the two were not
affiliated, and if there were a contractual relationship between
the insurance company and the financial institution, they could
provide information that is relevant - necessary - to the
service.
REPRESENTATIVE CRAWFORD asked whether that would be true even if
the consumer didn't opt in.
MR. ELDER affirmed that. He added that otherwise, small banks
such as many Alaskan banks would be at a significantly
competitive disadvantage when compared to larger, generally
national, banks that have an affiliate structure. For example,
having an affiliate insurance company would force smaller banks
either to not compete, to seek out those kinds of affiliations,
or to be purchased by bigger institutions.
Number 1501
REPRESENTATIVE HALCRO reported that he had received an e-mail
that day from the Alaska Public Interest Research Group
(AkPIRG), which said HB 106 would strip the cap off of credit
card interest rates. He asked whether it would, in fact, do so.
MR. ELDER referred to Section 13, page 9, Version F, saying the
division and the state had proposed that it remove the current
cap of 17 percent on credit card charges. He explained the
reason for that language. He said "our" view is that a cap such
as this essentially has no effect on the interest rates paid by
most Alaskans on their charge cards. Instead, it only prevents
smaller, state-chartered institutions from participating in the
credit card business. He noted that of the six state-chartered
institutions in Alaska, three don't offer credit cards, and
three offer them but don't "push" them. He surmised that
[offering credit cards] comes more from a desire to be a full-
service institution or from the fact that credit cards may be a
means of providing overdraft protection for checking accounts.
MR. ELDER reported that [the department] also looked at what the
legislature did in 1996 in amending the retail installment sales
Act, which is in Title 45. The cap on interest rates was
changed at that time to essentially whatever was negotiated
between the institution and the borrower. Noting that he has a
background as an economist, Mr. Elder said a cap is effective
only if the market rate would be higher; otherwise, all a cap
does is create a shortage, because the demand would exceed the
supply at that price. Mr. Elder said that is what he believes
has happened, since half of the state-chartered institutions
don't offer credit cards.
Number 1713
MR. ELDER suggested that one test is looking at the credit cards
in one's wallet; if they are from major banks, the rates will
vary widely - having no relationship to the 17 percent - because
federal law allows banks that operate in more than one state to
"export" interest rates. Mr. Elder suggested that a cap may
even go against economic development by ensuring that the
decisions will be made outside of the state, because in order to
export interest rates, they must be made in other states. He
then stated:
We honestly don't believe that if House Bill 106
passes and becomes law this way, and that [the] cap is
removed, ... people will see any difference in the
interest rates that they pay on the credit cards that
they are likely to have in their wallet. The only
possible difference would be that perhaps a state-
chartered financial institution that they otherwise do
business with will also offer credit cards.
... I don't think it is anti-consumer or anything like
that. But having said that, the will of the committee
and the will of the legislature are fine with me. ...
It's not a Gramm-Leach-Bliley issue. I think it's
more of ... a fairness-to-state-banks-versus-out-of-
state-banks and ... a small-bank-versus-large-bank
issue. ...
I'd like to see bipartisan support of House Bill 106,
and if that is the only section that was preventing
bipartisan support for the bill, then ... I wouldn't
have any strong feeling, one way or the other, if the
legislature chose not to include it.
Number 1851
REPRESENTATIVE HALCRO summarized his understanding of what Mr.
Elder was saying: first, it doesn't come into play for people
whose credit cards come from outside of Alaska, and second, it
impedes the success of state banks, which can't charge a decent
rate in order to make money.
MR. ELDER concurred, again saying it is a matter of what is fair
to state-chartered institutions, which is the reason for its
inclusion.
Number 1903
CHAIR MURKOWSKI brought attention to an e-mail that referenced
"an Office of the Comptroller of Currency decision, apparently,
OCC letter number 822," which provides that when a national bank
has branch offices in a state and makes credit determinations in
that state, that bank must follows the state's law. She said
the individual's concern was that if there were no cap in
Alaska, then a Wells Fargo Bank could issue an out-of-state
credit card and charge usurious rates.
MR. ELDER said the federal law that governs the ability to
export interest rates does say that; one criterion is where the
credit decision is made. He said the banks know that and can
structure their operations to show that the credit decisions are
made in whatever state they need to have the credit decisions
made in. Therefore, a 17 percent cap in Alaska means almost
nothing to a true multi-state bank. Furthermore, nobody puts a
gun to someone's head and makes that person use a credit card;
people sign up for credit cards, and most people notice what the
rates are. He said it is a competitive business. If a bank
offered a truly usurious rate, he suggested that people wouldn't
take it.
CHAIR MURKOWSKI indicated her belief that Alaska has usury laws.
REPRESENTATIVE ROKEBERG disagreed, saying the usury laws were
abolished because they don't make sense anymore. He mentioned a
credit reporting Act. He then said market principles are there,
and it is clear, from the testimony, that state banks cannot
compete with national banks because of the artificial cap. He
indicated that the only thing in Alaska's statutes relating to
usury is "some nonfloating-rate legal interest rates," which he
said he was going to look into.
CHAIR MURKOWSKI said she would like to hear from the bankers
before there was a motion to adopt Amendment F.1. She asked
whether there were further questions of Mr. Elder; none were
offered.
Number 2107
JOE SCHIERHERN, Senior Vice President, Northrim Bank, testified
via teleconference, noting that he was a charter employee of the
bank and has worked primarily in the commercial loan area over
the last ten years. He informed members that he formerly was
president of the Alaska Bankers Association. He added that the
Alaska Bankers Association and Northrim Bank are in favor of
Version F and concur with Mr. Elder's testimony.
MR. SCHIERHERN addressed the need for Amendment F.1 to allow the
marketing of bank services to the public. He referred to Mr.
Elder's testimony that the FCRA preempts any regulation of banks
with affiliates. Mr. Schierhern said a bank with an insurance
affiliate would be allowed to freely market its services to the
affiliate; by contrast, a smaller state bank without such an
affiliate could not do that without the amendment. He
emphasized the importance of the amendment in order to provide
fairness, allowing state-regulated banks to be on an equal
footing with larger national banks with affiliates. He added
that another central point is the ability for consumers to
receive a free flow of information. Without these provision, he
said he thinks the opportunity to choose and the opportunity to
receive information would be inhibited.
Number 2252
LAURA WALDON, Alaska Public Interest Group, testified via
teleconference. She stated that she doesn't think HB 106 will
focus on the local people, because it allows [the banks] to
charge people anything they want. She said people don't realize
that their [interest] rates are changing until they get their
bill.
LISA BELL, Senior Vice President, Chief Operating Officer,
Alaska Pacific Bank, testified on behalf of the Alaska Bankers
Association. She noted that [the Alaska Bankers Association] is
in complete agreement with the Division of Banking, Securities
and Corporations, and is in support of the proposed committee
substitute and the proposed amendment. She remarked:
We as bankers are not interested in selling lists of
customer information to third parties. We have our
reputation to protect. What we are interested in
doing is being able to market our own products and
services, and to be able to market financially related
products and services that we may not be able to offer
in-house. ... We believe that this legislation, with
the proposed amendment, does exactly that for us, and
also protects the privacy interest of Alaskans.
Number 2396
REPRESENTATIVE CRAWFORD asked Ms. Bell what personal financial
information she would share if she were only marketing products
to somebody the bank has a relationship with.
MS. BELL answered that it is possible that some household
characteristics would be shared, which might allow [the bank] to
determine if the product would be of interest to that household.
For example, it could be household income or average balances.
The bank might want to know who would be interested in an
account that would have a minimum balance requirement of $2,500;
therefore, [the bank] would not be marketing it to people who
would be outside that range.
REPRESENTATIVE CRAWFORD asked, if based on that information,
whether someone would be able to receive services that wouldn't
be offered to someone who didn't have the $2,500 minimum
balance.
MS. BELL replied that she could have given a poor example;
however, it's possible. Depending on the product or service,
[the bank] may want to offer it to everyone. However, it
depends on what the products are. They could be trust,
brokerage, or insurance services, which she thinks are the most
common three things her bank would want to market to customers
that can't be offered in-house. She added that small banks
probably don't have a long list of things they would want to
engage in.
TAPE 01-67, SIDE B
MS. BELL continued [inaudible due to tape failure]. She stated
that it is quite possible that database sorting would be done
within the bank and not even need to be shared with a third
party, because in the end, the bank is possibly paring down a
list and only sharing names and addresses in order for a mailing
to go out.
Number 2455
REPRESENTATIVE CRAWFORD asked Ms. Bell if she wouldn't be
adverse to limiting what would be shared to just the name and
address, if the list has already been limited within the bank.
MS. BELL replied that she would be concerned if limitations were
placed on what is shared without knowing what the opportunities
in the future might be. She said this could create an undue
restriction on the kinds of financial services [the bank] might
be able to offer.
REPRESENTATIVE CRAWFORD remarked that it seems to him, if the
bank wants to share more information, [the bank] should get an
opt-in provision whereby the consumer would say it is OK to
share something more [than just name, address, phone number,
birthday, or occupation].
MS. BELL responded that she would feel that [the bank] would
have to be very careful in placing those limitations. A smaller
bank may not have thought of all the possible opportunities.
For example, there could be a situation in which the partner [of
a smaller bank] has a more sophisticated system that sorts,
looks at the demographics, and determines what products a person
would be interested in.
REPRESENTATIVE CRAWFORD commented that he is concerned that [HB
106] may be discriminating against a large segment of the
marketplace based on other information.
MS. BELL replied that she wouldn't want to mislead [the
committee] on guessing what types of information might be shared
or what kinds of demographics might be used in a "sort," since
she has never engaged in that kind of a joint-marketing
agreement with a third party.
REPRESENTATIVE CRAWFORD added that if someone could more
specifically show him a need to share more information, he might
be more amenable to going along with it.
Number 2337
REPRESENTATIVE ROKEBERG referred to Amendment F.1, subparagraph
(B), and stated that he thinks the theory is it would allow
state banks to have "equal footing" with large national banks by
granting them the disclosures necessary to market financially
related products or services of the financial institution and
its marketing partners.
MS. BELL agreed.
REPRESENTATIVE ROKEBERG stated that he'd read the provision in
the context of the exceptions that were delineated under
subparagraphs (A), (B), and (C) [on page 2 of the proposed CS].
He asked Ms. Bell whether she would consider the proposed
subparagraph (B) as an opt-in or an opt-out. He said it seems
that the way it's drafted, it is an opt-out, and the customer
would have to declare that he or she wouldn't want that
information divulged.
MS. BELL answered that her interpretation is it really does
stick with a default opt-in for many circumstances, except for
the basic exceptions already included in the statute for the
normal course of banking. She said this amendment allows,
particularly, the smaller banks the opportunity to go a little
further in marketing other products and services that cannot be
offered in-house.
REPRESENTATIVE ROKEBERG asked whether her interpretation is that
this would occur without the permission of the customer.
MS. BELL agreed, and stated that this would be an exception to
opt-in; however, there are still requirements under the GLBA
that would require the bank to have a contract with the third
party.
REPRESENTATIVE ROKEBERG asked Mr. Elder if conformance with the
GLBA is in the bill.
Number 2225
MR. ELDER answered that there are aspects of the GLBA that apply
to the bank regardless of what is done in terms of opt-in or
opt-out. He explained that subsection (f) [on page 3] is an
exception to the general rule that disclosure of information is
not allowed, and subsections (a) through (c) state when that is
allowed. The purpose of subsection (d) is to level the "playing
field" between the small state-charted banks that don't have
affiliate structures and the larger banks that do.
REPRESENTATIVE ROKEBERG asked whether it would not be consistent
with the GLBA to say "state-chartered banks", if there were any
enforcement on the national level.
MR. ELDER responded that the idea is that in [Alaska] smaller
banks tend to be state-chartered banks, but nationwide there are
some large state-chartered banks. He stated that the issue
isn't necessarily whether it's state-chartered or national, but
whether it has an affiliate structure or not. He noted that it
just so happens that in [Alaska] the state banks are also
smaller banks and tend not to have an affiliate structure. He
emphasized that subsection (d) is designed to allow smaller
banks to do things that other banks can already do because of
their affiliate structure.
CHAIR MURKOWSKI asked, if [HB 106] is trying to give equal
footing to the state-chartered banks, whether it could be
specified that the state banks are brought up to parity with
their ability to do the [agreement].
MR. ELDER, in response, reiterated that the purpose of
subsection (d) is to level the playing field between banks that
have large affiliate structures and banks that don't, regardless
of their charter.
CHAIR MURKOWSKI asked Mr. Elder if he would be reluctant to
specify that it is a state financial institution because that is
just the way it is right now.
MR. ELDER agreed.
Number 2012
REPRESENTATIVE ROKEBERG asked if, under the proposed
subparagraph (d)(1)(B) and the proposed CS, banks have the right
to opt back in.
MR. ELDER responded that the bill and the amendment are written
with information that is necessary to provide the services of
the institution, or to conduct joint-marketing efforts of that
institution with its marketing partners where there is a
contractual relationship. He explained that he thinks it's
limited by the fact that it is necessary information, it's
financially related services, and there has to be a written
contract between the financial institution and the partner that
they will be subject to the limitations in subsections (a)
through (c).
REPRESENTATIVE ROKEBERG asked, if [the committee] adopts
Amendment F.1, where in the bill it would provide that the opt-
out provision would be sent out [to customers].
MR. ELDER answered that if [the committee] passes the bill as it
is, opt-in is in paragraph (a)(1) [on page 2]. He added that
the Gramm-Leach-Bliley requirement, which the banks - including
the state banks - are still subject to, requires that a privacy
notice be sent.
Number 1794
CHAIR MURKOWSKI asked, by opting-in, if the Gramm-Leach-Bliley
provisions are still in play, but there will be a higher
standard when it comes to privacy.
MR. ELDER agreed.
REPRESENTATIVE ROKEBERG stated that also, those institutions
with large affiliate structure have been allowed to have co-
marketing parties.
MR. ELDER responded that institutions with large affiliate
structures already have large marketing parties, which is why
subsection (d) is necessary. Should [institutions] not have an
affiliate in a certain area that's a financially related area,
and should they want to operate under a contractual arrangement
just like any other bank, then subsection (d) would allow them
to do that. He added that the contractual obligation is there
because it binds them to the rest of the sections of the privacy
provision, it's limited to financial services, and it has to be
a joint effort.
REPRESENTATIVE ROKEBERG asked Mr. Elder whether there is a
natural disincentive within the structure of an institution with
a large number of affiliates to compete against itself. He said
the natural flow of things is that this would allow the smaller,
less-affiliated institution to be able to compete with a larger
one.
MR. ELDER agreed.
CHAIR MURKOWSKI remarked that she was trying to suggest that
[the committee] limit the amendment to only state-chartered
institutions. However, she said she was reminded, for example,
that Alaska Pacific Bank is a federally chartered bank, but
doesn't have any affiliates. Therefore, if the amendment were
limited, [the committee] wouldn't really have done what they
want to do, which is to allow the smaller state banks [to do
things that other banks can because of their affiliate
structure].
MR. ELDER stated that that is exactly why subsection (d) is
written the way it is - to only address the difference in
affiliate structures. He added that one thing that needs to be
kept in mind when talking about information that is shared or
sold under Gramm-Leach-Bliley is that the restriction is on
nonpublic information. Therefore, there are no restrictions on
things that are available publicly.
Number 1582
REPRESENTATIVE HALCRO referred to Ms. Bell's comment about how
the intention is not to sell lists. He asked her, if she were
to create a prospective list of customers based on an average
daily or monthly balance, and she was going to do a joint
marketing with somebody who offered market accounts, what her
bank would get for providing that list.
MS. BELL answered that there would be two types of benefits from
it. [Her bank] would hopefully retain the customer, who might
have otherwise taken his or her money out and put it in a
brokerage account, and [her bank] might get an interest override
paid back on the funds that are basically sent out of the bank.
REPRESENTATIVE CRAWFORD commented that a few years ago he
decided not to do business with a couple of the larger banks in
[Alaska] because he wasn't getting good, individualized service.
He asked Ms. Bell if she thinks one of the plusses about smaller
banks is that they provide more individualized service. He
remarked that it seems to him that now [these smaller banks]
want to get bigger.
MS. BELL responded that she understands Representative Halcro's
point and she agrees with him. She stated that she doesn't
think any small bank in Alaska has an intention of "stuffing
people's mailboxes" with all kinds of offers. She said she
thinks they want the ability to do selective kinds of marketing
for products that they think will help retain customers.
REPRESENTATIVE HALCRO stated that it seems to him from
subparagraph (B) in the proposed amendment that [the smaller
banks are marketing financially related products or services]
without accepting an opt-in.
MS. BELL remarked that paragraph (B) is an exception to opt-in.
REPRESENTATIVE HALCRO asked if it would be OK to first check
with [the consumers] to see if they are interested in receiving
that material.
Number 1346
MS. BELL responded that she thinks the whole point of the
amendment was to allow [banks], without a lot of expense and
effort, to be able to offer something to a large portion of the
customer base so that they could look at it at their leisure and
make their own decisions. She stated that it is far more
expensive and time-consuming to seek opt-in; it would probably
prevent some of these offers from ever taking place. She said
the return rate is not very high when people have to say, "Yes,
I want to receive more mail." Opt-in is still preserved in many
circumstances under this legislation, and certainly for any
nonfinacially related products.
REPRESENTATIVE HALCRO asked whether financially related products
are the only things that [banks want to share].
MS. BELL stated that that is the only thing her bank would want
to share.
REPRESENTATIVE HALCRO remarked that opt-in wouldn't be preserved
in anything except for financially related products.
MS. BELL responded that preserving opt-in for the rest of the
field of possibilities protects the privacy of Alaskans.
Number 1151
STEVE CONN, Alaska Public Interest Research Group, testified via
teleconference. He stated that the purpose of the GLBA was to
break down the barriers between financial institutions.
(Indisc.) He said the issue of the caps on interest rates and
the response of Mr. Elder were quite revealing, because not only
do working people lose the protection of the 17 percent, it
opens the possibility that the out-of-state banks will make
their decisions here and that the "sky will be the limit." He
concluded by saying that both bills [HB 106 and HB 186] lack
private rights of action. This is in high contrast to a bill
moving through the Senate and the House related to the
automobile dealers their manufacturers, and the franchise
relationships whereby the consumers are talking directly to the
automobile dealers and to the Department of Law's
representative. This bill, he said, is outside the realm of
consumer protection, and it "cries out" for private rights of
action to be installed, because "we" simply cannot trust those
who only speak to bankers and never speak to consumers.
Number 1042
REPRESENTATIVE HAYES made a motion to adopt Amendment 1 [22-
GH1026\F.1, Bannister, 4/23/01], which read:
Page 3, lines 24 - 25:
Delete all material and insert:
"(1) the disclosure is necessary to
(A) provide the services of the
financial institution to a depositor or customer; or
(B) market financially related products
or services of the financial institution and its
marketing partners; and"
REPRESENTATIVE CRAWFORD objected. He stated that he believes
subparagraph (B) of the amendment takes out the opt-in provision
for anything financially related, and therefore "guts" the
language.
CHAIR MURKOWSKI disagreed. She stated that she thinks an effort
has been made to preserve the opt-in policies in reference to
information, whether it be financial information or personal
health information. When this was first discussed, it was all
opt-out; however, it is recognized in Alaska that there are
greater privacy protections. She remarked that she thinks there
has to be certain exceptions to that in order to allow state
institutions to offer the type of services that are expected.
She noted that a bank's competition is no longer another bank;
people are putting their money everywhere else except a bank.
REPRESENTATIVE CRAWFORD withdrew his objection.
Number 0795
CHAIR MURKOWSKI announced that there being no further objection,
Amendment 1 was adopted.
REPRESENTATIVE HAYES moved to report CSHB 106, version 22-
GH1026\F, Bannister, 4/19/01, as amended, out of committee with
individual recommendations and the attached zero fiscal note.
There being no objection, CSHB 106(L&C) moved from the House
Labor and Commerce Standing Committee.
HB 184-INSURANCE CODE AMENDMENTS
[Contains discussion of HB 211, HB 106, and SB 138]
CHAIR MURKOWSKI announced that the next order of business would
be HOUSE BILL NO. 184, "An Act relating to the business of
insurance, including changes to the insurance code to implement
federal financial services reforms for the business of insurance
and to authorize the director of insurance to review criminal
backgrounds for individuals applying to engage in the business
of insurance; amending Rule 402, Alaska Rules of Evidence; and
providing for an effective date." [Before the committee was a
proposed committee (CS), version 22-GH1025\f, Ford, 4/19/01,
adopted as a work draft on 4/20/01]
CHAIR MURKOWSKI addressed Bob Lohr, the Director of the Division
of Insurance, and stated that during the last hearing on the
bill, [the committee] wanted to make sure that privacy
provisions with regard to financial institutions and what was
going on with the insurance were somewhat similar. She said she
assumed that the proposed F.2 amendment is the product of those
concerns. Amendment F.2 [22-GH1025\F.2, Ford, 4/25/01], which
was later adopted as Amendment 1, read:
Page 25, line 30, through page 26, line 9:
Delete all material and insert:
"Sec. 21.36.162. Nondisclosure of an
individual's personal financial and personal
health information. (a) A person may not
disclose personal financial or personal health
information regarding an individual who seeks to
obtain, obtains, or has obtained an insurance
product or service, except when and only to the
extent that the disclosure is
(1) authorized by the individual whose
personal financial or personal health information
is sought to be disclosed;
(2) required by federal or state law
or federal or state regulation;
(3) compelled by a subpoena, search
warrant, or other order issued by a court or
administrative agency of competent jurisdiction;
(4) for the performance of any of the
following insurance functions: claims
administration; claims adjustment and management;
detection, investigation, or reporting of actual
or potential fraud, misrepresentation, or
criminal activity; underwriting; policy placement
or issuance; loss control; rate making and
guaranty fund functions; reinsurance and excess
loss insurance; risk management; case management;
disease management; quality assurance; quality
improvement; performance evaluation; provider
credentialing verification; utilization review;
peer review activities; actuarial, scientific,
medical, or public policy research; grievance
procedures; internal administration of
compliance, managerial, and information systems;
policyholder service functions; auditing;
reporting; database security; administration
of disputes and inquiries; external accreditation
standards; the replacement of a group benefit
plan or workers' compensation policy or program;
activities in connection with a sale, merger,
transfer, or exchange of all or part of a
business or operating unit; or other functions
that the director may approve as necessary
for the performance of the above functions and
that are fair and reasonable to the interest of
the insurance consumer;
(5) permitted without requiring
authorization under federal privacy rules adopted
under 42 U.S.C. 300gg - 92 (Health Insurance
Portability and Accountability Act of 1996) by
the United States Department of Health and Human
Services; or
(6) required to enforce the person's
rights or the rights of other persons engaged in
carrying out an insurance transaction or
providing an insurance product or service that an
individual requests or authorizes.
(b) The director may adopt regulations to
implement this section that provide not less than
the protection of an individual's personal
financial and personal health information
provided under (a) of this section.
(c) This section does not restrict
disclosure of publicly available information.
(d) This section does not prohibit a person
from disclosing personal financial information if
(1) the disclosure is necessary to
market a financial product or service of the
person, including a financial product or service
that is jointly offered, endorsed, or sponsored
by another person under a written contract;
(2) the person receiving the
information agrees in writing not to disclose or
use the information other than to carry out the
purposes for which the person disclosed the
information; and
(3) the person disclosing the
information provides written notice to the
individual who is the subject of the information
and the notice includes
(A) the information that the
person collects;
(B) the information that will be
disclosed; and
(C) to whom the information will
be disclosed.
(e) For purposes of this section,
(1) "personal financial information"
means any information or data about a person that
is not personal health information;
(2) "personal health information"
means any information or data except age or
gender, whether oral or recorded in any form or
medium, created by or derived from a health care
provider or other person that relates to
(A) the past, present, or future
physical, mental, or behavioral health or
condition of an individual;
(B) the provision of health care
to an individual; or
(C) payment for the provision of
health care to an individual;
(3) "publicly available information"
means any information that a person has
reasonable basis to believe is lawfully made
available to the general public from
(A) federal, state, or local
government records;
(B) widely distributed media; or
(C) disclosures to the general
public that are required to be made by federal,
state, or municipal law."
Number 0330
BOB LOHR, Director, Division of Insurance, Department of
Community and Economic Development, came forth and stated that
Chair Murkowski was correct. He stated that the Senate has been
considering a companion bill [SB 138] to this one, which is now
in the form of a Senate Labor and Commerce Standing Committee CS
in front of the Senate Judiciary Standing Committee. Both
committees have taken the approach of mandating that the
Division of Insurance come up with regulations that are
consistent with, but no less restrictive of, privacy in the
Gramm-Leach-Bliley Title Five. He stated that the division
would prefer the duty of adopting regulations to make all of
this consistent. He emphasized that [the division] still feels
that is the best approach to getting a good privacy standard for
Alaskans with respect to insurance financial information and
insurance health information. This is what the amendment would
do.
MR. LOHR explained that subsection (d)(3) of the amendment is
the one difference between the banking marketing exemption and
the insurance approach. It would require notification to the
individual that joint marketing arrangements might occur. Under
this approach, in the bill, it would provide an opt-out or opt-
in. The individuals are simply qualifying for an exemption;
however, they would at least receive notification that this type
of joint marketing could occur. He noted that some reviewers of
the amendment have asked why that wouldn't give them opt-in or
opt-out, and why a customer couldn't be allowed to say, "You
tell me you want to do joint marketing; I don't think you should
with my data." He explained that that would be a kind of opt-
out approach imbedded in paragraph (d)(3). He emphasized that
that is not the way it is currently drafted, but is an approach
the committee may wish to consider.
REPRESENTATIVE ROKEBERG stated that he is uncomfortable with
joining the health insurance information with other financial
information. He said he thought [the committee] had talked
about having very stringent confidential and/or opt-in health
insurance, without exceptions.
Number 0159
CHAIR MURKOWSKI stated that she understands that with this
amendment, personal information is opt-in, and the only
exception is to financial information. The exceptions that are
in paragraph (4) [on page 1 of the amendment] are part of the
NAIC (National Association of Insurance Commissioners) model;
therefore, they are not new.
MR. LOHR stated that Chair Murkowski was correct. He said he
doesn't believe that this marketing exemption would be available
for health information; as a result, the stricter standard is
maintained.
CHAIR MURKOWSKI referred to page 2, line 16 [subsection (d) of
the amendment], and said she read that as being an exception for
the financial information, and that it does not apply for
personal health information.
MR. LOHR responded that Chair Murkowsky was correct.
REPRESENTATIVE ROKEBERG remarked that the format of commingling
both the health and the financial information leaves it open for
interpretation. He stated that he is not comfortable with the
drafting language, because it is not clear.
MR. LOHR agreed with Representative Rokeberg. He stated that
the division had prepared redundant language for both the health
and financial information to separate the notion of health from
privacy. He said he was advised by staff and by the office of
the Attorney General that that was unnecessary; therefore, they
were combined. However, he said the division has prepared a
version that will allow completely separate sections for the
health information and the financial information.
REPRESENTATIVE ROKEBERG stated that he is also uncomfortable
with the "laundry list" of activities in paragraph (4)
[subsection (a), page 1 of the amendment].
TAPE 01-68, SIDE A
Number 0076
MR. LOHR clarified that the language [in paragraph (4)] is
analogous to a bill title. It is lengthy and involved because
it is designed to delimit what an insurance company may do with
that exemption. By being so precise in each individual element,
it covers regulations on privacy from the NAIC that were
determined to be appropriate to allow insurance companies to do.
It does not have vague language, which could then be broadly
interpreted in such a way as to fit in some type of exemption
under the guise of administrative operations of the company. He
stated that the elements of subsection (a)(4) are designed to
allow an insurance company to do the business for which the
financial or health information is gathered in the first place.
REPRESENTATIVE ROKEBERG stated that he thinks paragraph (6)
[subsection (a), page 2 of the amendment] is broad; yet it
provides the protections without having to list every one. He
asked whether the intention of paragraphs (4) and (6) is to
allow the activities of health insurance to be conducted.
MR. LOHR responded that paragraph (6) appears to be more of a
general statement.
CHAIR MURKOWSKI stated that language taken directly from the
NAIC regulations has the whole "laundry list," as does paragraph
(6). She asked where the list of regulations came from.
MR. LOHR answered that the list came from the model regulations.
He explained that once the Gramm-Leach-Bliley Act (GLBA) was
adopted, the NAIC began a process of forming a working group of
commissioners from various states and taking detailed testimony
from insurance companies, interested parties, and consumer
groups. The regulations are consistent with the GLBA, but in
some respects they go beyond it. For example, with respect to
health information, GLBA does not restrict uses of health
information; however, the model regulations that NAIC developed
address that. He added that [the list in paragraph (4)] is what
is appropriate for a company to do, while not allowing a lot of
"wiggle room" in terms of defining an individual element of
administrative practice by that company.
Number 0407
REPRESENTATIVE ROKEBERG stated that with HB 106 [the committee]
was trying to look at the smaller financial institutions in
Alaska and put them on equal footing with national insurance
companies. He asked how many domestic insurers there are in
Alaska.
MR. LOHR answered that there are nine domestic insurance
companies.
REPRESENTATIVE ROKEBERG asked Mr. Lohr if it would be his
opinion that those smaller, local companies could use some
assistance, particularly given GLBA, to do the expanded
marketing.
MR. LOHR responded that there has not been substantial comment
to the division about the provisions of this bill.
REPRESENTATIVE ROKEBERG stated that this language is not the
same language in [HB 106]. He said this is more of an opt-out
situation, without much in the way of sideboards.
MR. LOHR responded that it is neither opt-in nor opt-out in the
sense that a company that wishes to engage in joint marketing is
not required to notify customers of its plan to [disclose
personal information]. He added that paragraph (d)(3) [in the
amendment] is an exemption to the requirement for opt-in, as
proposed in this amendment.
CHAIR MURKOWSKI asked whether this is an expansion from when
[the committee] first started. She said initially it was opt-
out with regard to financial information and opt-in with regard
to personal health information. Now, it is still opt-in for
personal health information, but neither "here nor there" with
financial information.
MR. LOHR agreed, and stated that traditionally opt-in is a
tighter form of privacy protection than opt-out. However, that
is not the case when a sufficiently large exemption is created
with opt-in that doesn't require opt-in or opt-out; opt-in then
looks more permissive.
Number 0726
CHAIR MURKOWSKI asked: In order to change this so it is opt-in
for everything, with an exception to opt-in for financial
information, would paragraph (d)(3) [of the amendment] also
allow the consumer to say he or she does not want that
information to be shared?
MR. LOHR responded that [it could be fixed that way].
CHAIR MURKOWSKI stated that the opt-in provision in subsection
(a)(1) [of the amendment] explains that it has to be authorized
by the individual whose information is being sought, but it
doesn't require that the authorization be in writing. She asked
if written consent would be one of the overall requirements.
MR. LOHR responded that it is hard for him to see how this would
require written consent. He recalled a debate about switching
from one long-distance telephone company to another, and the
level of proof that is required from the person intending to
switch. He stated that the regulatory commission does allow
voice-mail messages, which is easier for the customer, but puts
the customer at some risk. [With the referenced section], he
said it is a policy call of whether it is worth the extra burden
on the company in terms of gathering [the written consent]. He
noted that the health information is more restrictive and does
require a written consent.
Number 0887
KATIE CAMPBELL, Life and Health Actuary, Division of Insurance,
Department of Community & Economic Development, stated that this
is an oversight; it should actually be authorized in writing or
in electronic form, which is consistent with the NAIC model.
CHAIR MURKOWSKI asked if "electronic form" would be an e-mail.
MS. CAMPBELL answered yes. She added that it may be unnecessary
to put "electronic form" [in the amendment], because there may
be another provision that would allow electronic [communication]
to count as written authorization.
CHAIR MURKOWSKI stated that the model regulations provide for
the administration of consumer disputes and inquiries; however,
page 1, line 23, paragraph (a)(4) [of the amendment] reads
"administration of disputes and inquiries". She asked whether
there was a reason to delete "consumer".
MR. LOHR answered that there was no intent to change what it
said, and [the division] would support [the committee's] adding
"consumer".
Number 1026
REPRESENTATIVE ROKEBERG referred to paragraph (a)(5) [of the
amendment], which states "permitted without requiring
authorization" under the HIPA (Health Insurance Portability and
Accountability Act) rules. He asked whether that is going to be
a default whereby the HIPA federal privacy rules are the bottom
line and can be tightened up.
MR. LOHR responded that under the NAIC model regulations for
health, the approach was to say that if an insurance company is
complying with the HIPA regulations, then that is good enough.
There is no attempt to go beyond those HIPA regulations or
duplicate the health requirements in the NAIC model regulations.
REPRESENTATIVE ROKEBERG asked whether they could be tightened up
through subsection (b) [of the amendment], which reads "not less
than the protection" provided under subsection (a).
MR. LOHR answered that they could.
REPRESENTATIVE ROKEBERG asked whether there is a provision for
HB 211, in which statutory provisions are already tighter than
the HIPA model.
Number 1114
MR. LOHR responded that this authority would not extend to
addressing the HB 211 provision. He said he would encourage
[the committee] to consider the possibility of conforming the HB
211 provisions to be more like whatever the decided approach is
for health privacy in this bill.
REPRESENTATIVE ROKEBERG remarked that if Mr. Lohr is suggesting
that he change his bill to meet whatever regulations the
division writes, he does not agree with that.
MR. LOHR responded that he thinks he was indicating that having
substantive health provisions in this bill consistent with the
HB 211 approach would make sense.
REPRESENTATIVE ROKEBERG asked whether the Senate had left the
NAIC language in [its version].
MR. LOHR answered that the Senate version said "consistent with
but no less than GLBA". He said the Senate has adopted an
amendment that would drop the NAIC model and put GLBA in its
place.
Number 1248
CHAIR MURKOWSKI made a motion to adopt Amendment 1 922-
GH1025\F.2, Ford, 4/25/01, text provided previously].
REPRESENTATIVE ROKEBERG objected for purposes of discussion.
Number 1274
CHAIR MURKOWSKI made a motion to adopt Amendment 1 to Amendment
1, on page 1, line 8, [subsection (a)(1)] of the amendment,
after "authorized", to insert "in writing". There being no
objection, Amendment 1 to Amendment 1 was adopted.
CHAIR MURKOWSKI made a motion to adopt Amendment 2 to Amendment
1, on page 1, line 23, [subsection (1)(4)] of the amendment,
after "administration of", to insert "consumer". There being no
objection, Amendment 2 to Amendment 1 was adopted.
CHAIR MURKOWSKI made a motion to adopt conceptual Amendment 3,
to Amendment 1, on page 2, subsection (d)(3) of the amendment,
to create a subparagraph (D) that would give the individual the
opportunity to prohibit the sharing.
REPRESENTATIVE ROKEBERG asked whether that would be prior to the
company's disclosing the information.
CHAIR MURKOWSKI explained that in HB 106 there were examples of
how banks provided the opt-out information. She said she thinks
if [the committee] does not allow for this, then it is neither
opt-in nor opt-out when it comes to the financial information.
MR. LOHR remarked that [the division] would be happy to help
with the conceptual amendment.
CHAIR MURKOWSKI announced that there being no objection,
conceptual Amendment 3 to Amendment 1 was adopted.
Number 1501
MR. LOHR made a motion to adopt conceptual Amendment 4 to
Amendment 1, on page 2, line 14, [subsection (b)] of the
amendment, to delete "under (a) of" and insert "in". There
being no objection, conceptual Amendment 4 to Amendment 1 was
adopted.
REPRESENTATIVE ROKEBERG stated that he is not sure what the
chair would like to do in regard to the health insurance policy
issue.
CHAIR MURKOWSKI responded that Mr. Lohr had mentioned that he
thought the financial and the health information needed to be
separated or set out more clearly in the amendment. She said
she thinks [the committee] has gotten to the point of knowing
what the policy call is by opting in when it comes to privacy.
REPRESENTATIVE ROKEBERG removed his objection to Amendment 1.
CHAIR MURKOWSKI announced that there being no further objection,
Amendment 1, as amended, was adopted.
Number 1738
MR. LOHR explained his proposed amendment, later adopted as
Amendment 2, which read [original punctuation and capitalization
provided, except that one line of text had been crossed out by
hand and is not included here]:
Page 18, after line 4, add a new section as follows
*Sec. 26, AS 21.27.360 is amended to read:
Sec. 21.27.360. Reporting and accounting for
premiums and premium taxes and fees. (a) A licensee
involved in the procuring or issuance of an insurance
contract shall report to the insurer the exact amount
of consideration charged as a premium for the
contract. The amount charged shall be shown in the
contract and in the records of the licensee.
(b) All money, except that made payable to the
insurer, representing premium taxes and fees, premiums
or return premiums received by the licensee, shall be
received by the licensee as a [IN THE] fiduciary
[ACCOUNT OF THE LICENSEE] and shall be promptly
accounted for and paid to the person entitled to the
money. [THE FIDUCIARY ACCOUNT SHALL BE LOCATED IN
THIS STATE UNLESS THE LICENSEE IS LICENSED AS A
NONRESIDENT UNDER AS 21.27.270. FOR PURPOSES OF THIS
SECTION, THE FIDUCIARY ACCOUNT OF THE FIRM SHALL BE
CONSIDERED THE FIDUCIARY ACCOUNT OF AN INDIVIDUAL
LICENSEE ACTING ON BEHALF OF THE FIRM AND SHALL BE THE
RESPONSIBILITY OF THE FIRM.] Money held by the
licensee as a fiduciary [DEPOSITED INTO A FIDUCIARY
ACCOUNT] may not be commingled or otherwise combined
with other money not held by the licensee as a
fiduciary[, EXCEPT AS ALLOWED UNDER (d) OF THIS
SECTION AND AS 21.27.365].
(c) In addition to any other penalty provided by
law, a person who the director has determined has
acted to divert or appropriate money held as a
fiduciary [ACCOUNT MONEY] for personal use shall be
ordered to make restitution and shall be subject to
suspension or revocation under AS 21.27.420 -
21.27.430 of all licenses and a civil penalty not to
exceed $50,000 for each violation.
(d) A licensee may only commingle premium taxes and
fees, premiums, and return premiums with additional
money for the purpose of advancing premiums,
establishing reserves for the payment of return
premiums, or reserves for receiving and transmitting
premium or return premium money. [MONEY COLLECTED FOR
THE PAYMENT OF PREMIUM TAXES, POLICY OR FILING FEES,
LATE PAYMENT CHARGES, AND INTEREST FROM FIDUCIARY
MONEY ON DEPOSIT, MAY BE COMMINGLED IN A FIDUCIARY
ACCOUNT, BUT SHALL BE SEPARATELY ACCOUNTED FOR AND
PERIODICALLY REMOVED FROM THE FIDUCIARY ACCOUNT].
(e) Money held by a licensee as a fiduciary may not
be treated, [A LICENSEE MAY NOT TREAT MONEY REQUIRED
TO BE IN A FIDUCIARY ACCOUNT] as a personal asset, as
collateral for a personal or business loan, or as a
personal asset or income on a financial statement,
except that money held by the licensee as a [IN A]
fiduciary [ACCOUNT] may be included in a financial
statement of the licensee if clearly identified as
assets held by the licensee as a fiduciary. [ACCOUNT
ASSETS AND LIABILITIES].
(f) This section does not apply to an individual in
the firm who acts solely on behalf of a firm that
maintains compliance with this section [AND DEPOSITS
ALL MONEY INTO THE FIRM'S FIDUCIARY ACCOUNT].
Page 30, after line 12, add a new section as follows:
*Sec. 49. AS 21.36.350 is amended to read:
Sec. 21.36.350. Regulations relating to claim
settlement and premium accounting practices. (a) The
director of insurance shall promulgate regulations to
implement, define, and enforce AS 21.36.125.
(B) The director of insurance may promulgate
regulations to implement, define, and enforce AS
21.36.360(b) and AS 21.27.360.
Page 31, after line 23, add a new section to read
*Sec. 55. AS 21.27.360(c), AS 21.27.365, AS
21.27.900(7) are repealed.
Page 32, after line 12, add a new section to read
*Sec 58. Sections 26, 39, 49 and 55 of this Act take
effect July 1, 2002.
[Note: The line of the amendment that had been crossed out by
hand read: "Page 30, line 29, after 'refusal" add
"limitation'"]
MR. LOHR stated that all of page one through subsection (b) on
page 2 of his proposed amendment deals with trust accounts. He
stated that at this time the Division of Insurance does require
agents and brokers to have a trust account for premium that is
received but not yet paid to an insurance company. He said this
is a good consumer-protection measure. Unfortunately, under the
Gramm-Leach-Bliley licensing provisions, if the trust account
requirement is maintained as an additional licensing requirement
on nonresident applicants, the state will be nonreciprocal for
purposes of helping to avoid a national takeover of licensing.
As a result, [the division] has proposed to delete the
references to "trust account" in Chapter 27 and to substitute
fiduciary capacity. He stated that as a legal matter [the
division] has been told that this makes no difference in terms
of what the responsibilities of the agent or broker would be.
MR. LOHR further explained his proposed amendment. Under
subsection (b) of Section 49 [of the amendment], this would
specifically grant the director authority to adopt regulations
that would require a trust account. This would solve the
problem of being nonreciprocal. This would also have a delayed
effective date, under Section 58, the last line of the
amendment, of July 1, 2002.
CHAIR MURKOWSKI asked whether it legally does not make any
difference using the term "fiduciary", but that for purposes of
complying with Gramm-Leach-Bliley, it makes a difference.
MR. LOHR stated that she was correct. He stated that if this
were featured permanently as a part of the licensing chapter,
then calling it a trust account looks to the national arbiter of
who is a "reciprocal" and who isn't, as if it were an additional
requirement on licensing. At that point, there is a savings
provision in the federal legislation that states that this would
not qualify for the savings clause. Therefore, this would cause
the state to become nonreciprocal for purposes of what's
required under the licensing provisions of Gramm-Leach-Bliley.
CHAIR MURKOWSKI asked why this was not included as part of the
original bill.
MR. LOHR responded that [the division] has been watching the
evolution of what's reciprocal and what's not at the national
level with the NAIC. At a meeting in Nashville last month, it
was determined that trust accounts, surplus lines bonds, and
fingerprinting were areas that could cause the state to be
nonreciprocal.
Number 1955
REPRESENTATIVE ROKEBERG made a motion to adopt Amendment 2 [text
provided previously].
There being no objection, Amendment 2 was adopted.
REPRESENTATIVE ROKEBERG asked if Mr. Elder, Director of the
Division of Banking, Securities & Corporations, had a chance to
look at the bill.
Number 2013
FRANKLIN TERRY ELDER, Director, Division of Banking, Securities
and Corporations, Department of Community and Economic
Development, came forth and responded that he has had
discussions with Mr. Lohr about the sections [referred to in
Amendment 2], but he has not reviewed the entire bill.
REPRESENTATIVE ROKEBERG stated that he asked because the trend
in the entire country is the consolidation of financial services
and primarily including insurance companies and banking
institutions with other financial services. He said it seems to
him that there needs to be some commonality between the
regulatory and the statutory schemes that regulate these
institutions in [Alaska].
MR. ELDER remarked that that is a valid point. He said [he and
Mr. Lohr] have also had discussions about increasing cooperation
between "two pavilions" on examining more complex institutions.
Certainly Gramm-Leach-Bliley also emphasized the continuation of
functional regulations; in other words, security regulators
would look at the securities aspect, insurance regulators would
look at the insurance aspect, and banking regulators would look
at the banking aspect. However, in addition to that, "we" have
to cooperate more and share more.
Number 2057
REPRESENTATIVE MEYER moved to report CSHB 184, version 22-
GH1025\F, Ford, 4/19/01, as amended, out of committee with
individual recommendations and the accompanying zero fiscal
note.
REPRESENTATIVE HAYES declared a conflict because HB 184 concerns
an area he works in.
CHAIR MURKOWSKI announced that there being no objection, CSHB
184(L&C) was moved from the House Labor and Commerce Standing
Committee.
HB 227-LAND SURVEY STANDARDS
CHAIR MURKOWSKI announced that the final order of business would
be HOUSE BILL NO. 227, "An Act instructing the State Board of
Registration for Architects, Engineers, and Land Surveyors to
adopt minimum technical standards relating to the practice of
surveying."
Number 2129
JOHN MANLY, Staff to Representative John Harris, Alaska State
Representative, came forth on behalf of the sponsor of HB 227
and stated that Representative Harris introduced this bill at
the request of one of his constituents who is a realtor in
Valdez. He explained that the main intent of the bill is to
require the Board of Architects, Engineers and Land Surveyors to
adopt minimum standards for land surveys. Therefore, the land
survey ordered in Fairbanks, for example, will have the same
information on it as the land survey in Ketchikan. He said he
is not personally well acquainted with the problems that may
arise, but he is sure that it does present a problem when
someone orders an as-built survey and it doesn't include an
easement or a pipeline that goes through the property.
REPRESENTATIVE ROKEBERG asked Mr. Manly if he knows the position
of the [Alaska] Professional Design Council [on the bill].
MR. MANLY answered no. He said the bill passed through the two
surveyor members of the board and was given a relatively
positive response.
Number 2255
JIM COLVER testified via teleconference on behalf of himself in
opposition to HB 227. He stated that some of the realtors are
concerned about what is contained in an as-built survey. He
said it is mainly going to be driven by the title companies and
whether they perform an ALTA (American Land Title Survey) survey
or a less-than-an-ALTA survey. He said his main concern is that
with this field changing so rapidly with global positioning
[systems], regulations are going to have to keep being amended
to comply with future standards. He said he thinks there will
be bureaucrats instead of professionals determining the practice
of land surveying. Under existing statute AS 08.48.101,
paragraph (a)(1), the language says the board may adopt
regulations to carry out the purpose of this chapter, including
paragraph (5), publishing a code of ethics or professional
conduct for those persons regulated by this chapter. He said he
thinks a lot of this can be accomplished through the existing
statutes and through ethics and professional conduct regulations
promulgated from that statute. He noted that there is a
standard of practice that the surveyor generally looks to, which
was been developed by the Alaska Society of Professional Land
Surveyors. This is taught in schools and is preparation
material for those taking the land surveyor's exam.
MR. COLVER responded that that is one of the discussions the
surveying community is going through right now - whether or not
to require continuing education. He relayed that some of the
surveyors [in the Matanuska-Susitna area] have commented that if
the regulations were to be adopted, they would be comfortable
going with the Alaska Society of Professional Land Surveyors
standards of practice.
Number 2405
REPRESENTATIVE CRAWFORD shared that in 1988 it was declared that
the surveys were all off in Rabbit Creek Heights. He said he
wasn't able to sell his land for more than ten years because
there was no way to obtain financing. He asked if that sort of
thing could continue, if nothing is done.
MR. COLVER answered that that was resolved through legislation a
few years ago. He stated that in any practice there are
mistakes made, and every profession has ways of policing its
membership. He expressed that he doesn't know that government
does a good job when the destiny of professions is placed in the
hands of career bureaucrats. He added that he does not know
that this bill would stop [errors like those at Rabbit Creek
Heights] from happening.
TAPE 01-68, SIDE B
Number 2472
PATRICK KALEN, Land Surveyor, Alaska State Board of Registration
for Architects, Engineers and Land Surveyors (AELS), Division of
Occupational Licensing, Department of Community & Economic
Development, testified via teleconference and stated that he has
worked with legislation in the past for the surveyors and has
some understanding of the situation. He remarked that he is
also one of the land surveyors on the board of registration who
would be charged with writing these regulations. He stated that
that could be an arduous task, because the driving forces - the
lending institutions - are the problem with as-built surveys not
being uniform. If the value of the property is really high,
banks will always call for ALTA survey standards; however, in
the low-budget survey the banks call for an as-built survey
where there aren't any standards.
MR. KALEN noted that the bill is very close to what Florida did.
He stated that Florida has about 15 pages of standards, and one
of the novel features is that Florida fixed the as-built problem
by absolutely requiring that surveyors do a boundary survey.
CHAIR MURKOWSKI asked whether the full board has not had the
opportunity to review this, which is why they haven't taken a
position.
MR. KALEN stated that she was correct. He stated that this was
a surprise to some [of the board members]. The two surveyors on
the board have an idea of where to go with it, but they haven't
heard much from the affected realtors and surveyors about how
they would react. He noted that the board would probably have
to talk about what would be some of the primary things in the
regulations.
REPRESENTATIVE HAYES asked Mr. Kalen whether the board's
position is that they would like to wait, discuss the bill
through the interim, and provide technical assistance to
Representative Harris if there are any problems.
MR. KALEN responded yes.
Number 2179
BARBARA HUFF, Legislative Director, Teamsters Local 949, came
forth in support of HB 227. From discussions with Teamster
representative surveyors, she said the concept is that this bill
does not draft the regulation that would be left up to the
board. [The Teamster's] surveyors think it is a good idea to
have at least minimum standards set for the entire state of
Alaska, instead of the Municipality of Anchorage and Fairbanks.
REPRESENTATIVE HAYES asked Ms. Huff what the harm would be in
letting the bill wait for the interim, having the AELS board
actually take a look at it, and getting consistency all around.
MS. HUFF replied that she does not think there would be a
problem.
MR. COLVER stated that if the problem is with the as-built
surveys, he would recommend including minimum standards for as-
built surveys in the title.
REPRESENTATIVE CRAWFORD stated that neither his as-built survey
nor the original survey from when the property was first sold
was deemed legal. He said it seems to him that if a little more
money were spent at the beginning, it might be advisable. He
asked Mr. Colver if his suggestion would take care of the
problem for the people in Rabbit Creek Heights.
MR. COLVER remarked that there is no other problem that he knows
of in Alaska that rises to the level of [the Rabbit Creek
Heights] problem. He stated that he doesn't know whether the
implementation of any kind of legislative standard would have
prevented that from happening.
[HB 227 was held over.]
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
6:05 p.m.
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