04/13/1999 01:40 PM Senate L&C

           HB 128-LEASE-PURCHASE OF PERSONAL PROPERTY                                                                           
                                                                                                                                
CHAIRMAN MACKIE announced HB 128 to be up for consideration.                                                                    
                                                                                                                                
REPRESENTATIVE LISA MURKOWSKI, sponsor of HB 128, said this is                                                                  
basically the "rent to own" bill; this is a fledgling industry in                                                               
our state and is growing quickly throughout the country.  It                                                                    
applies to renting personal property mostly for people who are                                                                  
temporary residents.  This bill makes it clear for the consumer to                                                              
know what his or her obligations are and the lease/purchase owner's                                                             
disclosure requirements.  There is nothing in the Alaska statutes                                                               
which addresses lease purchase situations.  There have been no                                                                  
specific problems in the industry; it's more preventative.  Forty                                                               
four other states have similar legislation that addresses the                                                                   
disclosure requirement.  She said they looked at legislation from                                                               
South Dakota and received input from people within the industry in                                                              
Alaska.                                                                                                                         
                                                                                                                                
SENATOR HOFFMAN asked if in the description of rent purchase                                                                    
agreements, merchants don't require a security deposit or                                                                       
downpayment.  He asked if that was true in this legislation.                                                                    
                                                                                                                                
REPRESENTATIVE MURKOWSKI indicated that was true.                                                                               
                                                                                                                                
SENATOR LEMAN asked if there was a table that would establish what                                                              
a "fair market value" is and would it be the original purchase                                                                  
price or depreciated value, for instance.                                                                                       
                                                                                                                                
REPRESENTATIVE MURKOWSKI said she understands that the purpose of                                                               
the fair market value disclosure is that there are no hidden                                                                    
agendas.  If you're going to rent it, it's going to cost so much                                                                
per week or month.  If you want to purchase it, you want to know                                                                
what the value of the T.V. will be.                                                                                             
                                                                                                                                
SENATOR LEMAN noted that there is a late fee of $5 and asked if                                                                 
there was a restriction on the amount of the fee and is there some                                                              
other way for a business to recover the cost of someone's payment                                                               
being late.                                                                                                                     
                                                                                                                                
Number 450                                                                                                                      
                                                                                                                                
REPRESENTATIVE MURKOWSKI responded that the reason a nominal late                                                               
fee was placed in there is because typically within the industry                                                                
they don't charge a late fee.  It came from the industry as being                                                               
a reasonable sum.  Usually, property is either returned voluntarily                                                             
or it is repossessed.                                                                                                           
                                                                                                                                
MR. BRAD DENISON, testifying from New Jersey, said this bill is                                                                 
very similar to what most of the other states have.  It's based on                                                              
suggested legislation from the Council of State Governments which                                                               
is existing Virginia state law.  As far as he knows, no one in the                                                              
industry is charging a security deposit; and he didn't think this                                                               
bill addressed that issue.  Industry's position is that late fees                                                               
should be left up to the individual dealer and should depend on the                                                             
market place.                                                                                                                   
                                                                                                                                
There is no table of fair market value if the merchandise is                                                                    
damaged, but there is a formula that most dealers use to determine                                                              
the value of the property at any time.  It's based on the cash                                                                  
price of the goods at the outset of the transaction.  For instance,                                                             
if at the outset a T.V. is valued at $300, the customer can buy it                                                              
by tendering an amount equal to the cash price less 50 percent of                                                               
all the rent paid.  The is the formula for determining fair market                                                              
value.  As a practical matter, when something happens to the goods,                                                             
it turns out to be a loss for everyone, because many customers                                                                  
don't have the cash to pay for the T.V.  It hasn't been a big issue                                                             
in the industry.                                                                                                                
                                                                                                                                
MR. DENISON explained the late fee of $5 is to recover the cost of                                                              
having to either make phone calls or send letters.  It also serves                                                              
as an incentive for the customer to make on-time payments.                                                                      
                                                                                                                                
Number 532                                                                                                                      
                                                                                                                                
SENATOR LEMAN moved to pass HB 128 with individual recommendations.                                                             
There were no objections and it was so ordered.