Legislature(2005 - 2006)CAPITOL 17
04/13/2005 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB226 | |
| HB213 | |
| HB227 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 213 | TELECONFERENCED | |
| *+ | HB 226 | TELECONFERENCED | |
| = | HB 227 | ||
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
April 13, 2005
3:34 p.m.
MEMBERS PRESENT
Representative Tom Anderson, Chair
Representative Pete Kott
Representative Gabrielle LeDoux
Representative Bob Lynn
Representative Norman Rokeberg
Representative David Guttenberg
MEMBERS ABSENT
Representative Harry Crawford
COMMITTEE CALENDAR
HOUSE BILL NO. 226
"An Act relating to breaches of security involving personal
information; and relating to credit report security freezes."
- HEARD AND HELD
HOUSE BILL NO. 213
"An Act relating to alcohol server education."
- MOVED HB 213 OUT OF COMMITTEE
HOUSE BILL NO. 227
"An Act relating to the Alaska Small Loans Act; and providing
for an effective date."
- HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 226
SHORT TITLE: PERSONAL INFORMATION BREACH
SPONSOR(S): REPRESENTATIVE(S) GARA
03/21/05 (H) READ THE FIRST TIME - REFERRALS
03/21/05 (H) L&C, JUD
04/06/05 (H) L&C AT 3:15 PM CAPITOL 17
04/06/05 (H) <Bill Hearing Postponed>
04/13/05 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 213
SHORT TITLE: ALCOHOL SERVER EDUCATION
SPONSOR(S): REPRESENTATIVE(S) RAMRAS
03/09/05 (H) READ THE FIRST TIME - REFERRALS
03/09/05 (H) L&C, FIN
04/13/05 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 227
SHORT TITLE: ALASKA SMALL LOANS ACT
SPONSOR(S): LABOR & COMMERCE
03/21/05 (H) READ THE FIRST TIME - REFERRALS
03/21/05 (H) L&C, JUD
04/01/05 (H) L&C AT 3:15 PM CAPITOL 17
04/01/05 (H) Bill Postponed
04/04/05 (H) L&C AT 3:15 PM CAPITOL 17
04/04/05 (H) Scheduled But Not Heard
04/13/05 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
REPRESENTATIVE LES GARA
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 226.
GEORGE BERRY
Teamsters Local 959
Fairbanks, Alaska
POSITION STATEMENT: During discussion of HB 226, stressed the
need to keep an individual's right to privacy at the forefront
when [employers] perform background checks.
JOHN GEORGE, Lobbyist
American Council of Life Insurers;
Property Casualty Insurance Association of America
Juneau, Alaska
POSITION STATEMENT: Testified in support of the concept of HB
226, but expressed some concerns.
BARBARA HUFF TUCKNESS, Director
Governmental and Legislative Affairs
Teamster Local 959
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 226.
CLYDE SNIFFEN, Assistant Attorney General
Civil Division (Anchorage)
Department of Law
Anchorage, Alaska
POSITION STATEMENT: Stated that the department has no legal
concerns with HB 226.
STEVE CLEARY, Executive Director
Alaska Public Interest Research Group (AkPIRG)
Anchorage, Alaska
POSITION STATEMENT: During discussion of HB 226, applauded the
quick efforts of the committee.
DAN SIMIEM, President
Laborers Local 942
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 226.
REPRESENTATIVE JAY RAMRAS
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Spoke as the sponsor of HB 213.
MIKE O'HARE, Staff
to Representative Kott
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: During discussion of HB 213, related his
experience with the techniques in alcohol management course.
JON BITTNER, Staff
to Representative Anderson
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 227 on behalf of the House
Labor and Commerce Standing Committee, sponsor.
MARK DAVIS, Director
Division of Banking & Securities
Department of Commerce, Community, & Economic Development
Juneau, Alaska
POSITION STATEMENT: Expressed concerns with HB 227.
MARK HAMBLEN
Wells Fargo Financial
(No address provided)
POSITION STATEMENT: Testified in support of HB 227.
RICHARD BLOCK
Mellen Investment Company, LLC
Anchorage, Alaska
POSITION STATEMENT: Expressed concerns with HB 227, and stated
that it would put his company out of business.
SHANE OSOWSKI
Equity Investors, Inc.
Anchorage, Alaska
POSITION STATEMENT: Expressed concerns with HB 227.
JIM JOHNSON
Affordable Loan Company
Anchorage, Alaska
POSITION STATEMENT: Testified on HB 227.
KENNETH GAIN, President
Cash Now Financial
Anchorage, Alaska
POSITION STATEMENT: Expressed concerns with HB 227, and
suggested that at a minimum Section 1 be deleted.
PEGGY ANNE MCCONNOCHIE
Alaska Association of Realtors
Juneau, Alaska
POSITION STATEMENT: Expressed concerns with HB 227, and
suggested that at a minimum Section 1 be deleted.
ACTION NARRATIVE
CHAIR TOM ANDERSON called the House Labor and Commerce Standing
Committee meeting to order at 3:34:26 PM. Representatives
Anderson was present at the call to order. Representatives
Rokeberg, Lynn, LeDoux, Kott, and Guttenberg arrived as the
meeting was in progress.
HB 226-PERSONAL INFORMATION BREACH
CHAIR ANDERSON announced that the first order of business would
be HOUSE BILL NO. 226, "An Act relating to breaches of security
involving personal information; and relating to credit report
security freezes."
3:34:59 PM
CHAIR ANDERSON then announced that HB 226 would be held over
until Friday, at which time he indicated the legislation would
be reported from committee. He mentioned that one party has
requested that the legislation be held in order to have time for
a bit more research. He also mentioned his intention to co-
sponsor HB 226.
3:35:10 PM
REPRESENTATIVE LES GARA, Alaska State Legislature, sponsor,
noted that there is a proposed committee substitute. He
explained that HB 226 responds to the ChoicePoint, Inc.,
security fraud cases. He informed the committee that a number
of financial companies that make money by selling people's
personal and financial information don't use the required
security safeguards. Therefore, people's personal and financial
information are being stolen. In the ChoicePoint case the
information of 145,000 people was stolen and the company didn't
immediately tell the victims. This legislation follows a
California law that specifies that if a company that makes money
on people's information discovers that information has been
stolen or misused, it must inform the individuals right away.
In the ChoicePoint case, a number of months passed before the
145,000 people were told that their information had been stolen.
In California, the individuals were notified because of the
state law requiring such knowledge be provided to the individual
whose information was lost or stolen.
3:38:13 PM
REPRESENTATIVE GARA highlighted that HB 226 also provides that
an individual who is worried that his or her information has
been stolen can call one of the three credit reporting agencies
and request a hold on his or her financial information. The
aforementioned is referred to as a security freeze.
Representative Gara related that the Department of Law, the
Alaska Public Interest Research Group (AkPIRG), and the U.S.
Public Interest Research Group (AkPIRG) appear to be supportive
of this legislation.
3:39:23 PM
CHAIR ANDERSON surmised that HB 226 is senior friendly. He
recalled reading information relating that one of the senior
advocacy groups supports the California legislation, on which
this based.
REPRESENTATIVE GARA stated that AARP is supportive of HB 226.
He opined that in this kind of security fraud, seniors are as
vulnerable as everyone else not more vulnerable than others.
Representative Gara further opined that everyone has an interest
in knowing if one's personal and financial information has been
stolen. Moreover, it's quite an outrage that these companies
aren't informing people when the information is stolen. "They
make money off us, and they have a duty to protect us," he
stressed.
The committee was at-ease from 3:40 p.m. to 3:44 p.m.
3:44:39 PM
CHAIR ANDERSON moved to adopt CSHB 226, Version I, as the
working document. There being no objection, Version I was
before the committee.
3:46:11 PM
GEORGE BERRY, Teamsters Local 959, informed the committee that
he works in the oil and gas industry through the Teamsters
union. He related that he and his coworkers are very concerned
with these types of businesses operating seemingly unregulated.
Mr. Berry noted that the legislation appears to require a remedy
for the individual to whom harm is done from poor or inaccurate
reporting, or theft or disclosure of information to an unknown
third party, and for that he thanked the sponsor. He stressed
the need to keep an individual's right to privacy at the
forefront when [employers] perform background checks. Mr. Berry
related that this will be implemented in the [oil and gas
industry] in the near future and thus there is the desire to be
sure that the appropriate protections are in place in the
[employee's] contract language.
3:48:24 PM
JOHN GEORGE, Lobbyist, American Council of Life Insurers;
Property Casualty Insurance Association of America, acknowledged
that insurance companies have much of this sensitive
information, such as social security numbers. The insurance
companies are concerned with regard to protecting such
information. He related that generally, the insurance
[industry] supports the concept of HB 266, which seems to be a
national movement. He mentioned that this concept has been
introduced in about 28 states. Mr. George informed the
committee that Congressional legislation, which is essentially
the earlier mentioned California bill, has been introduced. The
aforementioned, national approach, is probably better than
having each state pass it's own legislation, possibly with
slight differences. Therefore, he urged the committee to
consider that. Mr. George related that the organizations he
represents believe that privacy of information and disclosure of
any breach of this type of information should apply to everyone.
Although this legislation doesn't specifically state that it
applies to governmental entities, the sponsor has related that
the reference to "any person" does include the state and other
governmental entities, he noted.
MR. GEORGE further informed the committee that his clients are
also concerned with regard to information that's being acquired
and information that's being accessed. He explained that one
can acquire something, but not have access to it because it's
encrypted data. In that case, there really isn't a breach of
information. Again, the sponsor believes the aforementioned
concern is addressed. Mr. George pointed out that the
legislation refers to encryption, which is the current
technology used to protect information. However, in the future
there may be other applications, and therefore he suggested that
the language should be broadened to refer to "encryption or
other technology that prohibits access to the data". He noted
that because other states are adopting similar legislation,
companies already have notification processes in mind.
Therefore, he expressed the need to have the notification
process be consistent with the law as long as it meets the
specified timeframes to get the notice out, even if a bit
different than what's prescribed in the law. Thus, companies
could use the same notice procedures in all states. He informed
the committee that the sponsor has agreed to meet with him and
discuss his concerns.
3:51:47 PM
REPRESENTATIVE GUTTENBERG asked if anyone used a more generic,
board language than "encryption."
MR. GEORGE replied yes, and suggested that the language "any
other method or technology that renders the personal information
unreadable or unusable" would include future technology that's
developed.
BARBARA HUFF TUCKNESS, Director, Governmental and Legislative
Affairs, Teamster Local 959, related her support of HB 226. She
said that Mr. George adequately covered her concerns with regard
to background checks. For smaller employers that [financially]
don't have access to a secure system for background checks,
something in statute would be appropriate. Ms. Huff Tuckness
noted that she is working with the sponsor to address the
background check, the chain of custody, and how documents
received on an employee are handled through the processing
company or the specific employer.
CLYDE SNIFFEN, Assistant Attorney General, Civil Division
(Anchorage), Department of Law, informed the committee that the
department reviewed HB 226 for legal concerns for which it has
none. Mr. Sniffen opined that HB 226 will help address some of
the earlier mentioned security breach issues.
STEVE CLEARY, Executive Director, Alaska Public Interest
Research Group (AkPIRG), applauded the committee's quick action
in addressing this national problem. He informed the committee
that he just learned that about 185,000 GM MasterCard holders
had their personal information breached again. The question is
how and when these people will be notified as well as how best
these people can protect themselves.
DAN SIMIEM, President, Laborers Local 942, stated his support of
HB 226. Mr. Simiem pointed out that companies that retrieve and
bank this data should have some kind of firewall protection. He
offered his understanding that the problem comes when these
companies go to smaller [entities], which tend to open the
portals to the information. Therefore, he requested that be
given consideration.
3:56:54 PM
REPRESENTATIVE LYNN highlighted that the legislation refers to
businesses that use personal information. He noted that when he
gets new software, it has to be registered, which includes
personal information. He asked if that would be included under
HB 226 or would it be limited to large companies such as
ChoicePoint.
REPRESENTATIVE GARA clarified that [under HB 226] if information
on an individual held by any government entity or company has
been breached, the individual(s) have to be told. He surmised
that Representative Lynn is alluding to the companies that sell
information, for which legislation was introduced last year. He
said that it's probably worth another look. Representative Gara
clarified that HB 226 relates to stolen information rather than
the sale of information. He mentioned his concern that the sale
of information may be regulated by federal law and thus the
state may not be able to address it. In further response to
Representative Lynn, he specified that HB 226 doesn't change
anything in regard to entering information for a computer
information form, for example. However, he said that is of
concern as well.
3:58:48 PM
REPRESENTATIVE GUTTENBERG turned to the situation in which a
site from which one has downloaded information pulls data from
an individual's computer and uses the data. The aforementioned
is a breach of the individual's security. He suggested that
most people don't have firewalls on their home computers. He
asked if the aforementioned situation is addressed in HB 226.
REPRESENTATIVE GARA reiterated that HB 226 addresses companies
that have individuals' personal information and [the
notification procedures] required when they discover that the
information has been stolen. This legislation merely says that
once the company finds out that the information has been stolen,
they have to inform the individuals immediately. The sale of an
individual's information is of great concern, but he said he
didn't know how to regulate it at this point.
REPRESENTATIVE LEDOUX posed a situation in which an individual
took information from one of these companies that stores data
and then sells it. She inquired as to what would happen.
REPRESENTATIVE GARA reiterated that HB 226 protects people when
there has been an unauthorized use of their information.
Therefore, if a company that holds data discovers that someone
has taken data without the company's consent, then the company
has to inform those whose data was taken. He said he wasn't
sure of the federal rules regarding a situation in which the
person who took the information subsequently sells it.
4:01:27 PM
REPRESENTATIVE LEDOUX asked whether "they" have to tell [the
individual] that his or her information is being sold.
REPRESENTATIVE GARA specified that this legislation doesn't
address the sale of the information that has been authorized by
the company housing the data. Again, this is an issue that
should be reviewed, but he said he didn't know how to address it
at this point.
4:01:45 PM
REPRESENTATIVE GUTTENBERG surmised that it would address the
Commerce Clause. He inquired as to how those companies that are
located out of state or out of the country would be addressed.
REPRESENTATIVE GARA highlighted that this legislation includes a
provision that specifies that it applies to the full extent the
constitution allows. Generally, if there is an out-of-state
company that is selling personal information of Alaskans, the
company has "touched us enough" that the state can regulate it.
Therefore, this legislation applies to companies located out of
state if they use the information of Alaskans.
CHAIR ANDERSON, upon determining there were no further
questions, closed public testimony.
[HB 226 was held over.]
HB 213-ALCOHOL SERVER EDUCATION
CHAIR ANDERSON announced that the next order of business would
be HOUSE BILL NO. 213, "An Act relating to alcohol server
education."
4:05:17 PM
REPRESENTATIVE JAY RAMRAS, Alaska State Legislative, sponsor of
HB 213, began by highlighting that as a restaurant owner he has
accumulated years of experience in the food and beverage
industry. He said that this bill covers the techniques in
alcohol management (TAM) course, which provides extraordinarily
useful information for servers, bartenders, security, and
doormen. However, under the current law individuals have to
renew their TAM card by retaking the entire four-hour exam every
three years. The aforementioned is time ill spent for
professional servers who have been in the industry for years.
Therefore, the legislation would provide that those who have
already taken the four-hour course would merely have to take the
written test demonstrating an understanding of the course
subject. The aforementioned is an excellent funding mechanism
for Cabaret Hotel Restaurant & Retailer's Association (CHARR)
and other advocacy groups in the industry, since there is a fee
charged for the course. The fees for the course aren't
addressed in this legislation. He stated that he is only trying
to be mindful of professionals in the food service industry and
suggest that after being in the industry for three years, they
should be allowed to demonstrate their competency with the laws
and regulations concerning alcohol rather than requiring another
full course and exam.
4:07:18 PM
CHAIR ANDERSON asked how much it would cost to renew the
certification.
REPRESENTATIVE RAMRAS answered that an applicant would have to
go through the same facility and the same testing and
certification program. He reiterated that this legislation
would not make any changes to the fees, but would allow
restaurant workers to arrive in the last half hour of the four-
hour exam to take the qualifying test to obtain recertification.
The examination is really not the hard part. He related his own
experience with the course, and characterized the challenging
part as sitting through the course itself. Representative
Ramras stated that the TAM course is extraordinarily useful and
makes servers more knowledgeable about the law concerning
alcohol, which makes the dispensing of alcohol safer.
4:09:43 PM
CHAIR ANDERSON surmised then that this legislation would allow a
worker in the food and beverage industry to skip the four-hour
course and simply take the test.
REPRESENTATIVE RAMRAS said that this correct, clarifying that it
would be optional whether or not the individual would sit for
the four-hour course. These workers, numbering in the thousands
across the state, oftentimes surrender work shifts to take the
four-hour course for which the establishment does not pay. The
proposal embodied in HB 213 would save time while the individual
would still have to demonstrate competency of the course
material.
4:11:00 PM
REPRESENTATIVE KOTT asked if this legislation was supported by
CHARR.
REPRESENTATIVE RAMRAS recalled that CHARR indicated its support
for HB 213 when the organization was present earlier. In
further response to Representative Kott, Representative Ramras
said he was not a TAM instructor, but he has sat through the
course.
REPRESENTATIVE LEDOUX related her understanding that the purpose
of retaking the test is merely the receipt of the fee, and
therefore she questioned why these workers can't just pay the
fee and forgo the test.
REPRESENTATIVE RAMRAS disagreed with Representative LeDoux, and
stressed that there is value in requiring that those who have
taken the exam remain familiar with the rules that govern
serving alcohol. Therefore, he opined that it's appropriate for
the state to enforce a renewal of the TAM card and
certification. However, if one can demonstrate competency of
the information, then there is no need to sit for the entire
course. Representative Ramras characterized the exam as easy,
with a low failure rate. The exam, he explained, is designed to
get the industry workers to sit through the three hours of
course instruction. Therefore, passage of the exam fulfills the
Alcoholic Beverage Control Board's requirement.
4:13:52 PM
REPRESENTATIVE GUTTENBERG asked if it's the sponsor's intent for
the fee to be the same for taking the three-hour course and
exam, and the exam alone.
REPRESENTATIVE RAMRAS clarified that his intent is not to
interfere with private enterprise, and therefore it's up to the
entities that offer the TAM course to set the fee. This bill
provides the worker with the ability to forgo the three hours of
instruction when seeking recertification.
4:15:55 PM
REPRESENTATIVE GUTTENBERG announced that he didn't see a
statement from the ABC Board, and was wondering if it had
offered any comment on this.
4:16:11 PM
REPRESENTATIVE RAMRAS informed the committee that when the ABC
Board performs a compliance test, it reviews whether every
single employee [in an establishment serving alcohol] has to
produce a current TAM card. An employee has 30 days upon being
hired or expiration of a TAM card to take the course.
4:17:28 PM
REPRESENTATIVE KOTT asked if Representative Ramras had retaken
the refresher course.
REPRESENTATIVE RAMRAS pointed out that he was not a server and
that he did not have to take the class, although most working
owners are required to have a TAM card. He said that at his
restaurant he is allowed to greet, but not seat guests.
REPRESENTATIVE KOTT pointed out that Section 1 refers to a TAM
card being shown as proof to the ABC board, and asked if the
issuance of such a card is something new or is this section
merely making the use of the card clear to everyone.
REPRESENTATIVE RAMRAS clarified that the TAM card has always
been an acceptable way to prove one's course completion to the
ABC Board. This legislation simply says that when an individual
demonstrates the competency, he or she will be issued a new card
with a new expiration date.
REPRESENTATIVE KOTT stated that one of his staff, Mike O'Hare,
had been certified and could offer his view of the TAM course.
4:20:33 PM
MIKE O'HARE, Staff to Representative Kott, Alaska State
Legislature, stated that currently, there is a renewal test that
requires one to sit through the entire TAM course every three
years. It is not a difficult test after sitting through the
four-hour course, he opined.
REPRESENTATIVE KOTT moved to report HB 213 out of committee with
individual recommendations and the accompanying zero fiscal
note. There being no objection, it was so ordered.
HB 227-ALASKA SMALL LOANS ACT
CHAIR ANDERSON announced that the final order of business would
be HOUSE BILL NO. 227, "An Act relating to the Alaska Small
Loans Act; and providing for an effective date."
JON BITTNER, Staff to Representative Anderson, Alaska State
Legislature, presented HB 227 on behalf of the House Labor and
Commerce Standing Committee, sponsor. Mr. Bittner paraphrased
from the following written sponsor statement [original
punctuation provided]:
The last significant revision of the Alaska Small
Loans Act (ASLA) occurred between 1995 and 1996. The
bill (then numbered House Bill 319) was signed into
law in July 1996 and brought this section of statute
up-to-date with the changing market demands. There
have been several changes to the market in the last
decade, and more importantly, there has been many more
changes in technology. As computer systems become more
and more adept at taking, storing, sorting, and
retrieving information, our laws must reflect the most
efficient use of those innovations.
House Bill 227, the latest revision of AS 06.020,
takes into account not only the market-driven or
technological changes, but also the changes in the
value of money. Put simply, goods cost more today than
they did twenty, ten, or even five years ago. For
example, it is not unheard of to pay between $7,500
and $10,000 for an ATV or snowmachine. Also,
manufacturer's list prices for new automobiles can
start as high as $40 - $50,000. Clearly the definition
of what constitutes a small loan needs some
adjustment.
HB 227 improves the business environment by
encouraging industry competition, which ultimately
should decrease loan prices as well as providing
consumers additional products and services to choose
from. HB 227 will also update the Small Loans Act to
reflect current technology. As written today, the law
does not recognize automated or centralized process
utilized by most companies today.
We worked with both members of financial community and
with the Division of Banking and Securities to find
language balancing the parties' wish lists and
consumer protection. HB 227 updates the ASLA to make
the law reflective of current industry practices and
raises the limit of a small loan from $25,000 to
$50,000 broadening the Department's regulatory
oversight. Additionally, it doubles the liquid assets
and bond requirements from $25,000 to $50,000 for
businesses writing small loans.
REPRESENTATIVE ROKEBERG inquired as to who requested this
legislation.
MR. BITTNER related his understanding that both members of the
banking community and the Division of Banking & Securities
requested introduction of HB 227. In further response to
Representative Rokeberg, Mr. Bittner said that he was fairly
certain Wells Fargo Financial Corporation was involved.
However, he deferred to Mr. Davis regarding the number of
entities that fall under this provision of law.
MARK DAVIS, Director, Division of Banking & Securities,
Department of Commerce, Community, & Economic Development
(DCCED), clarified that currently there are eight licensees, of
which seven are licensees of Wells Fargo bank and the one
remaining is an independent licensee. Therefore, there are two
different entities.
4:25:36 PM
MR. DAVIS noted that although the division generally supports
the legislation as written, he has provided the committee with
written remarks regarding some issues with which the division is
concerned. He agreed that the legislation, as reform
legislation, is necessary. This legislation basically raises
the lending limit for a small loan from $25,000 to $50,000 and
caps [the interest rate of] most loans to a maximum of 24
percent. Currently, licensees are able to do business as "other
business" over $25,000 at any rate wished. Furthermore,
currently loans over $10,000 can be made at any rate the
[lending institution] wishes. Therefore, this reform would
lower rates.
4:26:19 PM
MR. DAVIS expressed concern with the exemption for sellers of
insurance under AS 06.20.010(b)(5), and related that the
Division of Banking & Securities and the Division of Insurance
oppose that. He explained that the divisions believe that
although an entity may sell insurance, it shouldn't be in the
lending business. Furthermore, Mr. Davis suggested including a
requirement in AS 06.20.060 of a physical location. He noted
that in 1996, the language "accessibility and convenience for
borrowers of money was put in the Act, the type of language
which the division supports. He then turned attention to
Section 13, AS 06.20.070(b), regarding web sites and related
that the division would prefer to follow the practice that was
included in the Deferred Deposit Loan Act of last year, which
requires a license for anyone attempting to operate [on the
Internet]. Mr. Davis said the division has concerns with AS
06.20.120 because the current language of HB 227 doesn't allow
the division the ability to revoke a multiple location license
for a violation in a singular location. He expressed the need
for the division to have the right to revoke a multiple location
license if a singular location seems to be operating at the
behest of the central office. He indicated that committee staff
had been given language to address the aforementioned. Mr.
Davis moved on to the surrendering of licenses at the end of
operations, which is found in AS 06.20.130(c). The current
language specifies a difference between non-corporate entities
and corporate entities, but the division doesn't see a reason
for that. Again, committee staff have been provided language
that specifies that an entity would have to ensure that all
loans are transferred before it can stop doing business in order
to avoid harming consumers. Furthermore, the language provided
specifies that the entity would have to notify the division
because the division can't enforce the provision unless it knows
the entity is going out of business. He then moved on to AS
06.20.160(c), which specifies that the division can only have
access to a licensees books and records during an examination.
However, the division believes that to be too restrictive.
Obviously, a complaint to the division may not occur during the
time of an examination, and therefore the division should have
the right to examine for that complaint.
4:29:18 PM
MR. DAVIS noted the division's concern with regard to the
legislation's handling of business licensing, which is located
in AS 06.20.130(c). Currently, the legislation provides an
exemption for business licenses. After talking with the
Division of Occupational Licensing, he said he understands that
the Division of Occupational Licensing requests that the
exemption be eliminated and require these small loan companies
to acquire a simple business license. Mr. Davis related the
preference for the fee, specified as $75 an hour in the
legislation, to actually follow what is specified in the
Deferred Deposit Loan Act, which is $75 per staff hour.
Furthermore, the fees in HB 227 are excessive, he opined. For
example, up to $500 can be charged for an origination fee. He
noted that committee staff has been given the division's
proposed fee schedule.
CHAIR ANDERSON announced his intention to hold HB 227 and hold
open public testimony on it.
4:30:46 PM
MARK HAMBLEN, Wells Fargo Financial, noted support for HB 227,
although he said there are some small changes that Wells Fargo
would want as well. He concluded by thanking the Division of
Banking & Securities for coming to Wells Fargo for input on the
legislation. He said he would contact the division regarding
the small changes.
4:31:38 PM
RICHARD BLOCK, Mellen Investment Company, LLC, informed the
committee that his interest in this is limited because of what
Mellen Investment Company, LLC, does. He explained that Mellen
Investment Company, LLC, only make loans secured by interest in
real property. However, the company's portfolio does include
some loans that are between $25,000 and $50,000. Mr. Block
informed the committee that he has provided the committee with
written testimony. Mr. Block said that his analysis of HB 227,
as it relates to the activities in which Mellen Investment
Company, LLC, engages, will drive it out of business. "In other
words, the volume of business we do will not justify paying the
fees, putting up the bonds, and going through the administrative
challenges that this bill would put up for us," he related. If
Mellen Investment Company, LLC, and other similarly situated
companies are out of the market, then a monopoly for certain
large banking institutions has been created. He emphasized that
Mellen Investment Company, LLC, and others have been providing a
service, particularly to those in rural areas, that have equity
in real estate for business purposes but don't qualify for bank
lending. Mr. Block related that he was greatly dismayed to
discover that his bank is sponsoring HB 227, which will put
Mellen Investment Company, LLC, out of business. In conclusion,
Mr. Block said that he would hope the committee would adopt the
amendment he has proposed at the end of his [written] testimony
to exclude loans secured by interest in real estate from HB 227.
4:34:26 PM
SHANE OSOWSKI, Equity Investors, Inc., informed the committee
that Equity Investors, Inc., is a private lender that performs
small real estate backed equity loans beyond $25,000. Mr.
Osowski related that he objects to HB 227 because it
mischaracterizes $50,000 obligations as small loans. He opined
that $50,000 is not a small amount, impulse item, that justifies
the level of bureaucracy and barriers to competition provided in
the legislation. Mr. Osowski pointed out that 50 years after
the enactment of the Alaska Small Loans Act, there are only two
licensees in Alaska. Therefore, he said he didn't believe that
one could claim that adding additional restrictions in the
$50,000 market would invite new business and further a
competitive lending environment. Mr. Osowski then turned
attention to the two credit studies submitted to support HB 227,
which actually lean against the bill. The first credit report
notes that restrictions ration high-risk consumers out of the
market, and also tend to ration out consumers seeking small
amounts of credit, which is classified as $50,000 in HB 227.
Both reports conclude that the best way to protect high-risk
borrowers is to ensure alternative sources of financing from
which to choose and facilitate unrestricted entry of new
competitors into the market. However, this legislation proposes
to do the exact opposite.
4:37:00 PM
MR. OSOWSKI concluded by charging that HB 227 treats borrowers
of $40,000 loans as unsophisticated borrowers, which isn't the
case. Furthermore, federal law already protects homeowners with
a three-day cooling off period. Moreover, individuals have the
ability to shop nationwide for alternatives via the Internet,
but this precludes that and forces individuals to go with the
two licensees in Alaska. Mr. Osowski stressed that Alaska has
unique property needs and HB 227 impacts those with impaired
credit as well as nonconforming properties in rural areas. He
also stressed that HB 227 doesn't ensure competition but rather
does the opposite. He urged the committee to consider the
aforementioned when considering to vote against HB 227 or
eliminating Section 1 from it.
JIM JOHNSON, Affordable Loan Company, explained that the
Affordable Loan Company basically operates buying paper under
the Alaska Retail Installment Sales Act, which doesn't limit the
fee or the interest charged to the consumer. Mr. Johnson
surmised that HB 227 suggests a fee that has been reduced to the
consumer for delinquency. He said that he didn't find the 24
percent objectionable today, but sometimes a law causes problem
in the future and it takes years for the legislature to make
changes to address the problem. Mr. Johnson opined that the
administration of the Division of Banking & Securities is
helpful.
KENNETH GAIN, President, Cash Now Financial, informed the
committee that his company is a small private real estate lender
as described by Mr. Block. Mr. Gain said that some of the most
valuable testimony heard today was on HB 226 regarding the
problems with errors in credit reports and stolen information.
With modern technology, most institutional lenders are highly
driven by credit scores. Many people have good credit, but
because of a mistake in their credit report are denied credit.
Cash Now Financial serves that market of people who don't meet
the credit standards of the institutional lenders. More
importantly, companies such as Cash Now Financial serve A credit
borrowers with properties against which the major institutional
loaners won't loan. While limiting this to $50,000 wouldn't put
him out of business, he said it would severely limit the
company. He said that he would either have to raise the
interest rates by 4 percent to comply with the law and the
company's current loan volume or not make loans under $50,000.
As written, HB 227 is anti-competitive and restricts credit. At
a minimum, he suggested deleting Section 1 of HB 227.
PEGGY ANNE MCCONNOCHIE, Alaska Association of Realtors, noted
that she submitted a letter to the committee. Ms. McConnochie
opined that HB 227 is a restraint of trade, will allow less
choice for consumers, and push those borrowers with problems
with income from the marketplace. She urged the committee, at a
minimum, to eliminate Section 1 of HB 227.
CHAIR ANDERSON announced that HB 227 would be held over.
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
4:43:23 PM.
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