Legislature(2021 - 2022)BELTZ 105 (TSBldg)
04/30/2021 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| SB17 | |
| SB76 | |
| HB36 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 76 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 17 | TELECONFERENCED | |
| + | HB 36 | TELECONFERENCED | |
HB 36-MOTOR VEHICLE DEALERS: APPLIC.; INSURANCE
2:06:06 PM
CHAIR COSTELLO reconvened the meeting and announced the
consideration of HOUSE BILL NO. 36 "An Act relating to an
application for a license to operate as a dealer in motor
vehicles; and requiring a dealer in motor vehicles to maintain
liability and property insurance."
[SCS HB 36(TRA) was before the committee.]
2:06:19 PM
REPRESENTATIVE MATT CLAMAN, Alaska State Legislature, Juneau,
Alaska, sponsor of HB 36, introduced HB 36 speaking to the
sponsor statement that read as follows:
House Bill 36 strengthens Alaska's motor vehicle
dealer license requirements by modernizing the statute
and incorporating reasonable standards for obtaining a
motor vehicle dealer's license without creating
barriers to entry into the field or restricting
competition.
2:06:41 PM
REPRESENTATIVE CLAMAN continued:
Alaska's current requirements for obtaining a motor
vehicle dealer's license are some of the least
stringent in the nation. Under current law, a motor
vehicle dealer in Alaska must register biennially by
filling out an application, pay a $50 registration
fee, and maintain a surety bond of $50,000. By way of
comparison, the requirements for a motor vehicle
dealer's license in other states are more stringent:
• Oregon Chapter 822 of Oregon State Statutes
provides for civil penalties for acting as a
vehicle dealer without a certificate, the
processes of applying for and maintaining an
automobile dealer license and related exemptions,
requirements and privileges, grounds for
revocation, suspension, or cancellation of the
dealership certificate, and further defines
illegal practices and associated penalties.
• Delaware Title 21, Chapter 63 of the Delaware
State Statutes provides for proof-of location
requirements and recordkeeping, license
expiration and renewal procedures, retainment of
bill of sale records for a period of at least
five years, and grounds for revocation of dealer
licenses.
• Texas Title 14, Subtitle A, Chapter 2301 of the
Occupations Code provides for public interest
information and complaint procedures, licensing
requirements, license expiration and renewal,
dealer operations, grounds for license revocation
as well as procedures for complaint hearings,
judicial review, and penalties.
Purchasing a car may be one of the largest investments
a consumer makes in their lifetime, so we need to
ensure that reasonable standards for becoming a dealer
are in place as well as financial protections should
the sale not work out.
House Bill 36 updates the surety bond requirement
which hasn't been changed in 20 years to $100,000 to
stay in line with the current economics of the
automobile industry. Furthermore, it requires that
dealers obtain liability insurance. There is currently
no requirement that dealers carry liability insurance
even though Alaska requires drivers to have liability
insurance for their vehiclesand dealers may allow
uninsured drivers to take cars for test drives. It
also limits ownership of persons who have been
convicted of felonies for fraud or embezzlement within
five years of the application date. Finally, it
requires dealers with employees to confirm that they
are aware of associated workers comp coverage
requirements.
2:09:01 PM
REPRESENTATIVE CLAMAN noted that his office also had questions
about the cost of the proposed changes for dealers. Currently, a
$50,000 performance bond costs from $500 to $1,000. A $100,000
auto dealer's bond costs from $1,000 to $2,500 for a year's
coverage. The estimated cost of insurance for a small dealer's
policy is approximately $2,500. This is comparable to the cost
for a new business owner to purchase general premises liability
for a restaurant, print shop, or retail store.
REPRESENTATIVE CLAMAN summarized that the purpose of HB 36 is to
establish reasonable standards for car dealer licensing and to
reduce the potential for harm through increased bond amounts,
mandatory insurance, and additional disclosures that hold auto
dealers more accountable under current statutes.
2:10:00 PM
SOPHIE JONAS, Staff, Representative Matt Claman, Alaska State
Legislature, Juneau, Alaska, presented the sectional analysis
for HB 36:
Section 1
AS 08.66.030. Form of application. Adds the following
requirements to dealer registration applications:
• a valid telephone number for the business;
• a statement that no person holding a five percent
or greater interest in the business has been
convicted of a felony involving fraud,
embezzlement, or misappropriation of property
within five years preceding the date of
application;
• a statement acknowledging that the applicant has
reviewed the requirements for workers'
compensation insurance and will maintain workers'
compensation insurance under AS 23.30, if
applicable; and
• a copy of the liability insurance policy in
compliance with section 3 of this bill.
Section 2
AS 08.66.060. Bond. Raises the amount of the bond
required for dealer registration applicants from
$50,000 to $100,000.
Section 3
AS 08.66.085. Insurance requirements. Adds a new
section to AS 08.66 that requires dealers to maintain
liability insurance for bodily injury and property
damage.
2:11:37 PM
SENATOR STEVENS asked for assurance that this would not make it
more difficult for small dealers to do business. He also asked
for the cost of a $50,000 to $100,000 bond.
REPRESENTATIVE CLAMAN answered that the current estimate for a
$50,000 bond is from $500 to $1,000 per year and the estimated
cost of a $100,000 bond is $1,000 to $2,500 per year. He noted
that the Division of Insurance regulates those bonds and Ms.
Wing-Heier was available online to answer further questions
about the bonding. Responding to the first question about the
effect on small dealers, he said he believes the proposed bond
is a reasonable cost of entry to this business. The bond
provides protection if there is some unforeseen problem with the
vehicle and it provides protection in the event that something
goes wrong after the sale.
CHAIR COSTELLO turned to invited testimony.
2:14:06 PM
MARCUS WAEHLER, Board Member, Alaska Automotive Dealers
Association; Owner, Red White & Blue Auto Sales, Anchorage,
Alaska, testified by invitation on HB 36. He advised that he
brought this concern to the board's attention six or seven years
ago when he noticed that many of the buyers attending used car
auctions did not have used car businesses. Rather, the autos
were being sold on Craigslist and were represented as being sold
by private parties, not dealers. Now when he goes to these
auctions the preponderance of buyers are private parties. He
recounted that he testified last week that he sold four cars "as
is" at auction that had not passed his safety inspections. That
afternoon he saw those same vehicles for sale online under the
guise of a private party.
MR. WAEHLER said his goal in bringing his concern forward was to
bring minimal standards to the used car sales industry. He noted
that his research of other states found many rules for becoming
a dealer. Alaska has none of those requirements. Somebody can
pay $500 for a bond and $75 for registration and be in business.
He emphasized that the bill is not intended to make it a
financial hardship to become a dealer, but rather to bring
minimal standards to the industry. HB 36 does that, he said.
2:17:06 PM
SENATOR STEVENS offered his understanding that the only used car
auction in Alaska is in Anchorage and said his concern is that
the bill may make it less likely that anybody that is not
connected to the road system would enter the used car business.
He asked if he knows of any other auctions in Alaska.
MR. WAEHLER said there are small auctions that pop up
sporadically in Fairbanks, Kenai, and Wasilla, but the main
auction is in Anchorage. Auctions have also moved online.
2:18:26 PM
STEVE ALLWINE, President and General Manager, Mendenhall Auto
Center; Director, National Automotive Dealers Association, Board
Member, Alaska Automotive Dealers Association, Juneau, Alaska,
testified in support of HB 36. Addressing Senator Steven's
concern, he said the board and membership in Alaska is a little
different in that it is comprised of large and small new and
used car dealers. When Mr. Waehler brought his concern forward,
the board wanted to make sure that adding standards would not be
burdensome. He said the board determined that the changes
reflected in HB 36 would not create a barrier to competition.
MR. ALLWINE confirmed that the issue is people who are licensed
as a dealer then hold themselves out as a consumer and sell to
other consumers. He said a consumer who works with a dealer who
properly represents himself as a dealer has built in protections
when they purchase a vehicle. However, those protections go away
on a consumer-to-consumer sale. The intent of the legislation is
to ensure those consumer protections. He added that everyone is
aware the bill will not eliminate the issue, but it may slow it
down. We're saying, "Do things right, take the necessary steps,
make a reasonable investment, and then come into our business."
SENATOR STEVENS said he was relying on his word that HB 36 will
not be a barrier to competition.
2:21:10 PM
CHAIR COSTELLO opened public testimony on HB 36; finding none,
she closed public testimony. She asked if there were questions
for Ms. Wing-Heier.
SENATOR STEVENS asked for an explanation of the change in
bonding and the cost to purchase the bond. He restated his
concern about not imposing a financial barrier on small
businesses in small communities.
2:22:08 PM
LORI WING-HEIER, Director, Division of Insurance, Department of
Commerce, Community and Economic Development (DCCED), Anchorage,
Alaska, said she does not see the bill as a barrier. It is an
increase in cost, but it provides more protections for consumers
who purchase these used cars. She explained that a bond
guarantees that the entity selling or repairing the car will
have the wherewithal to follow through and do the work. She
explained that insurance looks at three parts of a bond: the
character, the capacity, and the capital. A person in good
standing enjoys the lesser premium, and a new business will see
the premium decrease as it builds reputation and business.
2:23:47 PM
SENATOR STEVENS asked how much more a bond would cost a small
dealer if HB 36 were to pass.
MS. WING-HEIER answered that a $50,000 bond for a person in good
standing costs about $500 per year. That bond would cost closer
to $1,000 for a new person or business. The cost of a $100,000
bond ranges from $1,000 to $2,500 per year. The reason the bill
increases the bond is because of increases in the cost of the
car and parts and the capital a person should have to operate a
business.
SENATOR STEVENS asked if she believes HB 36 would present a
barrier to someone in a smaller community.
MS. WING-HEIER replied she didn't think so because the startup
costs for any new business will be in line with the numbers the
division gave to the sponsor for this bill.
CHAIR COSTELLO informed the members that the director of the
Division of Motor Vehicles was available to answer questions.
She asked Mr. Schmitz if he was aware of the administration's
position on HB 36.
2:26:13 PM
JEFFREY SCHMITZ, Director, Division of Motor (DMV), Department
of Administration (DOA), Anchorage, Alaska, stated that the
division does not have a position on HB 36.
SENATOR MICCICHE offered his perspective that the legislation
levels the playing field, sets expectations, and protects the
public.
2:27:28 PM
SENATOR GRAY-JACKSON echoed the previous comments and thanked
the sponsor for introducing the bill.
2:28:10 PM
CHAIR COSTELLO stated that she would hold HB 36 for further
consideration.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 76 Letters of Support Received by 2021.04.20.pdf |
SL&C 4/30/2021 1:30:00 PM |
SB 76 |