Legislature(1999 - 2000)

04/10/2000 02:20 PM Senate JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
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              SENATE JUDICIARY COMMITTEE                                                                                        
                    April 10, 2000                                                                                              
                      2:20 p.m.                                                                                                 
                                                                                                                                
MEMBERS PRESENT                                                                                                                 
                                                                                                                                
Senator Robin Taylor, Chairman                                                                                                  
Senator Rick Halford, Vice-Chairman                                                                                             
Senator Dave Donley                                                                                                             
Senator Johnny Ellis                                                                                                            
                                                                                                                                
MEMBERS ABSENT                                                                                                                  
                                                                                                                                
Senator John Torgerson                                                                                                          
                                                                                                                                
COMMITTEE CALENDAR                                                                                                              
                                                                                                                                
SENATE CONCURRENT RESOLUTION NO. 3                                                                                              
Relating to the sovereignty of the State of Alaska and the                                                                      
sovereign right of the State of Alaska to manage the natural                                                                    
resources of Alaska.                                                                                                            
     -MOVED SCR 3 OUT OF COMMITTEE                                                                                              
                                                                                                                                
SENATE CS FOR CS FOR HOUSE BILL NO. 37(JUD)                                                                                     
"An Act relating to restricting sale of cigarettes, to enforcement                                                              
of certain laws relating to sales of cigarettes, and to smoking                                                                 
education and cessation programs administered by the Department of                                                              
Health and Social Services."                                                                                                    
     -MOVED SCS CSHB 37(JUD) OUT OF COMMITTEE                                                                                   
                                                                                                                                
CS FOR HOUSE BILL NO. 239(FIN)                                                                                                  
"An Act relating to the Uniform Commercial Code; relating to                                                                    
secured transactions; amending Rule 79, Alaska Rules of Civil                                                                   
Procedure; and providing for an effective date."                                                                                
     -MOVED CSHB 239(FIN) OUT OF COMMITTEE                                                                                      
                                                                                                                                
CS FOR HOUSE BILL NO. 435(JUD)                                                                                                  
"An Act making corrective amendments to the Alaska Statutes as                                                                  
recommended by the revisor of statutes; and providing for an                                                                    
effective date."                                                                                                                
     -MOVED CSHB 435(JUD) OUT OF COMMITTEE                                                                                      
                                                                                                                                
PREVIOUS SENATE COMMITTEE ACTION                                                                                                
                                                                                                                                
SJR 3  - See State Affairs minutes dated 1/28/99 and Rules minutes                                                              
         dated 3/15/99.                                                                                                         
                                                                                                                                
HB 37  - No previous action to report.                                                                                          
                                                                                                                                
HB 239 - No previous action to report.                                                                                          
                                                                                                                                
HB 435 - No previous action to report.                                                                                          
                                                                                                                                
WITNESS REGISTER                                                                                                                
                                                                                                                                
Representative Scott Ogan                                                                                                       
State Capitol Building                                                                                                          
Juneau, Alaska 99801                                                                                                            
POSITION STATEMENT:      Supports SCR 3                                                                                         
                                                                                                                                
Representative Norman Rokeberg                                                                                                  
State Capitol Building                                                                                                          
Juneau, Alaska 99801                                                                                                            
POSITION STATEMENT:      Sponsor of HB 37                                                                                       
                                                                                                                                
Mr. Elmer Lindstrom, Special Assistant                                                                                          
Department of Health and Social Services                                                                                        
Office of the Commissioner                                                                                                      
PO Box 110601                                                                                                                   
Juneau, Alaska 99811-0601                                                                                                       
POSITION STATEMENT:      Testified on HB 37                                                                                     
                                                                                                                                
Ms. Christie McIntire                                                                                                           
American Lung Association of Alaska                                                                                             
500 West International Airport Road, Suite A                                                                                    
Anchorage, Alaska 99518                                                                                                         
POSITION STATEMENT:      Testified on HB 37                                                                                     
                                                                                                                                
Ms. Delisa Culpepper                                                                                                            
Alaska Tobacco Control Alliance                                                                                                 
500 West International Airport Road, Suite A                                                                                    
Anchorage, Alaska 99518                                                                                                         
POSITION STATEMENT:      Testified on HB 37                                                                                     
                                                                                                                                
Representative Lisa Murkowski                                                                                                   
Alaska State Capitol Building                                                                                                   
Juneau, Alaska 99801                                                                                                            
POSITION STATEMENT:      Sponsor of HB 239                                                                                      
                                                                                                                                
Mr. Jerry Kurtz                                                                                                                 
National Conference of Commissioners on Uniform State Laws                                                                      
1050 Beech Lane                                                                                                                 
Anchorage, Alaska 99501                                                                                                         
POSITION STATEMENT:      Testified on HB 239                                                                                    
                                                                                                                                
                                                                                                                                
Mr. Steve Weise                                                                                                                 
Heller Ehrman White and McAuliffe                                                                                               
601 South Figueroa Street                                                                                                       
Los Angeles, CA 90017-5758                                                                                                      
POSITION STATEMENT:      Testified on HB 239                                                                                    
                                                                                                                                
Ms. Sharon Young                                                                                                                
State Recorder's Office                                                                                                         
Department of Natural Resources                                                                                                 
3601 C Street, Suite 1180                                                                                                       
Anchorage, Alaska 99503-5947                                                                                                    
POSITION STATEMENT:      Testified on HB 239                                                                                    
                                                                                                                                
Ms. Pamela Finley                                                                                                               
Division of Legal Services                                                                                                      
Alaska State Legislature                                                                                                        
Terry Miller Office Building                                                                                                    
Juneau, Alaska 99801                                                                                                            
POSITION STATEMENT:      Testified on HB 435                                                                                    
                                                                                                                                
ACTION NARRATIVE                                                                                                                
                                                                                                                                
TAPE 00-20, SIDE A                                                                                                              
Number 001                                                                                                                      
                                                                                                                                
CHAIRMAN ROBIN TAYLOR called the Judiciary Committee meeting to                                                                 
order at 2:20 p.m.  Present were SENATOR HALFORD, SENATOR DONLEY,                                                               
SENATOR ELLIS and CHAIRMAN TAYLOR.  The first order of business to                                                              
come before the committee was SCR 3.                                                                                            
                                                                                                                                
           SCR  3-SOVEREIGNTY OF THE STATE; RESOURCES                                                                           
                                                                                                                                
CHAIRMAN TAYLOR stated that SCR 3 makes a statement to Congress.                                                                
SCR 3 cites U. S. Supreme Court cases and puts Congress and federal                                                             
agencies on notice that Alaska will not put up with the federal                                                                 
mandate and intervention of fish and game management.  If Congress                                                              
chose to ignore Alaska's rights by passing the Alaska National                                                                  
Interest Lands Conservation Act (ANILCA), then Alaska needs to take                                                             
this issue forward and litigate.  The dispute revolves around                                                                   
whether or not the federal government can force a sovereign state                                                               
to amend its constitution and to amend the equal protection clause                                                              
of its constitution to provide for discrimination based on                                                                      
residency.                                                                                                                      
                                                                                                                                
REPRESENTATIVE SCOTT OGAN said he strongly supports SCR 3.                                                                      
Sovereignty of Alaska should be defended by the legislature and the                                                             
governor.  This issue is not about subsistence, it is about                                                                     
Alaska's right to manage its resources and whether Alaska will be                                                               
a first or second class state.  The Equal Footing Doctrine states                                                               
that Alaska was admitted to the Union on equal footing with other                                                               
states--this was specifically mentioned in the 1953 Submerged Land                                                              
Act in the Statehood Compact.  Representative Ogan said he finds it                                                             
outrageous that the federal government has stepped in and taken                                                                 
over the management of Alaska's sovereign property.  When Alaska                                                                
became a state it received title to its submerged land and having                                                               
title is a property right.                                                                                                      
                                                                                                                                
CHAIRMAN TAYLOR agreed wholeheartedly with a quote in Governor                                                                  
Knowles' appeal of the Katie John case, "No governor should ever                                                                
barter away the state's sovereign right to manage its lands, its                                                                
waters, or its natural resources."                                                                                              
                                                                                                                                
SENATOR HALFORD moved SCR 3 from committee with individual                                                                      
recommendations.  Without objection, the motion carried.                                                                        
Number 377                                                                                                                      
                                                                                                                                
        HB  37-CIGARETTES:SALES/ EDUC & CESSAT'N PROGRAM                                                                        
                                                                                                                                
SENATOR ELLIS moved to adopt a proposed SCS CSHB 37(JUD), labeled                                                               
version Y.  There being no objection, the motion carried.                                                                       
                                                                                                                                
REPRESENTATIVE ROKEBERG, sponsor of HB 37, said that on page 2,                                                                 
line 20, after the word "is" the word "not" was deleted, and "any                                                               
health warning, including" was added to the sentence.  The new                                                                  
wording is:  (B)  any health warning, including a health warning                                                                
that is specified in 15 U.S.C. 133 (Federal Cigarette Labeling and                                                              
Advertising Act).                                                                                                               
                                                                                                                                
On page 3, line 20,  "required to be" was added.  The new wording                                                               
is:  (g)  A person who is required to hold a business license                                                                   
endorsement under this section, or who is required to be licensed                                                               
or agrees to be licensed under AS 43.50.010, or an agent or                                                                     
employee of the person, may not...."                                                                                            
                                                                                                                                
Page 5 contains the outline of what a tobacco control and cessation                                                             
program should do and more emphasis on youth was added.                                                                         
                                                                                                                                
REPRESENTATIVE ROKEBERG noted that, in large part, the bill                                                                     
includes a provision prohibiting grey market sales,  the sale of                                                                
export cigarettes for manufacture for export.  HB 37 also has a                                                                 
provision prohibiting the sale of loose cigarettes, and a provision                                                             
that applies to the duty-free shop at the Anchorage airport.  HB 37                                                             
does have a fiscal note that will be addressed by the Senate                                                                    
Finance Committee.  That fiscal note reflects the need for HB 37 to                                                             
be in compliance with the Master Smoking Agreement.  Over the years                                                             
Alaska should receive around $680 million from that settlement so                                                               
the fiscal note represents a mere token of that amount.  The Center                                                             
for Disease Control recommends that the State of Alaska spend as                                                                
much as $8 million to add a comprehensive smoking control program.                                                              
                                                                                                                                
REPRESENTATIVE ROKEBERG said the primary thrust of HB 37 is the                                                                 
provision on page 5 that dictates the state shall administer the                                                                
program by grant or contract.   He emphasized that he sees no need                                                              
to create a bureaucracy to do that as DHSS will only be passing                                                                 
money to other agencies.  The wording for that provision reads:                                                                 
(15) a comprehensive smoking education, tobacco use prevention, and                                                             
tobacco control program; to the maximum extent possible, the                                                                    
department shall administer the program required under this                                                                     
paragraph by grant or contract with more than one organization in                                                               
the state; the department's program must include.                                                                               
                                                                                                                                
Representative Rokeberg explained that his intention is to send a                                                               
policy statement from the legislature saying there is no need for                                                               
the bureaucracy to administer these programs, there are existing                                                                
organizations in the state that have that capability.                                                                           
                                                                                                                                
Number 634                                                                                                                      
                                                                                                                                
CHAIRMAN TAYLOR asked for the meaning of the phrase "an enforcement                                                             
component."  He wondered if this will enable a review of the grants                                                             
and programs.                                                                                                                   
                                                                                                                                
REPRESENTATIVE ROKEBERG said an evaluation component is essential                                                               
to make sure the program is working.  The enforcement provision                                                                 
contains broad language intended for follow-up.                                                                                 
                                                                                                                                
CHAIRMAN TAYLOR asked what the penalties are for grey market sales.                                                             
                                                                                                                                
REPRESENTATIVE ROKEBERG said there is no penalty, the department                                                                
confiscates and destroys the cigarettes.  A provision on page 4,                                                                
line 8, (h) A violation of (g) of this section is an unfair or                                                                  
deceptive act or practice under AS 45.50.471, makes grey market                                                                 
sales a violation.                                                                                                              
                                                                                                                                
CHAIRMAN TAYLOR said that his only concern with HB 37 is that the                                                               
crime is not even a class B misdemeanor.  He noted that he would                                                                
like to hold the bill in committee just long enough to get an                                                                   
amendment for the purpose of stiffening the penalty provision.                                                                  
                                                                                                                                
Number 835                                                                                                                      
                                                                                                                                
SENATOR HALFORD said that on page 2 the bill reads, "the                                                                        
commissioner shall treat as confidential certain information," and                                                              
he wondered what the information is and why it has to be                                                                        
confidential.                                                                                                                   
                                                                                                                                
REPRESENTATIVE ROKEBERG replied it is marketing information.                                                                    
                                                                                                                                
SENATOR HALFORD noted that on page 3, line 7, the language says                                                                 
"for personal use free of federal tax or duty," and it looks like                                                               
this only applies to importation for sale.  He asked if there is a                                                              
penalty in existing law for importation of large quantities not for                                                             
sale.                                                                                                                           
                                                                                                                                
Number 925                                                                                                                      
                                                                                                                                
REPRESENTATIVE ROKEBERG said he can only answer in part, cigarettes                                                             
cannot be brought in from a foreign country.                                                                                    
                                                                                                                                
SENATOR HALFORD said his real concern is with importation from a                                                                
state that has a lower tax rate than Alaska.                                                                                    
                                                                                                                                
REPRESENTATIVE ROKEBERG said he believes that is prohibited but he                                                              
is not certain.                                                                                                                 
                                                                                                                                
SENATOR HALFORD asked if HB 37 creates an exemption that does not                                                               
exist or if a penalty that exists is being reduced.                                                                             
                                                                                                                                
REPRESENTATIVE ROKEBERG said he would get back to the committee                                                                 
with that information.                                                                                                          
                                                                                                                                
Number 992                                                                                                                      
                                                                                                                                
CHAIRMAN TAYLOR asked if there was an objection to the adoption of                                                              
Version Y.  There being no objection, Version Y was adopted.                                                                    
                                                                                                                                
MR. ELMER LINDSTROM, Special Assistant for the Department of Health                                                             
and Social Services (DHSS), said he has been working with Section                                                               
3 of HB 37 and recommends two minor changes.  First, DHSS suggests                                                              
deleting the word "tobacco" on page 5, line 7, and inserting the                                                                
word "nicotine" prior to the word "gum."  The new wording will                                                                  
read:  (A) a community-based tobacco use prevention and cessation                                                               
component addressing the needs of youth and adults that includes                                                                
use of cessation aids such as a nicotine patch or a nicotine gum                                                                
tobacco substitute;".                                                                                                           
                                                                                                                                
REPRESENTATIVE ROKEBERG agreed with the amendment.                                                                              
                                                                                                                                
SENATOR DONLEY moved to adopt amendment 1.  There being no                                                                      
objection, amendment 1 was adopted.                                                                                             
                                                                                                                                
MR. LINDSTROM said the other change DHSS suggests is on page 5,                                                                 
line 12; delete the word "smokers" and insert "tobacco users."  The                                                             
new language will read:  (C)  anti-tobacco counter-marketing                                                                    
targeting both youth and adult populations designed to communicate                                                              
messages to help prevent youth initiation of tobacco use, promote                                                               
cessation among current tobacco users, and educate the public about                                                             
the lethal effects of exposure to secondhand smoke;.                                                                            
                                                                                                                                
REPRESENTATIVE ROKEBERG agreed with the amendment.                                                                              
                                                                                                                                
SENATOR DONLEY moved to adopt amendment 2.  There being no                                                                      
objection, amendment 2 was adopted.                                                                                             
                                                                                                                                
Number 1138                                                                                                                     
                                                                                                                                
MS. CHRISTIE MCINTIRE, Executive Director of the American Lung                                                                  
Association of Alaska (ALA), said she supports CSHB 37.  The ALA                                                                
supports the prohibition of the sale of single cigarettes or                                                                    
"LUCYS", as they are commonly known.  LUCYS are easier and cheaper                                                              
to purchase; requiring cigarettes to be purchased in packs of 20                                                                
will limit the number of cigarettes that end up in the hands of                                                                 
children.  Laws which limit the supply of tobacco is one strategy                                                               
for reducing addiction. ALA supports DHSS administering a                                                                       
comprehensive tobacco prevention, cessation, and control program in                                                             
Alaska.  As a leading cause of preventable death in Alaska, tobacco                                                             
addiction needs to be specifically identified and recognized as the                                                             
tragic epidemic that it is.  Other states have made significant                                                                 
improvements in reducing tobacco use.  These improvements are only                                                              
effective if three conditions are met.  They must be comprehensive,                                                             
sustained over time, and well funded.  The cost to Alaska will be                                                               
about $8 million dollars annually.                                                                                              
                                                                                                                                
MS. MCINTIRE noted that during the last legislative session, $1.4                                                               
million was allocated to a startup effort aimed at reducing tobacco                                                             
addiction.  There are now several components in place for that                                                                  
program: counter-marketing advertising, media campaigns, theater                                                                
slides, and bus panels.  The theme of this advertising campaign is                                                              
cessation and environmental tobacco smoke, and currently a program                                                              
is being developed around youth prevention.  There are also four                                                                
other pilot projects for cessation.  ALA is also working with the                                                               
Alaska Tobacco Control Alliance (ATCA) to develop goals and                                                                     
objectives for future programs, as well as evaluation measures.                                                                 
ALA has received 22 proposals totaling over $1.1 million for                                                                    
cessation needs alone.  The current level of funding is inadequate                                                              
for the job at hand.                                                                                                            
                                                                                                                                
Number 1367                                                                                                                     
                                                                                                                                
CHAIRMAN TAYLOR asked Ms. McIntire if she is employed by the Lung                                                               
Association as part of the $1.1 million grant.                                                                                  
                                                                                                                                
MS. MCINTIRE replied that she is the executive director of ALA and                                                              
the $1.4 million grant is to her organization.                                                                                  
                                                                                                                                
CHAIRMAN TAYLOR asked if any other organization has applied for                                                                 
this grant.                                                                                                                     
                                                                                                                                
MS. MCINTIRE replied that last year it was a designated grant to                                                                
the ALA and they are serving on behalf of the Alaska Tobacco                                                                    
Control Alliance.  Many health partners throughout Alaska are                                                                   
working on the goals and objectives that ALA is pursuing in this                                                                
grant.  Last June the ALA met and defined the goals and objectives                                                              
for this money.                                                                                                                 
                                                                                                                                
Number 1447                                                                                                                     
                                                                                                                                
MS. DELISA CULPEPPER, Chair of the Alaska Tobacco Control Alliance                                                              
(ATCA), explained that ATCA is a statewide alliance of non-profit                                                               
and governmental agencies that work toward reducing tobacco-related                                                             
disease in Alaska.  ATCA is not a non-profit group and, therefore,                                                              
when the settlement money came through they were not able to accept                                                             
it.  This is why ATCA organizations got together and chose ALA.                                                                 
It was thought that ALA was the best non-profit organization to                                                                 
implement the program.  ATCA works with ALA in an advisory capacity                                                             
on an ongoing basis and is developing a comprehensive tobacco plan                                                              
for Alaska.  That plan will delineate ideas of where ATCA thinks                                                                
things will need to go in the future and how to measure progress.                                                               
MS. CULPEPPER said that ATCA supports HB 37 and she urged committee                                                             
members to move the bill on today.                                                                                              
                                                                                                                                
Number 1550                                                                                                                     
                                                                                                                                
                HB 239-UCC SECURED TRANSACTIONS                                                                                 
                                                                                                                                
REPRESENTATIVE LISA MURKOWSKI, sponsor of HB 239, explained that                                                                
national commissioners have been working on a substantial re-write                                                              
of Article 9 of the Uniform Commercial Code Secure Transaction                                                                  
(UCC) for about eight years.  The re-write was done by some of the                                                              
greatest minds in the country.  It has been accepted unanimously by                                                             
the commissioners, and HB 239 is an excellent document as far as                                                                
what has been done with the UCC.  This version of Article 9 has                                                                 
been distributed all over Alaska to the parties that will be                                                                    
affected.  The comments coming back have all been positive, and it                                                              
is felt that this re-write brings Alaska into the Twenty-First                                                                  
century.  HB 239 modernizes and updates the UCC and allows for a                                                                
centralized filing system without policy changes.                                                                               
                                                                                                                                
Number 1653                                                                                                                     
                                                                                                                                
MR. JERRY KURTZ, a member of the Alaska delegation to the National                                                              
Conference of Commissioners on Uniform State Laws, said he has been                                                             
to every floor session of the national conference concerning HB 239                                                             
which covers Article 9.  Article 9 is the most important part of                                                                
the Uniform Commercial Code; it has been adopted in every state in                                                              
its present form and it is fast being adopted in its proposed                                                                   
revision.  The balance has not been changed by the revision but                                                                 
there are improvements that will save money and improve the flow of                                                             
commerce.                                                                                                                       
                                                                                                                                
Number 1736                                                                                                                     
                                                                                                                                
SENATOR DONLEY asked for an explanation of the changes in the                                                                   
definition of "good faith."                                                                                                     
                                                                                                                                
MR. STEVEN WEISE, American Bar Association advisor to the Drafting                                                              
Committee of the UCC, said that the definition was changed from a                                                               
subjective definition to a definition that has a more "commercial                                                               
reasonableness component."   The change means that even if a person                                                             
was acting honestly, if the action was so out-of-bounds of what is                                                              
fair, the action would not be considered to be done in good faith.                                                              
This same definition is in other articles of the UCC over the last                                                              
10 years.                                                                                                                       
                                                                                                                                
SENATOR DONLEY asked how good faith affects the consumer.                                                                       
                                                                                                                                
MR. WEISE answered that it runs in all directions.  All parties to                                                              
the transaction, consumer, secured party or non-consumer borrower,                                                              
are required to act in good faith in their performance and                                                                      
enforcement of their rights under a security agreement or in                                                                    
enforcing rights under Article 9.                                                                                               
                                                                                                                                
SENATOR DONLEY said, "So you are going to enforce on consumers now,                                                             
even if they honestly believe their case is right--some commercial                                                              
standard that they might not know anything about?"                                                                              
                                                                                                                                
MR. WEISE answered that the primary purpose of it is that secured                                                               
lenders who are enforcing their rights have to act in good faith.                                                               
Their ability to contest what the lender has done would be                                                                      
unaffected by that.  The good faith standard was brought about                                                                  
because of the concern over lenders not acting in good faith.  It                                                               
puts some constraints on their performance of a contract or                                                                     
enforcement of a contract.                                                                                                      
                                                                                                                                
CHAIRMAN TAYLOR asked Mr. Weise to give the committee a                                                                         
hypothetical situation.                                                                                                         
                                                                                                                                
MR. WEISE replied if a lender was seeking to enforce its collateral                                                             
and honestly believed its method of enforcement was fair, but, when                                                             
viewed objectively from the outside it was way beyond the range -                                                               
for example the way notice was given to the borrower, the court                                                                 
could say that the secured party had not conducted its activities                                                               
in a manner that complied with the requirement.                                                                                 
                                                                                                                                
SENATOR DONLEY stated he is more concerned about the impact to the                                                              
borrower.                                                                                                                       
                                                                                                                                
MR. WEISE maintained that this should not have much of an effect on                                                             
the borrower or consumer side of such transactions.  None of the                                                                
case law comes up in the context of what the borrower has done but                                                              
the general notion is that the need to act in good faith applies to                                                             
all parties in the transaction.  For example, a borrower should not                                                             
be able to hide or damage the collateral if the collateral has been                                                             
fairly obtained.  Part of the tradeoff for the lending community in                                                             
accepting a tougher definition of good faith was that it apply in                                                               
all directions.                                                                                                                 
                                                                                                                                
CHAIRMAN TAYLOR remarked that some years ago, a borrower had failed                                                             
to make the payments on a leased piece of logging equipment located                                                             
on the side of a hill.  The lender had rights to retake the                                                                     
equipment for default under the secured transaction, even though it                                                             
was a lease purchase agreement.  The lender, however was denied                                                                 
access to the road system that would allow him to take the piece of                                                             
equipment.  Under the old definition, the borrower's right to deny                                                              
access could be exercised.  He asked Mr. Weise if that right could                                                              
not be exercised under the new good faith standard.                                                                             
                                                                                                                                
MR. WEISE said that is a good example.  It is the expectation that                                                              
it will be exceedingly rare where good faith will be an issue                                                                   
concerning the borrower.  He added that the entire discussion by                                                                
the UCC committee with regard to this issue revolved around the                                                                 
conduct of the lender.                                                                                                          
                                                                                                                                
Number 2080                                                                                                                     
                                                                                                                                
SENATOR DONLEY wondered how HB 239 will impact an ordinary consumer                                                             
buying ordinary consumer goods, for example, what types of things                                                               
a consumer will want to know.                                                                                                   
                                                                                                                                
MR. WEISE said there was extensive consideration given to consumer                                                              
interest and a number of provisions have been added for their                                                                   
protection.  For example, if a consumer were to default in their                                                                
secured obligation, they are entitled to special notice (more than                                                              
a commercial borrower will receive) at the time of a foreclosure,                                                               
a detailed accounting, etc.  There are a string of pro-consumer                                                                 
provisions in the revised Article 9 that are designed specifically                                                              
to give consumers more protection than they have under current law                                                              
and more protection than a commercial borrower would have under the                                                             
new law.  A consumer task force, made up of representatives of                                                                  
consumers' unions, legal aid groups from various states, banks and                                                              
automobile creditors, worked out a series of provisions that all                                                                
sides signed off on.                                                                                                            
                                                                                                                                
SENATOR DONLEY asked Mr. Weise if he had anything from consumer                                                                 
groups endorsing HB 239.                                                                                                        
                                                                                                                                
MR. WEISE said he does not have anything in writing but at the very                                                             
last meeting of the drafting committee, the Chair asked each of the                                                             
sides to stand up publicly and state that they were in support of                                                               
the revision.  He said he would fax a Law Review article written by                                                             
the Chair of that committee that reports that activity.                                                                         
                                                                                                                                
Number 2196                                                                                                                     
                                                                                                                                
CHAIRMAN TAYLOR asked if the rewrite improves the defensive                                                                     
position of consumers if their credit is transferred or sold to a                                                               
buyer "in due course."                                                                                                          
                                                                                                                                
MR. WEISE responded yes it has.  The Federal Trade Commission (FTC)                                                             
has a holder in due course rule which requires that when a consumer                                                             
obligation is transferred, that the obligation contain a statement,                                                             
required by the FTC, saying that the buyer of the note is subject                                                               
to all defenses that the consumer would have had against the                                                                    
original seller or lender.  There is a provision in the new Article                                                             
9 that says if the FTC statement is not on the obligation, it will                                                              
be treated as if it were there.  So, anyone who buys a consumer                                                                 
obligation is subject to those defenses even if the person who                                                                  
sells the obligation did not comply with the FTC rule.                                                                          
                                                                                                                                
Number 2350                                                                                                                     
                                                                                                                                
MR. KURTZ said there was a concerted effort by car financiers to                                                                
change the balance of Article 9.  There were battles over the early                                                             
draft of the bill because of the attempt to shift the balance.  The                                                             
net result is that the balance has been shifted in the opposite                                                                 
direction of what the car financiers wanted.                                                                                    
                                                                                                                                
Tape 00-20, Side B                                                                                                              
Number 000                                                                                                                      
                                                                                                                                
MR. KURTZ continued.  The consumer organizations, with whom they                                                                
had quite a bit of contact at the various annual meetings and                                                                   
through correspondence, are comfortable with the end result.                                                                    
                                                                                                                                
MS. SHARON YOUNG, State Recorder's Office for the Department of                                                                 
Natural Resources, said that HB 239 will make a drastic improvement                                                             
of the filing system in Alaska.  HB 239 will streamline the system                                                              
and make it easier for the customer to use.                                                                                     
                                                                                                                                
SENATOR DONLEY moved HB 259 from committee with individual                                                                      
recommendations.                                                                                                                
                                                                                                                                
CHAIRMAN TAYLOR noted he would distribute the article from Mr.                                                                  
Weise prior to moving the bill from committee.  With no objection,                                                              
the motion carried.                                                                                                             
                                                                                                                                
Number 2270                                                                                                                     
                     HB 435-REVISOR'S BILL                                                                                      
                                                                                                                                
CHAIRMAN TAYLOR asked if HB 435 makes any substantive changes to                                                                
law.                                                                                                                            
                                                                                                                                
MS. PAMELA FINLEY, Division of Legal Services, Legislative Affairs                                                              
Agency, said the only change is Section 7 which allows banks to own                                                             
property in connection with negatively amortizing loans.  Several                                                               
years ago the legislature passed a bill that allowed negatively                                                                 
amortized loans, the problem was that if banks did not own the                                                                  
property they could not amortize the loan.  The policy has already                                                              
been made; Section 7 only cleans up the statutes to allow banks to                                                              
do what the legislature tried to get them to do.                                                                                
                                                                                                                                
SENATOR DONLEY asked if there is anything in HB 435 that repeals                                                                
statutes based on court decisions.                                                                                              
                                                                                                                                
MS. FINLEY responded no.                                                                                                        
                                                                                                                                
SENATOR DONLEY moved HB 435 from committee with individual                                                                      
recommendations.  There being no objection, the motion carried.                                                                 
                                                                                                                                
There being no further business to come before the committee,                                                                   
CHAIRMAN TAYLOR adjourned the meeting at 3:15 p.m.                                                                              
                                                                                                                                
                                                                                                                                

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