Legislature(2019 - 2020)BARNES 124
03/13/2020 03:15 PM House LABOR & COMMERCE
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| HB91 | |
| HB27 | |
| HB146 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 91 | TELECONFERENCED | |
| += | HB 301 | TELECONFERENCED | |
| + | HB 27 | TELECONFERENCED | |
| + | HB 146 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 146-MOTOR VEHICLE DEALERS: APPLIC.; INSURANCE
3:57:42 PM
CHAIR SPOHNHOLZ announced that the final order of business would
be SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 146, "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."
3:58:04 PM
REPRESENTATIVE MATT CLAMAN, Alaska State Legislature, prime
sponsor, introduced HB 146. He paraphrased the sponsor
statement [included in the committee packet], which read in its
entirety as follows [original punctuation provided]:
The purpose of House Bill 146 is to improve consumer
protections for those purchasing motor vehicles by
strengthening the requirements for motor vehicle
dealers. Under current law, a motor vehicle dealer in
Alaska must register biennially by filling out an
application that requires an address, but not a valid
telephone number. The application must be accompanied
by a $50 registration fee and a surety bond of
$50,000. There is no current requirement that dealers
carry liability insurance even though we require
drivers to have liability insurance for their vehicles
and dealers may allow uninsured drivers to take
dealer-owned cards for a test drive.
Alaska's current statutory requirements for motor
vehicle dealers are some of the least stringent in the
country. By way of comparison, for an automobile
dealership application to be valid in other states:
? Oregon Chapter 822 of Oregon State Statutes
provides for civil penalties for acting as a vehicle
dealer without a certificate (.005-.009), the
processes of applying for, and maintaining, an
automobile dealer license and related exemptions,
requirements, and privileges (.025-.042), grounds for
revocation, suspension, or cancellation of the
dealership certificate (.050), and further definition
of illegal practices and associated penalties (.055-
.080).
? Delaware Title 21, Chapter 63 of the Delaware
State Statutes provides for proof-of-location
requirements and recordkeeping (? 6303), license
expiration and renewal procedures (? 6304), retainment
of bill of sale records for a period of at least five
years (? 6305), in addition to grounds for revocation
of dealer licenses (? 6313);
? Texas Title 14, Subtitle A, Chapter 2301 of the
state's Occupations Code provides for public interest
information and complaint procedures (Subchapter E),
licensing requirements (Subchapter F), license
expiration and renewal (Subchapter G), dealer
operations (Subchapter H), grounds for license
revocation (Subchapter N), as well as procedures for
complaint hearings, judicial review, and penalties
(Subchapters O, P, and Q).
Comparatively speaking, Alaska Statutes Title 8,
Chapter 66 addresses the application form (.040) and
registration renewal (.050); sets the minimum bond
amount (.060), defines allowable action on bonds and
defines failure to file a bond as a class A
misdemeanor (.070, .080); and holds the dealer
responsible for maintaining a record of each motor
vehicle transaction (.320). Unlike Texas, Oregon, and
Delaware, there are no statutes explicitly providing
for a grievance process nor grounds for revocation of
the license in question.
HB 146 aims to strengthen consumer protection by
addressing two scenarios that may create problems for
both consumers and dealers:
HB 146 seeks to provide better protection when one
selling dealer sells multiple vehicles to a buying
dealer and receives payment without providing titles
(the titles are being held by the bank that provides a
credit line for purchasing vehicles). The selling
dealer plans to pay for the vehicles and get the
titles but runs into financial difficulties and is
unable to continue making payments. When this happens,
the bank repossesses the vehicles from the buying
dealer. The buying dealer has now lost the money and
decides to seek recompense from the selling dealer's
bond. At present, the bond requirement under state law
is $50,000, which, depending on the type and quantity
of vehicles, may be only a fraction of what is owed.
Raising the bond amount will help protect the buying
dealer in the event that the bank repossesses their
new stock.
Another scenario that this bill addresses is
"curbstoning," which is the act of selling used
vehicles under the false pretense of being the car's
owner in order to evade regulations that are imposed
on state-licensed automobile dealers. When a dealer
obtains a license, they are qualified to purchase cars
at "dealer only" auctions at steep discounts. In these
scenarios, the dealer is not required to disclose the
fact that they are a licensed car dealer or that the
vehicle has a reconstructed title or has known
defects. If deemed a personal vehicle, the vehicle is
not subject to a routine safety inspection. Often, the
title is not placed in the dealer's name, the contact
information provided is not the dealer's information,
or the transaction takes place in cash, leaving little
paper trail for the consumer to follow if issues
arise. Requiring a verified working telephone number
increases the consumer's ability to locate the dealer.
HB 146 would help protect against these two scenarios
by requiring that those registering as motor vehicle
dealers include more detailed information about their
business in the application, register a bond for
$100,000 instead of $50,000, and maintain liability
insurance that covers collisions with dealer-owned
cars.
4:01:34 PM
DAVID CLARK, Staff, Representative Matt Claman, Alaska State
Legislature, on behalf of Representative Claman, prime sponsor,
presented the sectional analysis for HB 146 [included in the
committee packet], which read as follows [original punctuation
provided]:
Section 1
Amends AS 08.66.030:
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
Amends AS 08.66.060(a):
Raises the amount of the bond required for dealer
registration applicants from $50,000 to $100,000.
Section 3
Adds a new section to AS 08.66:
Sec. 08.66.085 Insurance requirements: Requires that
dealers maintain public liability and property damage
insurance of not less than $50,000 for property
damage, $100,000 for injury to a single person, and
$200,000 for injury, including death, to more than one
person.
4:03:17 PM
REPRESENTATIVE STORY sought clarification on the cost of
insurance.
4:04:11 PM
STEVE ALWINE, President, Mendenhall Auto Center, stated that the
need for further regulation is because its easier to obtain a
dealers license in the state of Alaska than in any other state.
He explained that a dealer's license grants access to dealer
only auctions wherein inventory swaps occur. He addressed the
expense of a bond, reporting that his bond for $50,000 costs
$700 and renews every two years. He noted that the premium is
linear if the bond rises from $50,000 to $100,000 the price
increases from $700 to $1500. He added that its not a barrier
to entry, nor is it supposed to be - however, he emphasized that
he expects those entering the industry to act in a responsible
matter.
4:07:28 PM
CHAIR SPOHNHOLZ sought to clarify that the bond expense is $700
every two years.
MR. ALWINE answered yes.
4:07:42 PM
TROY JARVIS, President, Alaska Automobile Dealers Association,
expressed his support for HB 146. He informed the committee
that he has been in the car business in Alaska for the last 40
years and recently, the amount of deception in the dealers
industry has increased. He shared an anecdotal example. He
reiterated that as dealers, they are not trying to make it more
difficult to get licensed, but they do want to regulate and
monitor peoples actions to ensure that car dealers have a good
reputation in Alaska. He added that the leniency of the current
law allows individuals to obtain a license at little cost. Some
of those individuals then compound the problem by selling
vehicles under false pretenses. He said he wants to make [the
industry] legitimate and safe and to protect consumers. To
conclude, he reiterated his support for the bill.
CHAIR SPOHNHOLZ sought to clarify the problem being presented.
She summarized that there are people registered as dealers who
are potentially buying defective cars through auctions and
selling them on Craigslist to people without transparently
revealing that they could be held responsible for the known
defects. She asked if that is correct.
MR. JARVIS confirmed that.
4:11:24 PM
MARCUS WAEHLER, Alaska Automobile Dealers Association, shared a
personal anecdote to exemplify the problem at hand. He
expressed his hope that HB 146 will benefit the consumers, as
well as the reputation of [car] dealers in Alaska.
4:14:38 PM
REPRESENTATIVE HANNAN asked if the Division of Motor Vehicles
(DMV) has seen an increase in fraudulent behavior by dealers
acting as private parties to sell used vehicles with
reconstructed titles.
4:15:17 PM
JOANNE OLSEN, Director, Division of Motor Vehicles, Department
of Administration, stated that she has worked for over 31 years
and during that time has experienced that behavior. She noted
that another problem is when dealers do not provide a valid
phone number. She offered her belief that increasing the bond
might help because the cost of vehicles has increased.
4:16:11 PM
CHAIR SPOHNHOLZ asked if the requirements in HB 146 would
adequately prevent this problem from continuing to happen.
MR. WAEHLER said hopefully it would deter some people and curb
their behaviors; however, it will not eradicate the problem
completely. He offered his belief that the bill will have an
impact.
CHAIR SPOHNHOLZ asked if there is a requirement for registered
dealers to post their information whenever they make a sales
transaction.
MR. WAEHLER offered his understanding that disclosure is
required but it's not being followed through on or enforced.
CHAIR SPOHNHOLZ asked if Mr. Waehler filed a report when he
witnessed this deceptive behavior.
MR. WAEHLER said, its a little difficult to track down because
[the dealers] title had already been transferred into [the
buyers] name." He added that the buyer didnt remember the
dealers name only that she had found the car on Craigslist.
He said he connected the dots based on that information.
CHAIR SPOHNHOLZ asked if the buyer was acting in good faith.
MR. WAEHLER shared his belief that she was.
4:20:24 PM
CHAIR SPOHNHOLZ asked what protections could be put in place to
ensure that unscrupulous dealers arent misrepresenting
themselves. She asked for additional recommendations in terms
of offering more transparency or enforcement to help solve the
problem.
MS. OLSEN stated that HB 146 should help deter dishonest people
from applying for a license. She said currently, theres not
much the DMV can do to protect the public from these situations.
CHAIR SPOHNHOLZ asked what the DMV does when they identify that
someone has been a victim of this kind of fraud or deception.
MS. OLSEN said theres not much they can do when the title has
already been transferred to [the buyers] name. She shared an
anecdotal example.
4:23:26 PM
REPRESENTATIVE CLAMAN added that in terms of consumer remedies,
the automobile dealers are subject the Alaska Unfair Trade
Practices and Consumer Protection Act [AS 45.50.471]. He
explained that if they are found liable in a civil claim, they
are subject to treble damages. He noted that a key feature of
HB 146 is adding required liability insurance, which would
provide a source of money if someone brings a claim against a
dealer. He said the liability insurance would also provide
coverage for potential buyers that [test] drive a car on the
dealers lot.
CHAIR SPOHNHOLZ said that is helpful; however, it doesnt
address the problem of individuals who deceptively misrepresent
themselves. She observed that there doesnt appear to be a
meaningful accountability mechanism, which is problematic from a
consumer protection standpoint.
REPRESENTATIVE CLAMAN agreed. Nonetheless, he stated that the
DMV does not have adequate resources to take on that kind of
investigative capacity given the current budget environment.
CHAIR SPOHNHOLZ said they may not have the investigators or the
personnel; however, the DMV is one of the few state agencies in
Alaska that generates a profit. She suggested equipping the DMV
with FTE [full time equivalent] to invest in consumer
protection.
4:27:30 PM
CHAIR SPOHNHOLZ announced HB 146 was held over.