Legislature(2017 - 2018)SENATE FINANCE 532
02/21/2018 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB155 | |
| HB195 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 155 | TELECONFERENCED | |
| + | HB 195 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE FINANCE COMMITTEE
February 21, 2018
9:16 a.m.
9:16:30 AM
CALL TO ORDER
Co-Chair MacKinnon called the Senate Finance Committee
meeting to order at 9:16 a.m.
MEMBERS PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Anna MacKinnon, Co-Chair
Senator Click Bishop, Vice-Chair
Senator Peter Micciche
Senator Donny Olson
Senator Gary Stevens
Senator Natasha von Imhof
MEMBERS ABSENT
None
ALSO PRESENT
Senator Kevin Meyer, Sponsor; Edra Morledge, Staff, Senator
Kevin Meyer; Sara Chambers, Deputy Director, Division of
Corporations, Business and Professional Licensing,
Department of Commerce, Community and Economic Development;
Lori Wing-Heier, Director, Division of Insurance,
Department of Commerce, Community and Economic Development;
Kristie Babcock, Agent, State Farm Insurance.
PRESENT VIA TELECONFERENCE
Mark Schiffman, Executive Director, Real Estate Evaluation
Advocacy Association, (REEVA), Minneapolis; William
Scoggin, Real Estate Evaluation Advocacy Association,
North Carolina; David Derry, Chair, Certified Real Estate
Appraisers, Kenai; George Pierce, Self, Kasilof; Ted
Moninski, Self, Anchorage; Gary Strannigan, Liberty Mutual
Insurance Company, Seattle.
SUMMARY
SB 155 REAL ESTATE APPRAISAL MNGMT. COMPANIES
SB 155 was HEARD and HELD in committee for
further consideration.
HB 195 INSURER'S USE OF CREDIT HISTORY/SCORES
HB 195 was HEARD and HELD in committee for
further consideration.
SENATE BILL NO. 155
"An Act relating to the registration and regulation of
real estate appraisal management companies; relating
to the establishment of fees by the Department of
Commerce, Community, and Economic Development;
relating to the Board of Certified Real Estate
Appraisers; and relating to real estate appraisers."
9:18:14 AM
SENATOR KEVIN MEYER, SPONSOR, explained the legislation:
An Appraisal Management Company, or AMC, is an
independent entity through which mortgage lenders
order residential real estate valuation services for
properties on which they are considering extending
loans to homebuyers. AMCs fulfill an administrative
function in the appraisal process, including selecting
an appraiser and delivering the appraisal report to
the lender. Individual appraisers who work for AMCs
provide the actual property valuation services.
AMCs existed well before the 2008 global financial
crisis, and today they play an increasingly important
role as a third-party service provider in the consumer
mortgage process. AMCs have become increasingly
popular by lenders across the country to ensure
federal and state regulatory compliance and
independence between lenders and appraisers as
required by the Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010. Dodd-Frank requires
that states enact comprehensive AMC oversight and
registration programs with an August 2018, deadline.
Senator Meyer believed that the legislation would help to
promote public trust, consumer protection, and establish
oversight and enforcement.
9:20:32 AM
Senator Olson asked whether commercial properties were
affected by the appraisals.
Senator Meyer thought that the appraisals applied only to
residential property but deferred to his staff for a final
answer.
9:21:14 AM
EDRA MORLEDGE, STAFF, SENATOR KEVIN MEYER, affirmed that
the bill applied only to residential real estate. She
discussed the Sectional Analysis (copy on file):
Section 1: Adds a new subsection 'j' to allow the
Dept. of Commerce, Community and Economic Development
to establish a fee for regulatory costs and a
mechanism for reporting those fees.
Section 2: Requires the department to establish a
registry fee as required by the federal government and
permits the department to remit those fees to the
federal government.
Section 3: Amends the powers and duties of the Board
of Certified Real Estate Appraisers to require
regulations for Appraisal Management Companies.
Section 4: Authorizes the Board to examine records of
AMCs, requires those companies to submit information
to the Board, and allows investigations of alleged
violations.
Sections 5 and 6: Adds a new section to the statute
regarding Appraisal Management Companies including
provisions for registration, reporting records
retention, and inspection requirements, exemptions,
prohibited practices, and disciplinary proceedings.
Section 7: Definitions "appraisal management
services," "appraisal panel," "company, controlling
person," and "principal dwelling."
Section 8: Allows for fingerprinting of a controlling
person of an Appraisal Management Company through the
Department of Public Safety.
Section 9: Allows real estate Appraisal Management
Company registry fees to be included in the definition
of program receipts and non-general fund program
receipts.
Section 10: Applicability clause this act applies to
a person offering or providing appraisal.
Co-Chair MacKinnon OPENED public testimony.
9:24:28 AM
MARK SCHIFFMAN, EXECUTIVE DIRECTOR, REAL ESTATE EVALUATION
ADVOCACY ASSOCIATION, (REEVA), MINNEAPOLIS (via
teleconference), spoke in support of the legislation. He
said that the association had supported similar legislation
in other states. He believed that the bill supported
consumer protections in the appraisal process; the
independent third party created a valuable firewall and
addressed undue influence. He said that AMCs were
integrated into the mortgage lending process as well as
secondary markets and the products provided by AMCs insured
proper valuations for the investment marketplace.
9:27:58 AM
Senator Stevens wondered whether a full-time new position
would need to be established to carry out the legislation
requirements.
Mr. Schiffman replied that licensing fees paid for the
program. He said that the need for additional staffing was
not unusual and varied from state to state.
9:29:30 AM
WILLIAM SCOGGIN, REAL ESTATE EVALUATION ADVOCACY
ASSOCIATION, NORTH CAROLINA (via teleconference),
introduced himself and indicated that he was available for
questions.
9:29:56 AM
DAVID DERRY, CHAIR, CERTIFIED REAL ESTATE APPRAISERS, KENAI
(via teleconference), testified in support of the
legislation and indicated that the board was ready to
assume oversight of AMCs. He said that the appraisal board
had been self-funded since 1991. He lamented that the
fingerprinting requirement for AMCs was cumbersome and
should be removed from the bill. He also recommended an
increased bond amount of $150,000. He believed that this
would provide a more fiduciary cushion for the state.
9:34:26 AM
Co-Chair MacKinnon clarified that the board listed in
Section 3 was an existing board; the powers and duties of
that existing board would be modified by the legislation.
Mr. Derry agreed.
Co-Chair MacKinnon asked whether the legislation created
another board in state government.
Mr. Derry replied no.
9:36:49 AM
SARA CHAMBERS, DEPUTY DIRECTOR, DIVISION OF CORPORATIONS,
BUSINESS AND PROFESSIONAL LICENSING, DEPARTMENT OF
COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, testified in
support of the legislation - with certain amendments. She
felt that the federal deadline created a sense of urgency.
She suggested that the authority to set fees in order to
recoup costs should be granted in the legislation. She
added that an extension to the effective date would allow
the board and the department the ability to adopt
regulations and set fees. She said that transitional
language would be needed in advance of the effective date.
She said that the department supported on PCN in the fiscal
note and did not believe that a full-time person would need
to be added to staff. She said that the PCN would be
supporte4d by fees and not general funds.
9:40:20 AM
Co-Chair MacKinnon requested that the department work with
her office on any amendments to the legislation.
9:40:33 AM
Senator Olson wondered about the self-regualtion of the
appraisers and worried that an appraiser could "go rouge."
Ms. Chambers replied that the program would be self-funded
and regulated by the existing Board of Certified Real
Estate Appraisers; self-regualtion was a misnomer, as the
board would be governed by the existing board process.
9:41:27 AM
Senator Stevens understood that the program would require a
half-time position but that the PCN was for a full-time
position. He wondered what the PCN would do for the other
half of their duties.
Ms. Chambers replied that the department would use the PCN
to manage the licensing work of other boards that had
produced more work than had been initially expected.
9:42:44 AM
Senator Micciche wondered how many licensees were expected
and the approximate cost of licensing.
Ms. Chambers responded that the department was working on
developing the licensing fee, 200 new licensees were
expected. This would be the only federally regulated
program for boards under the department and would require
additional scrutiny.
9:43:57 AM
Vice-Chair Bishop wondered what the economic loss to the
state would be if the bill were not passed.
Ms. Chambers thought that the appraisal management
companies that were not federally regulated would not be
able to operate in the state. She said that anything that
required federal oversight would not be able to be
regulated by a non-federally regulated AMC, which would
slow the process in the state.
Co-Chair MacKinnon queried Mr. Derry's thoughts on the
matter.
Mr. Derry shared that it could constrict potential for
financing for home purchases, which would negatively affect
the entire residential market.
9:47:16 AM
Co-Chair MacKinnon understood that 10 to 15 percent of the
mortgages in Alaska were processed through Fanny Mae or
Freddy Mac.
Mr. Derry replied that the mortgage funder was not the
issue, whether the transaction was federally regulated
would be what would impact AMCs under the Dodd-Frank Act.
9:49:00 AM
Co-Chair MacKinnon CLOSED public testimony.
Co-Chair MacKinnon stated that amendments would be due the
following Friday at 5pm.
SB 155 was HEARD and HELD in committee for further
consideration.
HOUSE BILL NO. 195
"An Act relating to insurer actions based on credit
history and insurance scores at insurance policy
renewal; and providing for insurer consideration of
consumer requests for exceptions of credit history or
insurance scores."
9:50:55 AM
LORI WING-HEIER, DIRECTOR, DIVISION OF INSURANCE,
DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT,
discussed HB 195 [from the Transmittal Letter (copy on
file)]:
This bill makes changes to the Alaska Insurance Code
to allow an insurer to use a consumer's credit history
or insurance score for policy renewals. Under the
current law, an insurer cannot use a consumer's credit
history or insurance score when renewing a policy,
unless the consumer affirmatively waives the
prohibition on the use of credit history at renewal.
If passed, this legislation would give an insurer the
ability to take into consideration a consumer's credit
history or insurance score at the time of renewal.
However, there are many consumer protections that have
been added.
The bill requires insurers to provide written
notification to consumers if their insurance rate will
be negatively affected due to their credit score. In
the notification to the consumer, the insurer must
provide information regarding extraordinary life
circumstance exceptions and instruct the consumer
regarding how to request an exception. In addition to
the specific circumstances listed, this legislation
adds language allowing consumers who feel their life
circumstances warrant exception, to request one in
writing, even if it is not specifically listen on the
insurer's list of expectations.
This legislation further protects consumers by
establishing an appeal process for consumers who
believe their requests for an extraordinary life
circumstance exception have been wrongfully denied by
an insurer. The appeal process designates the State's
Division Director of Insurance as the final decision
maker on consumer appeals under the extraordinary life
circumstances and requires a decision maker on
consumer appeals under extraordinary life
circumstances and require a decision be made within 30
days after receipt of the appeal. The appeal process
included in this legislation implements safeguards for
consumers by ensuring the final decision does not rest
with the insurer and requires timely action so as not
to adversely affect the consumer.
Additionally, this bill adds provisions stating that
an insurer may not fail to renew a policy based on a
consumer's lack of credit history and prohibits the
use of a credit score that is more than 90 days old.
Furthermore, this bill would require insurers that use
a consumer's credit history to underwrite or rate a
policy to re-underwrite or re-rate a policy no later
than every 24 months, allowing consumers to reap the
benefits of an improved credit score.
This bill clarifies that the definition of an "adverse
action" is limited to the definition under the Fair
Credit Reporting Act.
9:55:30 AM
Senator Olson asked how the bill would affect people who
did not have credit or credit scores.
Ms. Wing-Heier replied that a credit score could not be
used if credit did not exist. The lack of a credit score
could not be used in a detrimental manner.
Senator Micciche requested and explanation of the
correlation between credit scores and premiums.
Ms. Wing-Heier responded that statistics had shown that
someone who managed their credit was a better insurance
risk.
Senator Micciche appreciated the explanation of the direct
relationship between credit scores and insurance risk.
Senator Stevens requested an example that showed a
correlation.
Ms. Wing-Herier agreed to provide the information to the
committee.
9:58:22 AM
Ms. Wing-Heier addressed the Sectional Analysis (copy on
file):
Section 1: The subsection is amended to require an
insurer writing personal insurance that uses credit
information in underwriting or rating a consumer at
the time of renewal to disclose to the consumer that
the insurer will obtain credit information in
connection with the renewal. It also replaces the word
"applicant's" with "consumer's" because the
requirement now applies to both new applicants and
existing policyholders.
Section 2: The subsection amends the notice required
when an adverse action is taken and to provide notice
informing the consumer of extraordinary life
circumstance exemptions, the process for requesting
such an exemption, and that they must request an
exemption within 60 days. The amendment also clarifies
that the notice of adverse action must be in writing.
Section 3: The subsection is amended to clarify the
statute by adding that an insurer may, in addition to
credit history, use a consumer's insurance score to
cancel, deny, nonrenew, underwrite, or rate personal
insurance only in combination with other substantive
underwriting factors. The subsection is also amended
to provide that if an insurer uses a consumer's credit
history or insurance score, then not later than 24
months after the insurer most recently used the
consumer's credit history or insurance score to
underwrite or rate a policy, the insurer shall
reunderwrite and rerate the policy based on the
consumer's current (1) credit history or insurance
score and current risk characteristics; or (2) risk
characteristics but not including, in whole or in
part, the consumer's credit history or insurance
score.
Section 4: This section eliminates the requirement
that an insurer first obtain a written waiver at each
renewal from a consumer to underwrite or rate a
personal insurance policy based on the consumer's
credit history or insurance score. The remaining
paragraphs in the subsection are renumbered
accordingly.is amended to provide that the
prohibitions on the use of credit scores by insurers
set forth in the paragraph also apply to nonrenewals.
This section also establishes that an insurer may not
use credit history to cancel, deny, nonrenew,
underwrite, or rate a personal insurance policy if the
history is obtained more than 90 days before the
policy is canceled, denied, nonrenewed, underwritten,
or rated. It further clarifies that the paragraph does
not require an insurer to reevaluate a consumer's
credit history more frequently than is required under
AS 21.36.460(c).
Section 5: is a new section which requires (except as
provided under AS 21.36.460(d)) an insurer that uses a
consumer's credit history or insurance score to
provide reasonable exceptions to the insurer's rates,
rating classifications, company or tier placement, or
underwriting rules or guidelines for a consumer who
has experienced, and whose credit history or insurance
score has been affected by one or more of the
following extraordinary life circumstances:
?a catastrophe, as declared by the director under
AS 21.06.080;
?a serious illness or injury, or a serious
illness of or injury to an immediate family
member;
?the death of a spouse, child, or parent;
?divorce or the involuntary interruption of
spousal support or maintenance payments;
?identity theft;
?loss of employment for three months or more as a
result of involuntary termination;
?military overseas deployment; or
?other extraordinary life circumstances where a
prudent person would consider an exception to the
insurer's rates, rating classifications, company
or tier placement, or underwriting rules or
guidelines to be reasonable.
AS 21.36.461(b)
This subsection allows an insurer to require a
consumer requesting an exemption under 21.36.461(a) to
provide reasonable written and independently
verifiable documentation of the extraordinary life
circumstances and demonstrate that the circumstances
had a direct and meaningful effect on the consumer's
credit information.
AS 21.36.461(c)
This subsection describes situations where an insurer
may grant an exception when a consumer requests an
exception under AS 21.36.460(b).
AS 21.36.461(d)
This subsection provides that an insurer may not be
considered out of compliance with a law or rule
relating to underwriting, rating, or rate filing as a
result of granting an exception under this section.
The subsection allows an insurer to grant an exception
notwithstanding its approved filings and rates and
does not require the insurer to have to submit filing
or rate amendments to the division for approval in
order to grant the exception.
AS 21.36.461(e)
This subsection requires the insurer to provide notice
to the consumer in writing of its decision in granting
or not granting the request for an exception not later
than 30 days after the insurer receives sufficient
documentation of the information requested from the
consumer under AS 21.36.461(b).
AS 21.36.461(f)
If an exception is denied and an adverse action will
be maintained by the insurer, this subsection requires
the insurer's notice under AS 21.36.461(e) to include
the insurer's reason for denying the request for an
exception and for maintaining the adverse action and
notice of the consumer's right to appeal the denial to
the director of the division of insurance.
AS 21.36.461(g)
This subsection provides that the consumer can appeal
the adverse action to the director not later than 30
days after receiving the insurer's notice.
AS 21.36.461(h)
This subsection requires the director of the division
of insurance to make a decision on the consumer's
appeal not later than 30 days after receiving the
appeal and requires the director to provide the
decision to both the insurer and to the consumer and
outlines requirements for the basis of the decision.
AS 21.36.461(i)
This subsection provides that the hearing and appeal
procedures provided for in AS 21.06.180 21.06.230 do
not apply to consumer appeals submitted to the
director under AS 21.36.461(g).
AS 21.36.461(j)
This subsection makes clear that nothing in AS
21.36.461 may be construed to provide a consumer with
a cause of action that does not exist in the absence
of this AS 21.36.461.
AS 21.36.461(j)
This subsection provides that the term "adverse
action" as used in AS 21.36.461 is limited to an
adverse action defined under AS 21.36.460(i) that is
based in whole or in part on the insured's credit
history or insurance score as affected by one or more
extraordinary life circumstances.
The subsection also provides that the term "consumer"
has the meaning given in AS 21.36.460 and the term
"director" has the meaning given in AS 21.97.900.
AS 21.36.461(k)
The subsection is amended to replace the term
"insured" with the term "consumer" for consistency.
Section 6:
This section is amended to exclude the exception
appeal process under AS 21.36.461 from the
jurisdiction of Department of Administration Office of
Administrative Hearings (OAH).
10:02:11 AM
Senator Stevens wondered when the 60 days, listed in
Section 2 on the Sectional Analysis, would officially
begin.
10:02:45 AM
Ms. Wing-Heier replied that the timeframe would begin once
the consumer received the notice from the insurance
company.
10:03:46 AM
KRISTIE BABCOCK, AGENT, STATE FARM INSURANCE, spoke in
support of the legislation. She offered a brief history of
similar legislation. She highlighted the difficulties she
faced working under the current law. She often had to
explain current law to her clientele, which she categorized
as confusing and cumbersome. She expressed gratitude to the
committee for hearing the legislation.
10:10:30 AM
Senator Stevens asked whether a similar bill passed by the
legislature 2 years ago had addressed the appeals process.
Ms. Babcock replied that there had been an appeal process
written into the previous legislation, this bill differed
in that the appeals process offered additional consumer
protections.
10:11:26 AM
AT EASE
10:11:38 AM
RECONVENED
10:11:54 AM
GEORGE PIERCE, SELF, KASILOF (via teleconference),
testified against the bill. He felt that the bill would
discriminate against those who experienced medical and
financial hardship.
10:14:57 AM
TED MONINSKI, SELF, ANCHORAGE (via teleconference), spoke
in support of the legislation. He believed that the intent
language in the legislation about the renewal process
should be very clear.
10:18:30 AM
Ms. Wing-Heier spoke to the testifiers concerns. She shared
that she read nothing in the legislation that implied that
a person would have to go back through the application
process; the word "consumer" had been substituted for
"applicant" so that it applied to renewal business as well
as new business.
10:19:11 AM
Co-Chair MacKinnon assured the testifier that under the
legislation all consumers would be considered equitably.
10:19:13 AM
Senator Micciche understood that the legislation provided
the right to appeal in the application process and that the
standard had been changed to what a prudent person would
consider to be "fair and reasonable."
Ms. Wing-Heier agreed. She said that the appeal process had
been at the sole discretion of the insurance company, which
had led to the Governor's veto of the previous legislation.
Co-Chair Hoffman asked if there had been other reasons that
the Governor had vetoed the previous legislation.
Ms. Wing-Heier responded that the Governor wanted to
ascertain that people were given the notice of the appeal
process, that the appeal went to the director if it could
not be resolved with the insurance company, and that the
"prudent person" language be added.
10:21:05 AM
Senator Stevens noted the changes from the previous bill.
He wondered whether the appeal process changes in the
current legislation would be onerous to the department.
Ms. Wing-Heier said that the department received 2 to 3
calls per month from consumers. She believed that her
department was equipped with the staff to handle the
workload.
10:22:32 AM
GARY STRANNIGAN, LIBERTY MUTUAL INSURANCE COMPANY, SEATTLE
(via teleconference), spoke in support of the bill.
10:23:44 AM
Co-Chair MacKinnon CLOSED public testimony.
10:23:55 AM
Vice-Chair Bishop discussed the zero-fiscal note:
This bill allows an insurer to use a consumer's credit
history or insurance score to underwrite or rate the
consumer's policy at renewal. It also provides for
exemptions from using credit history.
This bill modifies existing statute and is not
anticipated to have a fiscal impact on the Division of
Insurance.
10:24:50 AM
Vice-Chair Bishop noted Section 5 of the bill. He hoped
that the department would make sure to keep the people of
Alaska's best interests at heart.
Co-Chair MacKinnon stated that amendments to the
legislation were due the following Friday at 5pm
HB 195 was HEARD and HELD in committee for further
consideration.
ADJOURNMENT
10:25:52 AM
The meeting was adjourned at 10:25 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 155 AMC Framework - Lexology Article.pdf |
SFIN 2/21/2018 9:00:00 AM |
SB 155 |
| SB 155 AMC Registry Fees - Lexology Article.pdf |
SFIN 2/21/2018 9:00:00 AM |
SB 155 |
| SB 155 Enacted State AMC Laws.pdf |
SFIN 2/21/2018 9:00:00 AM |
SB 155 |
| SB 155 Sponsor Statement.pdf |
SFIN 2/21/2018 9:00:00 AM |
SB 155 |
| SB 155 Support Alaska Bankers Association.pdf |
SFIN 2/21/2018 9:00:00 AM |
SB 155 |
| SB155 Sectional Summary - Sponsor.pdf |
SFIN 2/21/2018 9:00:00 AM |
SB 155 |
| SB 155 Support Wells Fargo.pdf |
SFIN 2/21/2018 9:00:00 AM |
SB 155 |
| SB 155 Support REVAA.pdf |
SFIN 2/21/2018 9:00:00 AM |
SB 155 |
| SB 155 Support Alaska Chamber.pdf |
SFIN 2/21/2018 9:00:00 AM |
SB 155 |
| HB 195 Background Document.pdf |
SFIN 2/21/2018 9:00:00 AM |
HB 195 |
| HB 195 Sectional Analysis.pdf |
SFIN 2/21/2018 9:00:00 AM |
HB 195 |
| HB 195 Support Letters.pdf |
SFIN 2/21/2018 9:00:00 AM |
HB 195 |
| HB 195 Transmittal Letter.pdf |
SFIN 2/21/2018 9:00:00 AM |
HB 195 |
| HB 195 Opposition Lynch.pdf |
SFIN 2/21/2018 9:00:00 AM |
HB 195 |
| HB 195 Letter of Support McCue.pdf |
SFIN 2/21/2018 9:00:00 AM |
HB 195 |
| HB 195 Opposition Opheim.pdf |
SFIN 2/21/2018 9:00:00 AM |
HB 195 |