05/05/2023 03:15 PM House LABOR & COMMERCE

            HB 145-LOANS UNDER $25,000; PAYDAY LOANS                                                                        
                                                                                                                                
3:46:01 PM                                                                                                                    
                                                                                                                                
VICE CHAIR RUFFRIDGE  announced that the final  order of business                                                               
would be  HOUSE BILL  NO. 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."                                                                                 
                                                                                                                                
3:46:38 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER moved  to  adopt  the proposed  committee                                                               
substitute  (CS)  for  HB   145,  Version  33-LS0508\U,  Dunmire,                                                               
3/28/23,  as  a working  document.    There being  no  objection,                                                               
Version U was before the committee.                                                                                             
                                                                                                                                
3:47:17 PM                                                                                                                    
                                                                                                                                
PI RIORDAN-RANDALL, Staff,  Representative Stanley Wright, Alaska                                                               
State  Legislature, on  behalf  of  Representative Wright,  prime                                                               
sponsor,  gave  the summary  of  changes  under Version  U  [copy                                                               
included  in  the  committee  packet],   which  read  as  follows                                                               
[original punctuation provided]:                                                                                                
                                                                                                                                
     The  committee substitute  for  HB145  version U  would                                                                    
     make the following changes:                                                                                                
                                                                                                                                
        Amend Section  3, adding  new subsection  (d) to  AS                                                                  
     06.20.025 to  clarify that lenders  who issue  loans to                                                                    
     Alaskan residents where the  borrower completes the in-                                                                    
     person   or   electronic    transaction   while   being                                                                    
     physically  present  must  register  as  a  small  loan                                                                    
     licensee.                                                                                                                  
          o This  change would protect Alaskan  consumers by                                                                    
     regulating  lenders  who  say   they  do  not  have  to                                                                    
     register  in  Alaska  because  their  server  or  other                                                                    
     infrastructure is located out of state.                                                                                    
          o It would also  provide clarity to businesses who                                                                    
     may be unclear if they need to register.                                                                                   
                                                                                                                                
     Add the following new sections:                                                                                            
     • Section 4, adding  new section AS 06.20.025 "National                                                                  
     Registry"   allowing   the  Department   of   Commerce,                                                                    
     Community, and  Economic Development to  participate in                                                                    
     the   Nationwide   Multistate  Licensing   System   and                                                                    
     Registry (NMLS)  and utilize  the registry  to register                                                                    
     licensees   and   have   licensees  apply,   renew   an                                                                    
     application, submit reports,  pay fees, submit reports,                                                                    
     upload  surety bonds,  challenge  information input  by                                                                    
     the  department  into  the registry,  and  input  other                                                                    
     information and forms into the registry.                                                                                   
          o  This change  should  reduce the  administrative                                                                    
     burden   on   licensees.  Currently,   licensees   must                                                                    
     complete a  pdf application, email it  to the division,                                                                    
     and mail a check or  fax a credit card authorization to                                                                    
     pay  application   fees.  These  processes   should  be                                                                    
     streamlined if  licensees apply through NMLS,  which is                                                                    
     used in over 50 U.S. states and territories.                                                                               
               ? Renewal applications  would simply note any                                                                    
     changes (versus  having to fill out  a full application                                                                    
     each  year),  surety bonds  could  be  uploaded by  the                                                                    
     insurance company, fees could be  paid by ACH or credit                                                                    
     card directly,  and no  more emails  or PDFs  to submit                                                                    
     the application.                                                                                                           
          o Additionally,  this change will reduce  the work                                                                    
     required by the division to process applications.                                                                          
     •  Section 5,  amending  AS  06.20.030(a) allowing  the                                                                  
     department  to collect  application investigation  fees                                                                    
     through the NMLS registry.                                                                                                 
     •  Section 6,  amending  AS  06.20.030(b) allowing  the                                                                  
     department  to  collect  application fees  through  the                                                                    
     NMLS  registry  as  well   as  bringing  the  licensing                                                                    
     structure for small loan licenses to the modern era.                                                                       
          o The  proposed licensing structure is  similar to                                                                    
     the  licensing structure  currently  found in  deferred                                                                    
     deposit advance (DDA or "payday") licensing.                                                                               
          o  This   change  is  not  expected   to  increase                                                                    
     application fees  on current  small loan  licensees and                                                                    
     will  keep  fees  constant for  any  DDA  licensee  who                                                                    
     migrates to a small loan license.                                                                                          
        Section 7,  repealing  and  reenacting AS  06.20.090                                                                  
     "Places of Business" to  update the licensing structure                                                                    
     of small loan licenses.                                                                                                    
         Section   8,   amending  AS   06.20.170   "Periodic                                                                  
     Examinations"  to  change   the  requirement  that  the                                                                    
     department examine  small loan licensees at  least once                                                                    
     every 18 months to "as  often as necessary to carry out                                                                    
     the purposes of this chapter."                                                                                             
          o This  change would reduce the  regulatory burden                                                                    
     and  costs on  licensees  by allowing  the division  to                                                                    
     examine  based  on  risk  rather  than  being  calendar                                                                    
     driven.                                                                                                                    
          o This "as needed"  examination structure is found                                                                    
     in mortgage (AS 06.60),  money services (AS 06.55), and                                                                    
     DDA  lending  (AS  06.50);  this  change  would  create                                                                    
     consistency and fairness among programs.                                                                                   
        Section   11,  adding   new  section   AS  06.20.325                                                                  
     "Criminal  Threats" to  prohibit  small loan  licensees                                                                    
     from threatening  a borrower with  criminal prosecution                                                                    
     as a result of the borrower's default.                                                                                     
       o This change would increase consumer protections                                                                        
     by implementing language similar to what is currently                                                                      
     found in AS 06.50 (DDA or "payday" lending).                                                                               
        Section 12, adding new paragraph to AS 06.20.900                                                                      
      "Definitions" defining "registry" as the Nationwide                                                                       
     Multistate Licensing System (NMLS) and registry.                                                                           
                                                                                                                                
3:52:51 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SADDLER questioned what Section 4 would cover.                                                                   
                                                                                                                                
3:53:36 PM                                                                                                                    
                                                                                                                                
ROBERT  SCHMIDT,   Director,  Alaska  Division  of   Banking  and                                                               
Securities,  Department  of   Commerce,  Community  and  Economic                                                               
Development, answered that the division  would use the Nationwide                                                               
Multistate Licensing System  and Registry (NMLS), and  it is used                                                               
for many  types of financial  and lending  regulations, including                                                               
mortgages.                                                                                                                      
                                                                                                                                
3:55:22 PM                                                                                                                    
                                                                                                                                
TRACY  RENO, Chief  of Examinations,  Alaska Division  of Banking                                                               
and   Securities,   Department    of   Commerce,   and   Economic                                                               
Development,  stated that  NMLS  is already  used  in Alaska  for                                                               
mortgage lending,  and for  small, short-term  loans in  33 other                                                               
states.                                                                                                                         
                                                                                                                                
3:56:10 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER expressed  concern about  using NMLS  for                                                               
the purposes outlined in the proposed legislation.                                                                              
                                                                                                                                
3:56:43 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 3:56 p.m. to 3:58 p.m.                                                                       
                                                                                                                                
3:58:11 PM                                                                                                                    
                                                                                                                                
VICE CHAIR RUFFRIDGE  announced that HB 145, Version  U, was held                                                               
over.