Legislature(2017 - 2018)BARNES 124
05/08/2017 03:15 PM House LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| HB180 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 180 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 180-MONEY SERVICES BUSINESS: REQS; LICENSING;
3:18:42 PM
CHAIR KITO announced that the only order of business would be
HOUSE BILL NO. 180, "An Act relating to money transmission and
currency exchange businesses; relating to transmitting value
that substitutes for money; relating to licensing requirements
and registration through the Nationwide Multistate Licensing
System and Registry; relating to surety bonding requirements;
authorizing certain licensees to contract to use subdelegates
for reloading funds on certain stored-value cards; relating to
record retention, reporting requirements, and enforcement
provisions; relating to exemptions; relating to money services
Internet activities; relating to transmitting value and
currency; and providing for an effective date."
3:19:19 PM
MARY SCHLOSSER, Staff, Representative Zach Fansler, Alaska State
Legislature, presented HB 180 on behalf of Representative
Fansler, prime sponsor. With the aid of a PowerPoint
presentation [hardcopy included in the committee packet], she
said HB 180 would amend the Alaska Money Services Act, which
provides legal framework for currency exchange and money
transmission functions, including transfer of money, and loading
and reloading of payment instruments - including store value
cards. She explained that when the Act was passed in 2007, the
legislature did not contemplate virtual or "crypto" currency,
such as "Bitcoin" or "Venmo," or the rate of money services
business expansion.
MS. SCHLOSSER stated that HB 180 would update licensing,
recordkeeping, and enforcement provisions designed to support a
"legal marketplace" and ensure legal behavior. She said the
proposed changes better support rural Alaska-based money service
businesses by removing the licensing discount for Outside firms;
current law allows applicants from other states to submit
minimal information and pay a fee of $500, which is half of the
fee that instate money service businesses pay.
MS. SCHLOSSER relayed that HB 180 would encourage business
expansion, replacing a $25,000 net-worth requirement with a
surety bond for the same amount "up to $1 million." The surety
bond coverage would add greater consumer protection, she said.
The proposed bill would also assist rural Alaskans by
simplifying the process for a license to contract with other
licensees to reload rural-issued prepaid cards. She drew
attention to the penultimate slide of the PowerPoint, which
shows the current treatment of subdelegates and how contracts
must be made individually with entities, such as Fred Meyer,
Walgreens, and Safeway. The last slide shows the proposed
treatment of subdelegates, which would be streamlined. She
indicated this would provide "a greater access for rural
Alaskans coming into Anchorage, in particular."
MS. SCHLOSSER said HB 180 would broaden the definition of money
services to include the new virtual currency transactions, as
well as "other methods of moving or transferring money." This
will better protect Alaskans against fraud, she said. Further,
the bill would add a criminal background check for all control
persons; require licensees to comply with federal laws,
including those related to suspicious activity reports; increase
records retention from three to five years for greater
transparency; update enforcement provisions by allowing
increased orders; require report sales for calculations of
license fees and assessments to ensure state costs are covered;
and require registration in the Nationwide Multistate Licensing
System and Registry (NMLS) for filing documents and paying fees
- a system used by over 90 percent of money service businesses
in other states.
MS. SCHLOSSER reported that Alaska currently has 87 registered
money service businesses, and the number is expected to increase
over the next few years. She said 3 of the 87 are Alaska-grown
companies. Ms. Schlosser concluded her presentation by offering
to answer questions.
3:23:44 PM
REPRESENTATIVE BIRCH asked for clarification as to what problem
HB 180 is attempting to solve.
MS. SCHLOSSER responded that HB 180 is "kind of a clean-up
bill." She said it would increase consumer protection, both
with the surety bond and with regulations that increase
transparency. She said by using a system that 90 percent of the
businesses in other states currently use, Alaska businesses
would be able to "get their information more readily." She
reiterated that the bill would expand the definition of money
services to include virtual money transfer businesses.
3:25:00 PM
REPRESENTATIVE KNOPP asked who contracts with multistate
agencies and whether there is any cost to the state.
MS. SCHLOSSER answered that money service businesses contract
with each other. She offered a hypothetical example such that a
contract made under the provisions of the proposed bill would be
valid with subdelegates. People with reloadable [stored-value]
cards would have greater access to goods and services. She
said, "It's not setting up an entire banking service, but it's
getting them a little bit closer, since there's not a lot of
banks set up in rural Alaska."
REPRESENTATIVE KNOPP offered his understanding that currently
"the cards are not used in the national company." He said he
tries to be cautious about "forcing money service businesses to
contract with a nationwide company in order to do business in
our state." He said it appears that the current situation is
working wherein businesses contract individually with the
stores, and under HB 180, they would have to go through a
national firm. He asked if [HB 180] is being requested to
facilitate the monitoring of consumer protection or for the
benefit of the nationwide company. He asked, "Who's pushing the
agenda?"
MS. SCHLOSSER offered her understanding that [HB 180] is "driven
by Alaska business folks," as well as by "an outdated regulatory
system around money services." She reiterated the streamlined
process [previously described in the last slide of the
PowerPoint].
REPRESENTATIVE KNOPP surmised that the committee would have the
opportunity to hear from some businesses.
3:29:02 PM
REPRESENTATIVE BIRCH asked for clarification about the current
manner by which a cash card can be used.
MS. SCHLOSSER answered that currently the business owner [who
sells the card] can contract with whomever he/she desires; it is
beneficial to have as many contracts as possible. Under HB 180,
the process of contracting would be streamlined using national
organizations, making it no longer necessary to contract through
individual stores; the card would be useable at any business
that uses the national business.
3:31:07 PM
REPRESENTATIVE BIRCH offered his understanding that a
significant percentage of cash cards do not get used at 100
percent. He asked who ends up receiving the unused balance.
3:31:56 PM
MS. SCHLOSSER offered her understanding that it is the business
owner that originally issued the card.
3:32:16 PM
PATRICE WALSH, Examinations Chief, Division of Banking and
Securities, Department of Commerce, Community & Economic
Development (DCC&ED), stated that prepaid cards are a little
different from gift cards. She explained that while gift cards
are issued for use at specific stores, prepaid cards are good
for any point of sale (POS), "so, the money stays on that card."
She continued, "The business owner is responsible for making
sure that money stays on the card. So, there's never any
expiration; there's never any balance that doesn't get used;
it's always available." She emphasized that prepaid cards are
different from a gift card, "which does have those fees."
REPRESENTATIVE BIRCH asked how [a prepaid card] compares to a
credit card.
MS. WALSH clarified that [prepaid cards] are not like credit
cards. She explained that a prepaid card is loaded with a
certain amount of money, and the person who owns the prepaid
card "would have that amount available at these point of sales"
- but no more than that amount.
3:35:32 PM
REPRESENTATIVE KNOPP mentioned currency exchange sites, which he
said he has observed when traveling outside the country. He
asked what would be regulated under HB 180.
MS. WALSH answered that HB 180 includes currency exchange, "but
not at the same level as the money transmission." Currency
exchange swaps one country's currency for another. She said the
department does license currency exchangers that are not
affiliated with a bank, but there are very few licensed in
Alaska. She said, "Our main volume of our licensees are the
traditional money transmitters." She stated that [businesses]
that want to transfer money from one person to another, outside
of a bank, must hold a money transmitter license. She said the
industry has changed a lot; it now offers services beyond the
traditional money transfer, including prepaid cards, virtual
currency, and cards used to make payroll. She expressed that
the proposed legislation is "trying to keep up with the changes
in the industry and the technology that's available."
3:38:16 PM
REPRESENTATIVE SULLIVAN-LEONARD noted that the sponsor statement
[included in the committee packet] states that the NMLS "allows
states to share information about licensed money services
businesses activity." She asked, "Who would be sharing that
information, and where would it go?"
MS. WALSH answered that NMLS is a licensing tool to which state
regulators from all 50 states have access. She explained that a
company that wants to be licensed would send an application
electronically to NMLS; the division, as regulator for Alaska,
would get the notice and communicate through NMLS. The system
allows other regulators to see if the applicant is licensed in
other states or if there have been any ramifications to the
applicant's license that could indicate regulatory issues
related to consumer protection.
REPRESENTATIVE SULLIVAN-LEONARD noted that Sections 41-44, of HB
180, address penalties that may be incurred for those
subdelegates that may not be in compliance. She asked Ms. Walsh
to expound on that issue.
3:41:03 PM
MS. WALSH replied that those sections were added to include the
subdelegate language, so [subdelegates out of compliance] would
be liable if there are any problems with the money that they
have collected from a consumer "not getting to where it's
supposed to go."
REPRESENTATIVE SULLIVAN-LEONARD asked for an example of why and
how a penalty would be applied.
MS. WALSH responded, "We are not anticipating problems with
that, but it does help to protect the consumers." She offered a
hypothetical situation, as follows:
Let's say a person goes up and wants $100 put onto
their prepaid card - and this is a subdelegate - and
they go to use the card and the money's not on the
card. And so, they need to find out why that money's
not accessible. So, this helps to make that
subdelegate accountable, and then they would be able
to go and contact who they purchased their card from
and try to find out where that money is.
REPRESENTATIVE SULLIVAN-LEONARD said, "Pretty simple."
3:43:21 PM
CHAIR KITO asked whether the state of Alaska has any law
restricting or capping the fee that can be charged on [prepaid]
cards.
MS. WALSH answered that those fees are all regulated by federal
law; there is nothing in state law that would counteract what
that federal law has in place. In response to a follow-up
question, she noted that the division had provided some
information to Representative Fansler's office regarding "card
fees at the federal level." She said there are separate rules
for gift cards and prepaid cards, and she said she does not have
that information at her fingertips.
CHAIR KITO indicated he may ask the bill sponsor for that
information.
3:44:58 PM
MS. SCHLOSSER relayed that there is a plethora of complex
information "out there." She said the fees currently don't have
much federal regulation. She indicated that the regulation that
does exist is broad, and there have been efforts made to tighten
the regulations; however, last month, when those changes were
slated to commence, the federal Consumer Financial Protection
Bureau decided to postpone the new rules for prepaid cards for
six months - to start April 1, 2018. She said, "It seems like
... [the] money services business is able to write ... [its] own
rules, as far as fees go." She said consumers pay a
[considerable amount] of hidden fees. She stated, "The proposed
regulation change would make it more transparent by putting them
there on the web site, having a grace period, and not targeting
low-income consumers - that kind of thing - but that's been put
on hold, ... according to the administration, to give those
money services more time to comply."
CHAIR KITO encouraged Ms. Schlosser to conduct research to
determine what Alaska can do as a state "to have some impact on
that realm." He expressed concern regarding the issue of hidden
fees.
3:47:31 PM
CHAIR KITO announced that HB 180 would be held over.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB180 ver. A 5.2.17.PDF |
HL&C 5/8/2017 3:15:00 PM |
HB 180 |
| HB180 Sponsor Statement 5.2.17.pdf |
HL&C 5/8/2017 3:15:00 PM |
HB 180 |
| HB180 Sectional Analysis 5.2.17.pdf |
HL&C 5/8/2017 3:15:00 PM |
HB 180 |
| HB180 Fiscal note DCCED-DBS 5.8.17.pdf |
HL&C 5/8/2017 3:15:00 PM |
HB 180 |
| HB180 Support Document Money Services Act Powerpoint 5.8.17.pdf |
HL&C 5/8/2017 3:15:00 PM |
HB 180 |