03/15/2006 01:30 PM House FINANCE

HOUSE BILL NO. 446                                                                                                            
                                                                                                                                
     An Act relating to the amount of a civil penalty for an                                                                    
     unlawful act or practice in the conduct of trade or                                                                        
     commerce.                                                                                                                  
                                                                                                                                
1:44:58 PM                                                                                                                    
                                                                                                                                
CRAIG   JOHNSON,   STAFF,   REPRESENTATIVE   LESIL   MCGUIRE,                                                                   
testified   that  the  Federal   Trade  Commission   recently                                                                   
reported that  Alaska topped the  nation in fraud  complaints                                                                   
last  year  with  249 per  100,000  people.    Unfortunately,                                                                 
Alaska's current consumer protection  laws provide one of the                                                                   
lowest civil penalties of any  state.  To strengthen Alaska's                                                                   
consumer protection law and send  a message to those who prey                                                                   
on Alaska consumers, HB 446 acts  to increase civil penalties                                                                   
authorized   under  Alaska's   Unfair  Trade  Practices   and                                                                   
Consumer Protection Act.                                                                                                        
                                                                                                                                
Under  current law,  when  a person  or  company violates  an                                                                   
injunction   prohibiting   unfair   or   deceptive   business                                                                   
practices, they are subject to  a maximum penalty of $25,000.                                                                   
HB 446 would increase that maximum to $50,000.                                                                                  
                                                                                                                                
Mr.  Johnson continued,  current  law provides  for a  $5,000                                                                   
civil penalty  for each violation.   The bill  increases that                                                                   
amount to a  range between $1,000 and $25,000  per violation.                                                                   
The  current $5,000  penalty  was established  in  1970.   By                                                                   
adjusting  for   inflation  alone,  the  penalty   should  be                                                                   
$20,200.   Obtaining  injunctive relief  and civil  penalties                                                                   
are the  tools that  enable the  attorney general to  protect                                                                   
Alaska   consumers  against   unfair   and  deceptive   trade                                                                   
practices.   The changes  are vital  enforcement tools  and a                                                                   
court  assesses all  civil penalties  after  a violation  has                                                                   
been proven.   All penalty payments  go directly to the State                                                                   
of Alaska.                                                                                                                      
                                                                                                                                
1:47:21 PM                                                                                                                    
                                                                                                                                
Co-Chair Chenault  inquired why  the $5,000 penalty  had been                                                                   
dropped.                                                                                                                        
                                                                                                                                
1:48:58 PM                                                                                                                    
                                                                                                                                
ED  SNIFFEN,   (TESTIFIED   VIA  TELECONFERENCE),   ASSISTANT                                                                   
ATTORNEY GENERAL,  FAIR BUSINESS  SECTION, CRIMINAL  SECTION,                                                                   
DEPARTMENT  OF LAW,  ANCHORAGE,  explained that  there are  a                                                                   
number of cases  involving violation of the  act that warrant                                                                   
some-kind of penalty.   He provided an example  of a business                                                                   
engaging in  advertising violations  but not realizing  there                                                                   
has  been  some  kind of  violation  causing  consumer  harm.                                                                   
However, in  that type of case,  the Department of  Law works                                                                   
with the business  to provide a meaningful penalty  less than                                                                   
$5,000.   Then  the Department  gets the  business to  change                                                                   
their practices  so that future  violations do not  occur and                                                                   
those are the cases where fewer penalties are warranted.                                                                        
                                                                                                                                
1:50:27 PM                                                                                                                    
                                                                                                                                
Representative  Hawker referenced  the fiscal notes,  pointed                                                                   
out increased penalties and thought  the note should indicate                                                                   
that.                                                                                                                           
                                                                                                                                
Mr. Johnson hoped  the note would be neutral,  and would keep                                                                   
business from violating the law.   It may be a bill that does                                                                   
nothing; with  relationship to consumer fraud,  doing nothing                                                                   
is a good thing.                                                                                                                
                                                                                                                                
Representative Hawker asked how  the fines were accounted for                                                                   
and which department would be  indicating the note from fines                                                                   
collected.                                                                                                                      
                                                                                                                                
Mr.  Sniffen   advised  that  the  funds  collected   by  the                                                                   
Department  for  civil  penalty  efforts  go  to  either  the                                                                   
general  fund or are  earmarked  to be used  by the  consumer                                                                   
agency   for  future   consumer   protection  education   and                                                                   
enforcement.  The  reason that a positive fiscal  note cannot                                                                   
be identified  is because the  Department does not  know what                                                                   
kind  of activity  might  occur.   Some  cases  do provide  a                                                                   
windfall into the State's general fund.                                                                                         
                                                                                                                                
1:53:15 PM                                                                                                                    
                                                                                                                                
Representative  Hawker thought it  would be more  appropriate                                                                   
to have  an indeterminate  note from  the Department  of Law.                                                                   
Co-Chair Meyer agreed.                                                                                                          
                                                                                                                                
1:53:42 PM                                                                                                                    
                                                                                                                                
Representative  Hawker  MOVED  a  conceptual  change  to  the                                                                   
Department  of Law's note  changing it  to indeterminate  for                                                                   
all years  indicated.  There  being NO OBJECTION,  the change                                                                   
was made.                                                                                                                       
                                                                                                                                
1:54:33 PM                                                                                                                    
                                                                                                                                
Representative Joule recommended  that the indeterminate note                                                                   
be indicated in the Department's budget next year.                                                                              
                                                                                                                                
Co-Chair Chenault  commented that their office  would attempt                                                                   
to track some of the indeterminate notes.                                                                                       
                                                                                                                                
Vice Chair  Stoltze MOVED  to REPORT CS  HB 446 (JUD)  out of                                                                   
Committee  with  individual  recommendations   and  with  the                                                                   
accompanying fiscal notes.                                                                                                      
                                                                                                                                
Representative  Hawker did  not think  that the Alaska  Court                                                                   
System note would be affected.                                                                                                  
                                                                                                                                
There being NO OBJECTION, the bill moved from Committee.                                                                        
                                                                                                                                
CS HB  446 (JUD)  was reported  out of  Committee with  a "no                                                                   
recommendation"  and with  a new  indeterminate  note by  the                                                                   
House Finance  Committee for the  Department of Law  and zero                                                                   
note #1 by the Alaska Court System.