Legislature(2007 - 2008)CAPITOL 17
04/25/2007 03:00 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB233 | |
| HB227 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 227 | TELECONFERENCED | |
| *+ | HB 233 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
April 25, 2007
3:04 p.m.
MEMBERS PRESENT
Representative Kurt Olson, Chair
Representative Mark Neuman, Vice Chair
Representative Carl Gatto
Representative Gabrielle LeDoux
Representative Jay Ramras
Representative Robert L. "Bob" Buch
Representative Berta Gardner
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 233
"An Act relating to giving notice of unclaimed net margin
distributions made by electric and telephone cooperatives."
- MOVED CSHB 233(L&C) OUT OF COMMITTEE
HOUSE BILL NO. 227
"An Act relating to the Uniform Money Services Act, to money
transmission services, and to currency exchange services; and
providing for an effective date."
- MOVED CSHB 227(L&C) OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: HB 233
SHORT TITLE: UNCLAIMED PHONE/ELEC COOP DISTRIBUTIONS
SPONSOR(s): RULES
04/11/07 (H) READ THE FIRST TIME - REFERRALS
04/11/07 (H) L&C
04/25/07 (H) L&C AT 3:00 PM CAPITOL 17
BILL: HB 227
SHORT TITLE: UNIFORM MONEY SERVICES ACT
SPONSOR(s): REPRESENTATIVE(s) KERTTULA
03/28/07 (H) READ THE FIRST TIME - REFERRALS
03/28/07 (H) L&C, FIN
04/25/07 (H) L&C AT 3:00 PM CAPITOL 17
WITNESS REGISTER
Derek Miller, Staff
to Representative Mike Kelly
Alaska State Legislature
POSITION STATEMENT: Presented HB 233 on behalf of the House
Rules Standing Committee, sponsor by request, which is chaired
by Representative Coghill.
ROBERT A. WILKINSON, Chief Executive Officer
Copper Valley Electric Association, Inc.
Glennallen, Alaska
POSITION STATEMENT: Testified in favor of HB 233.
JIM ROWE, Director
Alaska Telephone Association (ATA)
(No address provided)
POSITION STATEMENT: Testified in favor of HB 233.
MARILYN LELAND, Executive Director
Alaska Power Association (APA)
Anchorage, Alaska
POSITION STATEMENT: Testified in favor of HB 233.
RICH GAZAWAY, Administrative Law Judge
Regulatory Commission of Alaska (RCA)
Anchorage, Alaska
POSITION STATEMENT: During testimony on HB 233, responded to a
question.
JESSIE KIEHL, Staff
to Senator Kim Elton
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 227 on behalf of
Representative Kerttula, sponsor.
EZRA LEVINE, Attorney
Money Services Round Table
Washington, D.C.
POSITION STATEMENT: Testified in support of HB 227.
MARK DAVIS, Director
Division of Banking and Securities
Department of Commerce, Community, & Economic Development
(DCCED)
Juneau, Alaska
POSITION STATEMENT: Testified in favor of HB 227 and responded
to questions.
ALLEN MORE, Compliance Officer
Manager
Similon (ph) Financial Services
(No address provided)
POSITION STATEMENT: Testified in favor of HB 227.
ACTION NARRATIVE
CHAIR KURT OLSON called the House Labor and Commerce Standing
Committee meeting to order at 3:04:31 PM. Present at the call
to order were Representatives Olson, Gardner, Neuman, Buch, and
Ramras. Representative LeDoux and Gatto arrived as the meeting
was in progress.
HB 233-UNCLAIMED PHONE/ELEC COOP DISTRIBUTIONS
3:04:55 PM
CHAIR OLSON announced that the first order of business would be
HOUSE BILL NO. 233, "An Act relating to giving notice of
unclaimed net margin distributions made by electric and
telephone cooperatives."
3:05:09 PM
DEREK MILLER, Staff to Representative Mike Kelly, Alaska State
Legislature, read from the sponsor statement [original
punctuation provided]:
The purpose of HB 233 addresses the sometimes
burdensome and ineffective noticing requirements of
unclaimed property law regarding capital credits of
electric and telephone cooperatives. Electric and
telephone cooperatives from time to time receive
excess revenue from members that exceed the expenses
of operations. The cooperative keeps these excess
revenues in a member-owned capital account called
capital credits, on behalf of the member.
Cooperatives may refund a portion of accumulated
capital credits, but in some cases the cooperative
seeking to refund the capital credits no longer has a
valid address for the member. As a result, many go
unclaimed. Current Alaska unclaimed property law
allows the credits to revert back to the cooperative
as long as the cooperative, at least six months prior
to the reversion 1) mailed a notice to the last known
address of the member; 2) publishes a notice of
proposed reversion in the same manner required for
publishing a service of summons by publication; and 3)
publishes a notice of the unclaimed capital credits
four times, during four consecutive calendar weeks in
a newspaper of local circulation.
While mailing to last known address of members
sometimes results in finding members, newspaper
publication does not result in a significant increase
in the number of members who cash their capital credit
checks, particularly for rural cooperatives. As a
result, cost of compliance with this notice
requirement is significant and the effectiveness is
questionable. HB 233 allows cooperatives the option
of using the internet, instead of newspaper
publication, to notify its members of unclaimed
capital credits. Alaska is the most "wired" state in
the country and this bill allows for cooperatives to
notify its members using a method most likely to reach
them.
MR. MILLER stated that the bill is simple in nature and is
supported by the Alaska Village Electric Cooperative, Inc., and
the Copper Valley Electric Association, Inc.
3:07:14 PM
REPRESENTATIVE GARDNER asked whether the list of unclaimed
credits could be posted on the internet site for 6 months
instead of 30 days.
MR. MILLER said he is not aware of why the 30-day period was
chosen, but indicated it might be possible to "bump that up."
REPRESENTATIVE BUCH asked if newspaper publication is more
effective in urban cooperatives and why this method does not
seem to work for rural cooperatives.
MR. MILLER opined that the newspapers of general circulation are
not reaching the constituent base of the rural cooperatives.
However, he went on to say that because Alaska is the "most
wired" state in the nation, the internet may be a better vehicle
for providing notice.
3:09:31 PM
ROBERT A. WILKINSON, Chief Executive Officer, Copper Valley
Electric Association, Inc., (CVEA), explained that CVEA is a
non-profit organization that serves approximately 3,600 members.
He explained that any monies collected over and above the cost
of providing electric services belong to members and are held in
accounts for each member. He relayed that most cooperatives
hold the excess money for 20 years, which makes it very
difficult to locate the members. He said that the state's
unclaimed property statute speaks directly to unclaimed capital
credits, but opined that this well-intended statutory provision
is burdensome and out-of-date. Furthermore, the statutory
provisions are expensive to comply with and not very effective.
He said that HB 233 would give utilities the option of posting
notice of capital credits on the internet. In response to a
prior question by Representative Gardner, he explained that the
30-day period for posting is likely derived from existing legal
notice requirements. He opined that posting on the internet has
a higher likelihood of being seen and that CVEA has no
objections to posting for longer than 30 days.
MR. WILKINSON reminded the committee that internet posting may
be more accessible as it is "always on." He said that the
CVEA's accounting department has already had some success with
notifying people on the internet if it does not have a valid
address for the person. He said that CVEA, like other
cooperatives, uses unclaimed capital credits to fund scholarship
programs. In the past 15 years, CVEA has awarded over $100,000
in scholarships to graduating seniors, he said. He explained
that the effectiveness of newspaper advertising is affected by a
couple factors. First, his area has a significant temporary
population in the summer months. He has done some research and
has discovered that only 1 in 5 current members have been
members for over 20 years and over 50 percent of the current
members have been members for less than 10 years. He opined
that these statistics illustrate why it is difficult to find
persons who may have excess funds in the system, especially
after a number of years.
[Due to technical difficulties, there is no sound recording from
3:15:26 to 3:20:51; that segment was reconstructed from Gavel to
Gavel's recording.]
REPRESENTATIVE GARDNER asked if he had any objection to posting
names on the internet for 180 days.
MR. WILKINSON stated CVEA would not have any objection.
JIM ROWE, Director, Alaska Telephone Association (ATA) explained
that ATA has seven rural cooperatives as members. He stated
that its members are in favor of the bill as it will provide an
effective means of communicating with members. He opined that
urban newspapers are not read very much in rural areas, yet the
internet is very active and can be more relevant to local
issues. He stated that he supports the bill as allowing a more
effective way to communicate with members.
REPRESENTATIVE GARDNER asked if he had any objection to posting
notice on the internet for 180 days.
MR. ROWE replied that he had no objection.
3:19:22 PM
MARILYN LELAND, Executive Director, Alaska Power Association,
(APA), explained that its members provide power to almost
500,000 Alaskans. She stated that APA's membership is in
support of HB 233 as the proposed changes will provide a more
effective way of locating members who are owed capital credits
and will save the utility cooperative thousands of dollars in
advertising expenses. She opined that the current method of
publishing a long list of names four times is not effective as
many of the persons no longer live in the area. In response to
an earlier question, she told members that the Department of
Revenue (DOR) has been successfully using the internet to
provide notices of unclaimed property.
RICH GAZAWAY, Administrative Law Judge, Regulatory Commission of
Alaska (RCA), responded to a question by stating that the RCA
does not take a position on this legislation.
3:22:13 PM
REPRESENTATIVE GARDNER offered Conceptual Amendment 1 to page 2,
lines 4-6, to lengthen the time period for posting on the
cooperative's Internet web site a list of the persons for whom
the cooperative has unclaimed distributions from 30 days to 180
days. There being no objection, Conceptual Amendment 1 was
adopted.
3:22:37 PM
REPRESENTATIVE NEUMAN moved to report HB 233, as amended, out of
committee with individual recommendations and the accompanying
fiscal notes. There being no objection, CSHB 233(L&C) was
reported from committee.
HB 227-UNIFORM MONEY SERVICES ACT
CHAIR OLSON announced that the final order of business would be
HOUSE BILL NO. 227, "An Act relating to the Uniform Money
Services Act, to money transmission services, and to currency
exchange services; and providing for an effective date."
3:25:17 PM
JESSIE KIEHL Staff to Senator Kim Elton, Alaska State
Legislature, explained on behalf of the sponsor, Representative
Kerttula, that HB 227 would implement the Uniform Money Services
Act ("UMSA") which was drafted by the National Conference of
Commissioners on Uniform State Laws (NCCUSL). House Bill 227
proposes to incorporate into Alaska law two regulatory aspects
of the UMSA: money transmission and currency exchange services.
Currently 47 states regulate money transmission services in some
fashion, and this bill will impose safety standards on these
money services businesses, he opined. He said that HB 227 has
no effect on Alaska's banks as their services are already
regulated. He relayed that Alaskans and visitors have been
duped by unscrupulous money transmitters who do not transfer
funds as directed. He stated that licensure would place
restraints on unscrupulous individuals.
MR. KIEHL said that the bill requires that money transmitters
meet certain bonding and net worth requirements to protect
consumers. Furthermore, the federal government is concerned
that money services businesses can be used to launder money or
to finance terrorist activities. Therefore, the federal
government encourages states to license money service businesses
to ensure that law enforcement and bank regulatory activities in
Alaska can coordinate with the federal government to ensure that
these businesses do not avoid banks because they want to avoid
scrutiny, he explained. He said that the bill is revenue
neutral for the state, and would require that one half-time
examiner be added to the Division of Banking and Security. The
cost of that position would be borne by regulated businesses, he
explained. He told members that the bill has the support of
both large and small money services businesses, consumer groups,
cruise ship lines, and the Alaska Bankers Association (ABA).
3:29:12 PM
REPRESENTATIVE LEDOUX requested further specifics regarding
incidents where Alaskans have been victimized by money transfer
service providers.
MR. KIEHL replied that although he is not familiar with specific
incidents, he has received information from a Juneau-based small
business representative regarding an incident in Juneau whereby
a person absconded with roughly $30,000 in funds that were given
to that person for transfer to another country.
REPRESENTATIVE NEUMAN asked what rates are charged for money
transfers of $500 to $1,000.
MR. KIEHL replied that the industry is competitive and generally
"niche" operators in communities will offer lower rates than
banks for wire transfers of small amounts.
REPRESENTATIVE NEUMAN shared his understanding that it is $5-$20
per $1,000.
MR. KIEHL agreed that the aforementioned rates are accurate. He
noted that the type of providers the bill would cover do not
tend to transfer larger amounts of money.
REPRESENTATIVE LEDOUX asked what the regulation proposed by the
bill will cost these businesses.
MR. KIEHL responded that the division estimates that licenses
will cost around $2,000 annually. He said that currency
exchange businesses would be licensed biennially so their rate
"would be half on an annualized basis."
REPRESENTATIVE LEDOUX opined that this may be a "pretty hefty
fee" for some of these smaller businesses, especially for ones
that have a specific niche and transfer money to only one
country, such as Laos or Thailand.
MR. KIEHL replied that he understands the concern expressed
about the fees, however he opined that most of the licensees
will be somewhat larger operations and their payment of fees
will help defray costs for smaller operations. He suggested
that adoption of a uniform fee structure levels out costs among
participants and contributes to efficiency of administration.
He noted that some states have adopted other models of this law,
and said that the model proposed was chosen to keep the fiscal
impact as low as possible.
3:34:32 PM
REPRESENTATIVE NEUMAN made a motion to adopt the proposed
committee substitute (CS) for HB 227, Version 25-LSO814\C,
Bannister, 4/19/07, as the working document. There being no
objection, Version C was before the committee.
3:34:57 PM
EZRA LEVINE, Attorney, Money Services Round Table, explained
that the organization's members include well-known money service
providers such as American Express, Western Union, and other
large non-bank money transmitters. He stated his organization
is in full support of HB 227.
REPRESENTATIVE LEDOUX asked whether national chains will pay
only one fee, or whether they will pay a fee for each individual
store location.
MR. KIEHL replied that national corporations would pay one
license fee. The bill imposes bond or surety requirements for
additional locations. The UMSA sets up a structure for what are
termed "authorized delegates," and requires the money transfer
business to pay the license fee when set up in a location that
also conducts other business. For example, if Western Union has
a business location in a grocery store, Western Union pays the
license and additional surety fee, not the store where the
business is transacted.
CHAIR OLSON inquired as to whether the 47 states that currently
regulate this area use the UMSA, or their own laws.
MR. KIEHL replied that currently there are four states - Iowa,
Texas, Washington, and Vermont - that use the UMSA. He said
that there are a "couple [of] model acts" in use, while other
states still use "sale of checks" laws, which he offered are not
generally a very good fit. He said that one benefit to
businesses in using the UMSA is that there is less paperwork to
complete when a business seeks to expand and do business in
another state that also uses the UMSA.
3:38:18 PM
MARK DAVIS, Director, Division of Banking and Securities,
Department of Commerce, Community, & Economic Development
(DCCED), stated that the department supports HB 227. He
explained that there are other model acts besides the UMSA, but
opined that these other acts do not protect the consumer as well
as the UMSA. He agreed that several states are using laws
related to check cashing to regulate money transfers. The bill
does not include the model act's provisions related to check
cashing, a decision he said was made by the bill's sponsor. He
said that at some point, DCCED would likely support a bill to
address check cashing and private automated teller machines. He
opined it would make sense to put provisions regarding
regulation of check cashing in a separate piece of legislation.
He said that Alaska does not currently regulate "non-bank"
financial services such as check cashing, mortgages, and money
transmitters. He offered his opinion that HB 227 will help
consumers by requiring that businesses post their rates, offer
receipts, and allow for refunds. He said that Version C
clarifies that the fees charged are not the fees charged by the
businesses, but the fees charged for the licenses.
MR. DAVIS characterized the bill as "pro law enforcement" as it
requires these businesses to register with federal agencies that
track money transfers. He said that Version C allows small
businesses to post something other than a bond for security as
bonds can be expensive for a small business. He said DCCED
supports the confidentiality requirements set forth in AS
06.55.407, and noted that the confidentiality provisions apply
only to the licensees. He indicated there may be an issue as to
whether information given to a money transmitter will remain
confidential. He referred to a prior concern regarding the cost
of this legislation by explaining that generally the Division of
Banking and Securities operates on receipts rather than general
funds. He said that the division has made a good faith estimate
as to how many licensees would be covered by the provisions of
the bill, and agreed that if there are not many providers the
fees could be higher than estimated. He indicated that a prior
estimate of the number of payday lending services was somewhat
off.
REPRESENTATIVE NEUMAN shared his understanding that the fee is
based on the division's efforts to create a neutral fiscal note.
MR. DAVIS explained that the bill's provisions state that fees
are to be based on actual costs, which is typical for his
division.
REPRESENTATIVE BUCH asked for further explanation of what
happens when the state's estimates turn out to not be accurate,
such as the situation with payday lenders mentioned earlier.
MR. DAVIS responded that the division has added an examiner to
review payday lending businesses, and opined that there is
enough revenue received through licensing to cover the costs.
He opined that the "next time around" the fees imposed on payday
lenders may be lowered as there are new participants in the
industry. He relayed that licensing bills tend to change
industries as sometimes business leave or are "put out of
business" due to licensing. When licensing was first imposed on
the payday lender business, it resulted in 10 businesses exiting
the industry, 30 to 40 new businesses joining, and the
collection of $758,000 in fines and penalties based on illegal
loans, he explained. He further explained that the first
examination of businesses after licensing was imposed revealed
that some loans made were not in compliance with law.
[Due to technical difficulties, there is no sound recording from
3:44:07 to 3:44:21; that segment was reconstructed from Gavel to
Gavel's recording.]
MR. DAVIS explained in response to a question that some business
were shown to have engaged in loan practices not allowed by
Alaska law, such as excessive rollovers or illegal interest
fees. He said that the division will not re-license an
offending business unless it makes full restitution.
REPRESENTATIVE BUCH sought assurance that the fiscal note
prepared by the division anticipates the correct number of
examiners and investigators to cover the businesses being
regulated.
MR. DAVIS stated that he anticipates that an additional half-
time examiner position will be adequate to review the records of
registered businesses. He said that his discussions with other
states indicate that the examinations necessary can be simple if
the business is registered, as required, under federal law. He
said that the number of businesses will affect the amount of the
fees, and stated that the division has estimated the number of
possible licensees. He noted that the money transfer business
is currently unregulated and unlicensed; therefore it is hard to
arrive at a good number.
REPRESENTATIVE LEDOUX shared her understanding that if the
division overestimates the number of licensees in the first year
to set the fee, the fee will likely be higher the next year as
it will be divided among the actual number of licensees rather
than the incorrect overestimated number.
MR. DAVIS agreed this is how the bill is drafted.
REPRESENTATIVE LEDOUX asked for further information on the
possible number of money transfer services.
MR. DAVIS reiterated that it is difficult to answer this
question as these businesses are currently not regulated.
REPRESENTATIVE LEDOUX expressed some concern about the smaller
businesses that operate out of small stores.
MR. DAVIS replied that it is difficult to find these business.
He opined that some of the money transfer services in small
stores are associated with larger national chains such as
Western Union. He said that Western Union tends to be in
Alaskan grocery stores, while other businesses, like Money Gram,
are not.
REPRESENTATIVE BUCH asked about the ability to adjust fees in an
appropriate timeframe so as to reflect reality when the number
of businesses becomes clearer.
MR. DAVIS replied that the division will be required to provide
a report to the legislature that discloses the actual amount of
fees charged to licensees and whether the licensees have
expressed concerns about the amount of the fee. He suggested
that the bill could be amended to allow that the fees be set
through regulation to provide more flexibility. He said it is
not the purpose of regulation to put small Alaska businesses out
of business.
3:50:15 PM
REPRESENTATIVE NEUMAN expressed support for the neutral fiscal
note and opined that if there are fewer licensees than expected,
those businesses will have more customers, and thus more
revenue, to cover their costs.
ALLEN MOORE, Compliance Officer, Manager, Similon (ph) Financial
Services stated his support for HB 227. He described Similon as
a "mom and pop" organization that has been in business for nine
years. It belongs to the National Money Transmitters'
Association, has a network in Indonesia, and works with a
company that has a network in the Philippines. He told members
that Similon, like many other money transfer business
nationwide, lost its bank account in September. He said banks
have been terminating their relationships with money transferors
based on advice of bank auditors that money transferors are a
risky business. He said that Similon has secured another
account in Alaska at a cost of "many thousands" of dollars.
MR. MOORE suggested that licensing and regulation would provide
the respect and standing that money transfer businesses deserve.
Furthermore, licensing and regulation would contribute to
industry safety and soundness. He opined that the licensing
fees would cost "a couple thousand dollars," but that many money
transfer businesses are agents for larger companies. The parent
company would pay for the license, not the in-state agent, he
said. He reminded the committee that the parent company is
required to monitor its business, train its employees, and keep
necessary records.
3:54:54 PM
REPRESENTATIVE NEUMAN moved to report the proposed CS for HB
227, Version 25-LSO814\C, Bannister, 4/19/2007, out of committee
with individual recommendations and the accompanying fiscal
notes. There being no objection, CSHB 227(L&C) was reported
from the House Labor and Commerce Standing Committee.
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
3:55 p.m.
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