Legislature(2001 - 2002)
04/30/2002 01:40 PM Senate L&C
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 393-SALES OF BUSINESS OPPORTUNITIES
CHAIRMAN STEVENS announced HB 393 to be up for consideration.
REPRESENTATIVE GARY STEVENS, sponsor of HB 393, said this is a
consumer bill introduced at the request of the Department of Law.
He said the idea is to protect Alaskans from lots of consumer
scams that are out there (called "busops" - short for business
opportunities). He just received about 25 examples from Edna
March, a Juneau lady, of "business opportunities." He said they
are targeted toward people who are over 50, those who have to
stay at home, etc.
This bill is not intended to harm any legitimate
businessman, but it does place requirements on those
that may not be quite on the up and up. The busops are
very high pressure as you'll see from reading through
some of these…They promise huge earnings; they scam the
vulnerable among us…
HB 393 requires that the busops register with the state so they
can find them. Right now they can't locate them. It also requires
them to disclose information to the buyers, they would have to
use an escrow account to make sure that things people buy
actually arrive and gives the customer the 30 day right of
cancellation. He said that about half the states have similar
regulations and his bill exempts the legitimate businesses they
are familiar with, like Avon and Amway and Mary Kay.
If they don't pass this bill, these scams will continue and it
will take a great deal of time and money to track them down. It
will protect Alaska businessmen and women and will let the
Department of Law take preventative action before people are
scammed.
SENATOR LEMAN said they had talked privately about this and his
opinion is that the change made on the House floor on page 13,
lines 5 - 8, are unnecessary and probably damage this
legislation. He intended to offer an amendment at the appropriate
time to delete it. Another item is that he thought they should
raise the exemption from $250 to $500, as it is in other states.
Finally, after reviewing some letters that he received, he said a
lot of these are legitimate businesses and the exemptions in line
15 - 17 don't cover them adequately. "You say they do; they say
they don't. I want to make sure that gets clarified."
Someone pointed out that product inventory may be sold to the
buyer at something other than a wholesale price and that may then
cause that exemption not to activate.
TAPE 02-27, SIDE A
REPRESENTATIVE STEVENS said the amendment on page 13, line 5,
begins with "except" and that establishes an aggregate up to
$10,000. He has a hard time defending that and wouldn't be
concerned if they deleted it.
The $250 - $500 is more interesting. Some people have told him
that there shouldn't be any level and, if people are scammed,
they should be protected whatever the amount is over. But he
thought that you have to draw a line somewhere and he thought
$250 was a reasonable line to draw. If you draw it at $500, you
would have a lot of companies who are targeting people at $495
and still do quite well financially, but be taking advantage of
lots of people. They have found states that have gone to the
higher figure of $500, but now wish they were at $250.
On Senator Leman's third point regarding the exemption on lines
15 - 17 he explained that those were legitimate businesses like
Mary Kay and Avon. He understands this does indeed protect those
people and takes them out of this section entirely saying he
talked extensively with the Direct Sellers Association and they
agreed that this section does exempt the direct sellers.
SENATOR TORGERSON asked if the Attorney General was the one who
brings the complaint in relation to the court rule amendments
copies section (page 17). He asked if they are assuming someone
else brings the complaint.
MS. CYNTHIA DRINKWATER, Assistant Attorney General, said the
indirect court amendments they are referring to specifically
address AS 45.6.120. When you look at that section of the bill,
you'll see that that is a reference to claims against the escrow
account. These complaints most likely would be brought by a
purchaser of busop who had been defrauded and the department
wants copies of those complaints. Similarly, in the preceding
section there is also a requirement that sellers who do escrow
accounts provide notice of where those escrow accounts are to the
Department of Law. This section is just for an additional
tracking mechanism.
CHAIRMAN STEVENS asked her to address the concern about the $500
threshold.
MS. DRINKWATER said that originally they had requested a $200
threshold because they wanted to provide as much protection for
consumers as they could while at the same time recognizing that
there has to be a diminimous level where it wouldn't be cost
effective for the department to monitor all these kinds of
business opportunities. This is a line that is based on what
other states have done, although $200 is at the lower end.
However, nine states have thresholds of $200 - $300. Thirteen
states have a $500 threshold amount. A model Business Opportunity
Act has a $250 amount. Several states have started with either
$500 or $300 thresholds and have found that it is advantageous to
consumers to lower it to $250.
SENATOR AUSTERMAN asked if they pass this law, could he call the
Department of Law to see if the stack he was just handed were
licensed to do whatever in the state.
MS. DRINKWATER said yes. The registration requirement would work
similar to the telemarketing statute that's in effect now, as
well as our charitable organization statutes. In both of those
cases there is a requirement that solicitors register with the
department. That information is available on their website, so
consumer can look it up and see which telemarketers, charities or
solicitors are registered.
SENATOR AUSTERMAN asked what happens if they are not registered.
MS. DRINKWATER replied then it would be reasonable to think that
activity wouldn't be a good idea to be involved in.
SENATOR AUSTERMAN said his point is what does the department do
when someone isn't registered.
MS. DRINKWATER responded that they would probably first of all
send out a cease and desist letter, which informs the business
entity that they are in violation of a law and that they have to
be registered in the state. Sometimes they get immediate response
and sometimes they don't. Depending on the complaint that's
filed, they would take additional action. "One of the advantages
of this legislation is that it would give us an ability to take
action prior to consumers loosing money…"
REPRESENTATIVE STEVENS said that someone asked about page 13,
number 5, which gives an exemption for the legitimate Mary Kay
type of business and asked her to comment.
MS. DRINKWATER said:
Almost all the other states that have a business
opportunity registration statute like this one have an
exemption that is designed to exempt out direct sellers
such as we've been discussing. The language in our
proposed statute is very similar to every other state.
It's also language that the direct sellers requested be
included in a federal trade commission rule on business
opportunities and franchises. Certainly our intent is
to provide an exemption that would allow Mary Kay folks
and Tupperware folks to carry on their business…
SENATOR LEMAN moved on page 13, line 5, to delete everything from
the comma following the $250 up to the semicolon and asked for
unanimous consent. There were no objections and it was adopted.
CHAIRMAN STEVENS explained that the amendment returned the bill
to its original state as it came to the House Judiciary
Committee. He said they would set the bill aside until Thursday
and adjourned the meeting at 3:30 pm.
| Document Name | Date/Time | Subjects |
|---|