04/14/2023 03:15 PM House LABOR & COMMERCE

            HB 145-LOANS UNDER $25,000; PAYDAY LOANS                                                                        
                                                                                                                                
3:22:35 PM                                                                                                                    
                                                                                                                                
CHAIR SUMNER announced  that the next order of  business would be                                                               
HB 145,  "An Act  relating to  loans in an  amount of  $25,000 or                                                               
less; relating  to deferred deposit  advances; and  providing for                                                               
an effective date."                                                                                                             
                                                                                                                                
3:23:42 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WRIGHT,  as prime  sponsor, introduced HB  145 and                                                               
stated  that the  proposed  legislation  would address  predatory                                                               
payday   lending.     He  explained   that   payday  loans   have                                                               
extraordinarily high interest rates, and  as a result these loans                                                               
cost a  great deal more  to pay back than  most other loans.   He                                                               
said  that payday  loan  lenders are  currently  exempt from  the                                                               
statutes  regarding loans.   He  estimated  that 15,000  Alaskans                                                               
take out  these loans on  an annual basis.   He said that  HB 145                                                               
would remove these payday loan exemptions.                                                                                      
                                                                                                                                
3:26:05 PM                                                                                                                    
                                                                                                                                
PI RIORDAN-RANDALL, Staff,  Representative Stanley Wright, Alaska                                                               
State  Legislature, on  behalf  of  Representative Wright,  prime                                                               
sponsor, gave the sectional analysis for  HB 145.  He stated that                                                               
Sections  1, 2,  and 6  would remove  references to  the Differed                                                               
Deposits  Advances Act  (DDAA);  Section 3  would define  lenders                                                               
subject  to  the bill;  Section  4  would  provide the  level  of                                                               
interest  caps;  Section  5 would  provide  that  interest  rates                                                               
exceeding those provided in  statute, would become unenforceable;                                                               
and  Section  7   would  prevent  lenders  from   using  fees  to                                                               
circumvent  the maximum  interest rates.   He  concluded, stating                                                               
that Section 8 would repeal DDAA,  and Section 9 would provide an                                                               
effective date.                                                                                                                 
                                                                                                                                
3:29:44 PM                                                                                                                    
                                                                                                                                
GRAHAM DOWNEY,  Alaska Public  Interest Research  Group, provided                                                               
invited testimony  on HB 145.   He briefly explained  the process                                                               
of acquiring  a short-term loan.   He stated that such  loans are                                                               
used for  things like rental deposits,  groceries, childcare, and                                                               
car repairs.   Because  these payday  loans require  repayment in                                                               
two weeks,  he suggested that it  can place a strain  on a person                                                               
who needs this money to pay for  rent or other expenses.  He said                                                               
that paying  back a partial  amount is  all some people  may have                                                               
the ability to do.  Interest  is then applied despite some of the                                                               
money being  paid back.   He estimated  that the  average Alaskan                                                               
takes five such loans annually,  taking an average of five months                                                               
to  pay them  back.   He  stated that  payday  loans average  $29                                                               
million in revenue annually.                                                                                                    
                                                                                                                                
3:35:37 PM                                                                                                                    
                                                                                                                                
LEIGH DICKEY, Advocacy Director,  Alaska Legal Services, provided                                                               
invited  testimony on  HB  145.   She  stated  that Alaska  Legal                                                               
Services  has 50  offices across  the state.   She  expressed the                                                               
understanding  that payday  loans target  low-income individuals,                                                               
and these individuals must often take  more loans in order to pay                                                               
back their previous loans.   She reiterated that payday loans are                                                               
usually taken out  for emergency expenses, which  often result in                                                               
financial problems becoming worse  because of the interest rates.                                                               
She advised that  the interest can often reach rates  of over 400                                                               
percent.  She  said that 18 other states have  enacted small loan                                                               
legislation with an interest rate cap of 36 percent.                                                                            
                                                                                                                                
3:40:19 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  FIELDS requested  a market  comparison of  online                                                               
loans versus physical payday loan stores.                                                                                       
                                                                                                                                
MS. DICKEY answered that 70 percent  of payday loans in the state                                                               
are taken  via online sources,  with 30 percent being  taken from                                                               
physical locations.   In  response to  a follow-up  question, she                                                               
said that  individuals do not  often seek the services  of Alaska                                                               
Legal Services for  help with any type of debt.   This is because                                                               
of the belief that the only way to clear debt is to pay it back.                                                                
                                                                                                                                
3:42:04 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  PRAX questioned,  if the  bill were  passed, what                                                               
would happen if payday loaners decided to stop lending.                                                                         
                                                                                                                                
MS. DICKEY expressed uncertainty.                                                                                               
                                                                                                                                
MR. DOWNEY responded  that consumers in other  states found other                                                               
options, which were often less expensive.                                                                                       
                                                                                                                                
3:44:37 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  CARRICK  questioned  whether online  payday  loan                                                               
lenders gain access to the bank accounts of borrowers.                                                                          
                                                                                                                                
REPRESENTATIVE WRIGHT  expressed the  opinion that  lenders often                                                               
find ways to take the permanent fund dividends of borrowers.                                                                    
                                                                                                                                
MR. DOWNEY expressed uncertainty about the specific details.                                                                    
                                                                                                                                
3:46:52 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SADDLER  inquired about  the occupations  of those                                                               
who most often take out payday loans.                                                                                           
                                                                                                                                
REPRESENTATIVE WRIGHT  answered that  he was unaware  of specific                                                               
numbers but said that it is  common for military personnel to use                                                               
these types of loans.                                                                                                           
                                                                                                                                
MR. DOWNEY  added that  close to  half of  those in  the military                                                               
have taken  out a  payday loan,  although military  personnel are                                                               
protected  by federal  laws.    He said  that  he  is unaware  of                                                               
demographic data related to borrowers.                                                                                          
                                                                                                                                
REPRESENTATIVE  SADDLER  asked  whether there  are  federal  laws                                                               
protecting borrowers who are not military personnel.                                                                            
                                                                                                                                
MR. DOWNEY expressed uncertainty concerning such laws.                                                                          
                                                                                                                                
3:49:18 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE FIELDS  commented that  laws were passed  in 2006;                                                               
however, payday lenders found loopholes.                                                                                        
                                                                                                                                
3:49:43 PM                                                                                                                    
                                                                                                                                
CHAIR SUMNER announced that HB 145 was held over.