05/04/2002 09:05 AM Senate L&C

             HB 393-SALES OF BUSINESS OPPORTUNITIES                                                                         
                                                                                                                                
CHAIRMAN STEVENS announced HB 393 to be up for consideration.                                                                   
                                                                                                                                
REPRESENTATIVE  GARY  STEVENS,  sponsor,  said that  this  is  not                                                              
intended to hurt legitimate businesses  at all and Avon ladies are                                                              
exempted.                                                                                                                       
                                                                                                                                
MR. GENE  DAU, AARP,  supported HB  393. He said  a lot  of senior                                                              
citizens  are trying  to supplement  their  income and  adds in  a                                                              
paper could  be scams catch their  eyes real fast. Passing  HB 393                                                              
would help seniors be less vulnerable to this type of scam.                                                                     
                                                                                                                                
MS. CINDY DRINKWATER,  Assistant Attorney General, said  this is a                                                              
good   consumer  protection   piece   of   legislation.  From   an                                                              
enforcement  perspective   this  bill  is  important   because  it                                                              
requires  registration  similar  to  how other  states  deal  with                                                              
business  opportunities   and  allows   the  department   to  find                                                              
something  out   about  these  businesses  ahead   of  time.  They                                                              
anticipate  that there  would  be  a lot  of sellers  of  business                                                              
opportunities  who  would not  register.  She  said that  this  is                                                              
important legislation.                                                                                                          
                                                                                                                                
SENATOR  AUSTERMAN said  there was  an  indeterminate fiscal  note                                                              
with the  bill and he  raised the question  about what  the actual                                                              
cost would be. He  asked if the legislature was going  to find out                                                              
how  much it  was going  to  cost next  year  when the  department                                                              
requests new employees.                                                                                                         
                                                                                                                                
MS.  DRINKWATER replied  that it  is  possible that  they will  be                                                              
asking for additional  funds, but at this point they  don't have a                                                              
sense of how many enforcement actions  they would have to take and                                                              
how many  registrations there  might be. At  this point,  they are                                                              
anticipating they  will be able to  afford this because  it is the                                                              
kind of work they do.                                                                                                           
                                                                                                                                
SENATOR  AUSTERMAN said  he  appreciated the  fact  that they  are                                                              
anticipating absorbing all the cost on this.                                                                                    
                                                                                                                                
CHAIRMAN  STEVENS said  he anticipated  the  discussion about  the                                                              
$250 - $500  threshold would continue because  Senator Leman still                                                              
has concerns about  it. He suspected it would be  raised again and                                                              
asked her to reiterate why they chose $250 instead of $500.                                                                     
                                                                                                                                
MS. DRINKWATER  replied that initially  the department  proposed a                                                              
$200 threshold  because they wanted  to protect as  many consumers                                                              
as possible.  Other states use a  range of $200 - $500.  They know                                                              
there are  a number  of fraudulent  "busops" out  there that  have                                                              
payment  requirements far  less  than even  $200.  When the  House                                                              
added "an aggregate  of $10,000" there was the  concern that there                                                              
are scam  artists bilking hundreds  of people out of  a relatively                                                              
small  amount  of  money  hoping  they  would  sneak  through  law                                                              
enforcement  radar and  people wouldn't  feel  like they  wouldn't                                                              
have to  vigorously protect  their investment.  They felt  at some                                                              
point that  a line  has to be  drawn somewhere,  so they  drew one                                                              
that other states had drawn.                                                                                                    
                                                                                                                                
The department  did  an informal  survey to find  if other  states                                                              
found the  $500 was  reasonable or whether  it should  be lowered.                                                              
The uniform  response  was that it's  best to  keep the  threshold                                                              
amount as low  as possible for the reasons she  already suggested.                                                              
In state's where there is a $500  threshold busops will sell their                                                              
product for $495  and that same package would be  sold for $199 in                                                              
a state with a $200 threshold.                                                                                                  
                                                                                                                                
     The  purpose of  keeping it  at the lower  amount is  to                                                                   
     throw  the net  as widely as  they could  to include  as                                                                   
     many fraudulent  sellers as possible. It seems  like the                                                                   
     real objection  to the  $500 amount  is from the  direct                                                                   
     callers association, but they  would be exempt under our                                                                   
     exemption  #5. So,  they wouldn't  be  affected by  that                                                                   
     provision anyway.                                                                                                          
                                                                                                                                
SENATOR AUSTERMAN asked how many complaints do they get a year.                                                                 
                                                                                                                                
MS.  DRINKWATER  replied  that  in   2001  there  were  six  busop                                                              
complaints. She  said they average 6  - 8 complaints per  year and                                                              
they  are aware  of  8 -  12  additional complaints  from  Alaskan                                                              
consumers that were filed with the  Federal Trade Commission. That                                                              
number might  seem low, but  it is viewed  as only the tip  of the                                                              
iceberg. Also, people are often surprised  to find that there is a                                                              
consumer protection  unit in state  government again. There  are a                                                              
variety of reasons that people may  not file complaints currently.                                                              
                                                                                                                                
SENAATOR AUTSERMAN moved to pass  SCS HB 393(L&C) out of committee                                                              
with individual  recommendations. There were no  objections and it                                                              
was so ordered.