Legislature(1999 - 2000)
04/14/2000 09:08 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
CS FOR HOUSE BILL NO. 239(FIN)
"An Act relating to the Uniform Commercial Code;
relating to secured transactions; amending Rule 79,
Alaska Rules of Civil Procedure; and providing for an
effective date."
AMY ERICKSON, Staff, Representative Lisa Murkowski,
commented that HB 239 was first introduced in Alaska in
1962 and was then revised again in 1972. The draft before
Committee members represents the first comprehensive draft
in over 25 years. She advised that those times and
technology have changed. She noted that there are many
reasons that Revised Article 9 should be adopted in Alaska:
· Technology
· Volume
· New Collateral
· Certainty of perfection
· New Liens
· Clarification of Rules
· Consumer Impact
· Commitment to Uniformity
Ms. Erickson emphasized that the legislation would bring
st
Alaska into the 21 century in how it handles consumer
credit transactions. There is an effective date of July
st
1, 2001, which would give the agency time to educate
itself to determine how it will work. The attempt to
standardize transactions by Article 9 is imperative for
business in Alaska.
Senator Phillips stated that he was leery of the proposed
legislation and requested names and address of those that
support it.
MARY ELLEN BEARDSLEY, (Testified via Teleconference),
Assistant Attorney General, Department of Law, Anchorage,
stated that she liked the bill and would answer any
questions of the Committee. She emphasized that the
st
legislation would bring Article 9 into the 21 Century and
would help both lenders and debtors.
Co-Chair Torgerson asked if any substantial changes would
be made to the way that business is currently being done.
SHARON YOUNG, (Testified via Teleconference), State
Recorders Office, Department of Natural Resources,
Anchorage, offered to answer any questions of the
Committee.
Co-Chair Torgerson requested further explanation of the
fiscal note, which indicates a loss of revenue for the
State.
Ms. Young commented that the concept of the legislation was
to centralize the filing in the Uniform Commercial Code
(UCC) office in Alaska. Under the current code, there is
UCC Central filing and also UCC filing throughout all the
recording districts around the State. At this time, the
spread is about 50/50. The declining revenues shown,
represent the decrease attributable to the gradual
elimination of dual filings over the transitional period.
Decreasing revenues are expected until all filings have
been transitioned to UCC Central, or lapsed.
JOHN MCCABE, (Testified via Teleconference), Legislative
Director/Legal Counsel, National Conference of
Commissioners on Uniform State Laws, Chicago, remarked that
his company was the origin of the proposed legislation,
revision of Article 9. Current Alaska law is based on the
last version of Article 9, put forth in 1972. The effort
is to prepare Alaska business and financial institutions to
do a better job of dealing with secured financing in Alaska
and the rest of the country.
Secured financing is very important economically. The bill
addresses the economic function within the United States
and the economic lack of function throughout the rest of
the world. He noted that a secure transaction would not be
changed, however, would address personal properties. Most
of Article 9 is not engaged in determining that
relationship but rather by agreement between the parties.
Secured creditors have priority over unsecured creditors.
For the most part, with most collateral, security interest
occurs when that financing base is filed in the Central
office in Alaska.
Mr. McCabe testified that the legislation would expand the
scope for new kinds of collateral for secured financing.
It would provide a better and simpler filing system that
would be electronically friendly. It would provide better
remedies for secured creditors and secured debtors
throughout the transactions. He admitted that the secured
financing area was complicated, however, reiterated that
much of the bill provides for simplification of current
practices. He urged passage of the legislation.
Senator Leman asked the impact on small business.
Mr. McCabe replied that many representatives had been
involved in the study process of creating these guidelines.
There were representatives from many small businesses and
financial institutions. Small business in the United
States already has the benefit of secured financing. That
is one of the reasons that we have an economy which
generates spontaneous economic activity. The bill will not
injure small business in any way. It will enhance credit
opportunities for everyone.
CYNTHIA WEED, (Testified via Teleconference), Preston Gates
& Ellis LLP, Seattle, spoke to the unintentional
consequences of the legislation. She noted that as a firm,
Preston Gates and Ellis, had participated in the drafting
and the implementation of the legislation. She agreed that
it would add substantial benefit in the area of consumer
credit. However, one of the unintended consequences would
be the transfer by governmental organizations.
Under the existing Article 9, transfers by the State in
local government organizations were exempted out of the
coverage. Most loans to general government are unsecured
loans. When the State or Municipality of Anchorage borrows
money, they do that from a general obligation pledge as
unsecured loans.
Co-Chair Torgerson recommended that Ms. Weed submit a draft
of the language that her office would like to see
reinserted.
Ms. Weed replied that they would like to see the current
language with the exempt transfers by State and local
government. Under existing law, adding language would
qualify for a transfer under AS 45.09.104, subsection 12.
In the existing statute, there is an exemption for
transfers by a government or governmental subdivision or
agency. She stressed that they would like to see that
language replaced in the new draft.
Co-Chair Torgerson noted that his office would work on that
request.
Ms. Weed confirmed that her company would support passage
of the legislation with that modification.
Co-Chair Torgerson referenced Page 121, Line 18.
Ms. Weed agreed that language could cause consternation in
the municipal bond market. It would be monumental to go
back and find all the outstanding bonds and refile those.
She agreed that would be a clause which could provide a
substantial problem for the Alaskan municipalities. If not
excluded, there would be many outstanding bondholders who
could be at-risk with no longer having secured revenue
bonds.
JERRY KURTZ, (Testified via Teleconference), Alaska's
Representative to the National Conference of Commissioners
on Uniform State Laws, Anchorage, acknowledged that this is
a good bill and would improve everyone's position.
In regard to reduction of State revenue, Mr. Kurtz stated
that it is important to undertake dual filing given the
uncertainties of the existing law. The lost funds are
revenue that both large and small business will not have to
pay. It is important to recognize that the bill will
protect bank money and the power of small business who sell
credit and take the secured interest back.
Mr. Kurtz pointed out that the law firm represented by Ms.
Weed is the only party that has voiced any concerns with
the proposed legislation. He noted that the Alaska State
Bond Counsel does not object to the legislation. He
questioned what portion of the State Ms. Weed was
representing.
Co-Chair Torgerson stated that the bill would be HELD in
Committee for further consideration.
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