Legislature(2025 - 2026)ADAMS 519
05/09/2025 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB57 | |
| SB39 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HJR 10 | TELECONFERENCED | |
| += | SB 80 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 57 | TELECONFERENCED | |
| += | SB 39 | TELECONFERENCED | |
HOUSE FINANCE COMMITTEE
May 9, 2025
1:59 p.m.
1:59:15 PM
CALL TO ORDER
Co-Chair Schrage called the House Finance Committee meeting
to order at 1:59 p.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Andy Josephson, Co-Chair
Representative Calvin Schrage, Co-Chair
Representative Jeremy Bynum
Representative Alyse Galvin
Representative Sara Hannan
Representative Nellie Unangiq Jimmie
Representative DeLena Johnson
Representative Will Stapp
Representative Frank Tomaszewski
MEMBERS ABSENT
Representative Jamie Allard
ALSO PRESENT
Senator Forest Dunbar, Sponsor; Brodie Anderson, Staff,
Representative Neal Foster; Arielle Wiggin, Staff, Senator
Forrest Dunbar.
PRESENT VIA TELECONFERENCE
Andrew Kushner, Senior Policy Counsel, Center for
Responsible Lending, Oakland, California; Claire Lubke,
Economic Justice Lead, Alaska Public Interest Research
Group; Robert Schmidt, Director, Division of Banking and
Securities, Department of Commerce, Community and Economic
Development; Tracy Reno, Chief of Examinations, Division of
Banking and Securities, Department of Commerce, Community
and Economic Development.
SUMMARY
CSSB 39(FIN)
LOANS UNDER $25,000; PAYDAY LOANS
CSSB 39(FIN) was HEARD and HELD in committee for
further consideration.
CSSB 57(FIN)
APPROP: CAPITAL/FUNDS/REAPPROP
HCS CSSB 57(FIN) was REPORTED out of committee
with six "do pass" recommendations, two "do not
pass" recommendations, and two "no
recommendation" recommendations.
Co-Chair Schrage reviewed the meeting agenda.
CS FOR SENATE BILL NO. 57(FIN)
"An Act making appropriations, including capital
appropriations and other appropriations; making
reappropriations; making appropriations to capitalize
funds; and providing for an effective date."
2:00:08 PM
Co-Chair Schrage asked for a motion on the bill.
Co-Chair Foster MOVED to REPORT HCS CSSB 57(FIN) out of
committee with individual recommendations.
Co-Chair Schrage OBJECTED for discussion. He reviewed the
work the committee had done on the bill. He elaborated that
the primary changes to the bill were to address deferred
maintenance. The committee added $19 million for school
major maintenance grants to fund the top nine projects on
the Department of Education and Early Development (DEED)
major maintenance list, $1.35 million to fund Mt.
Edgecomb's top deferred maintenance project, $10 million
for statewide deferred maintenance, $5 million for
University of Alaska deferred maintenance, and $750
thousand to Judiciary for building maintenance. In
addition, the grant amount for the Alaska Travel Industry
Association (ATIA) was increased by $2.5 million, and $53
million in receipt authority for the University of Alaska
Fairbanks (UAF). He noted that the committee made a $730
thousand reduction in UGF, bringing the total to $161
million in UGF; a roughly 45 percent reduction from the
governor's request. There were no additional Capital
Project Submission and Information System (CAPSIS) projects
added to the budget. Therefore, no legislators' projects
were funded in recognition of that state's fiscal
challenges. Lastly, the most recent committee substitute
(CS) of the bill included fiscal year 25 Capital Budget
items and two fiscal notes for bills with capital budget
impacts.
Co-Chair Schrage WITHDREW the OBJECTION
Representative Johnson OBJECTED.
2:02:55 PM
AT EASE
2:03:30 PM
RECONVENED
Representative Johnson explained that she would be a no
vote due to the inclusion of a fiscal note that included
the Hilcorp loophole S corporate tax.
Co-Chair Schrage noted that inclusion of the fiscal notes
did not imply support or opposition to the bills and were
included in coordination with the Legislative Finance
Division and were contingent upon passage of the bills.
Representative Johnson MAINTAINED the OBJECTION.
A roll call vote was taken on the motion.
IN FAVOR: Hannan, Galvin, Jimmie, Josephson, Foster,
Schrage
OPPOSED: Stapp, Johnson, Bynum, Tomaszewski
The MOTION PASSED (6/4).
HCS CSSB 57(FIN) was REPORTED out of committee with six "do
pass" recommendations, two "do not pass" recommendations,
and two "no recommendation" recommendations.
2:05:06 PM
AT EASE
2:09:31 PM
RECONVENED
CS FOR SENATE BILL NO. 39(FIN)
"An Act relating to loans in an amount of $25,000 or
less; relating to financial institutions; relating to
the Nationwide Multistate Licensing System and
Registry; relating to pawnbroker licensing exemptions;
relating to deferred deposit advances; relating to
computing interest; and providing for an effective
date."
2:09:47 PM
Co-Chair Foster noted the committee heard invited testimony
during the morning meeting [May 9, 2025, 9:10am]. He asked
to hear an introduction of the bill from the sponsor.
SENATOR FOREST DUNBAR, SPONSOR, provided a review of the
bill. The legislation capped payday loan annual percentage
rates at 36 percent aligning with the federal cap that
already protected active duty service members and their
families. He noted that the House had passed the bill in
the previous year with broad bipartisan support with a vote
of 37 to 2 and every member that was still in the committee
or House in the current session voted for the bill. He
informed the committee that SB 39 included two additions
from the previous year. He delineated that the bill brought
Alaska in line with Alaska's existing Small Loans Act that
applied to most other short-term loans. Despite the service
Members' Civil Relief Act, a Texas study discovered that 45
percent of veterans had used payday loans compared to 7
percent of the general population. The loans, often
marketed as quick solutions, had interest rates with an
average of over 421 percent according to the Alaska Public
Interest Research Group and trapped borrowers in cycles of
debt. The payday loan business model depended on repeat
borrowing and nationally 75 percent of payday loan fees
were derived from borrowers who took out an average of 10
loans per year. The average Alaskan borrower took out 5
loans per year. The loans did not build credit and often
worsened financial instability and increased bankruptcy
rates. He reported that from 2017 to 2022 payday lenders
garnished over $3.7 million from Permanent Fund Dividends
(PFD). The majority of plaintiffs in small claims court
were from out of state. The vast majority of payday lenders
were out of state online vendors. He cited a study ["Do
Payday Loans Cause Bankruptcy?" October 20, 2010] (copy on
file) in members' bill packets that demonstrated
individuals who qualified for the loan went bankrupt at a
much higher rate than those that did not qualify. He
summarized that the bill closed the loophole allowing
operators to operate outside of Alaska's laws and included
a non-invasion clause to ensure out-of-state online lenders
were held accountable. Nineteen other states, including
Nebraska, South Dakota, and Montana passed similar laws. No
state that had imposed the cap had elected to repeal the
law. He referenced the argument that without the payday
lending option individuals would have no other place to go.
He shared that traditional lenders and community groups had
stepped up to offer relief. The reform yielded positive
results in the states that adopted the measure.
Co-Chair Foster asked his staff to review the fiscal note.
BRODIE ANDERSON, STAFF, REPRESENTATIVE NEAL FOSTER,
reviewed the published fiscal note from the Department of
Commerce, Community and Economic Development (DCCED)
(FN2(CED) dated April 9, 2025, allocated to Banking and
Securities. He reported that the fiscal note reflected zero
operating costs in FY 26 but showed a change in revenue of
$19.5 thousand in lost revenue, half of the $39 thousand
due bi-annually to the bi-annual licensure. He indicated
that the Legislative Finance Division pointed out that the
Division of Banking and Securities provided $18 million in
annual revenue.
Co-Chair Foster reviewed individuals available online for
questions.
2:17:16 PM
Representative Galvin thanked the bill sponsor and
recognized the importance of the bill. She discerned that
$19 thousand seemed fairly irrelevant when considering the
data indicating 47 percent of the loan users were veterans
and many ended up in bankruptcy and likely in need of state
services like housing vouchers. She described the bill as
cost neutral and advantageous by decreasing bankruptcies
and consequently, dependence on government services.
Senator Dunbar agreed with Representative Galvin's
assessment. He clarified that the data showed 45 percent of
veterans in a Texas study of loan users were veterans; they
did not have the data for Alaska. He suggested that the
earlier testifier from the Alaska Public Interest Research
Group, [Claire Lubke, Economic Justice Lead, Alaska Public
Interest Research Group] speak to the connection between
the need for government services and bankruptcy in
connection with payday loans. He mentioned hearing prior
Senate public testimony from many pastors supporting the
bill because they saw the deleterious impact on their
congregation.
2:19:57 PM
Representative Stapp thanked the bill sponsor. He asked
what the difference in the percentage of loans was between
a veteran and an active duty service member. Senator Dunbar
agreed the topic could be a bit confusing. He explained
that there was a federal law specifying that predatory
types of loans could not be marketed to active duty service
members or their families. Once a person was a veteran, the
federal law no longer applied therefore, the percentage
applied to veterans. He emphasized that veterans utilized
the loans at a higher rate than non-veterans. He viewed the
bill as extending the protection for active duty military
that the federal government deemed was essential to
everyone in the state. Representative Stapp noted the bill
packets included several opposition letters. He mentioned
the Southwest Public Policy Institute (SPPI) letter stating
that alternative lending sources were largely unavailable
to consumers, specifically low income and unbanked, and
passing the law would cut people off from available
lending. He read an excerpt from the letter:
Similarly, our research into credit union lending
shows that Payday Alternative Loans (PALs) are largely
unavailable to the consumers they are supposed to
serve. We tested 15 credit unions in New Mexico, and
86% either denied membership
Senator Dunbar answered that the primary objection was from
the payday lenders or organizations they pay, and the same
objections were raised in every state that passed the
legislation. However, it had not been the case in other
states with the law. He mentioned letters of support from
financial institutions that indicated there were financial
products available and also from non-profits. He voiced
that the fiscal evidence showed that the individuals who
used payday loans were left in a worse financial position
than prior to taking out the payday loan. He referenced
research done from AKPIRG that supported his statements. He
deferred to Andrew Kushner, [Senior Policy Counsel] from
the Center for Responsible Lending, who testified during
the earlier meeting, for more detail.
2:24:31 PM
Representative Stapp was curious what the rebuttal to the
arguments from those in opposition were. He read further
from the SPPI letter;
In states like Illinois, where similar legislation has
been enacted, the data confirms this outcome.
Consumers report increased difficulty in managing
financial emergencies, and many have been pushed into
higher-cost alternatives that ultimately worsen their
financial standing.
ANDREW KUSHNER, SENIOR POLICY COUNSEL, CENTER FOR
RESPONSIBLE LENDING, OAKLAND, CALIFORNIA (via
teleconference), communicated that in general, he agreed
with everything Senator Dunbar had stated. He related that
the harm outweighed any benefits from the products and put
people in further jeopardy. He informed the committee that
since 2020, there were new products on the market that were
options for individuals in need that would otherwise turn
to payday loans. Many mainstream banks offered small dollar
loan products that were repaid in installments over time
versus a balloon payment due in two weeks through payday
loans. He mentioned the American Fintech Council (a trade
group that represented innovative lenders) offered products
and had been supportive of the legislation. He referenced
the Illinois situation and reported that payday industry
backed studies cherry picked data to create a bias in their
point of view. He pointed out that no state that adopted
the law rescinded it, in part due to the new financial
products.
2:27:17 PM
Representative Stapp relayed that he was not a fan of
payday loans or loans from subprime creditors because he
believed they set people up for failure. He reiterated a
similar argument made in opposition to the bill that
Alaskans had the highest average credit card balance and
the second highest credit card utilization rate in the
country." The conclusion was if the financial product was
outlawed, the individuals would not be able to pay their
bills. Mr. Kushner responded that someone who was heavily
indebted with credit card or other debt was exactly the
individual at the most risk from payday loans. He felt that
the statements indicated that Alaska borrowers were
especially vulnerable. He elaborated that credit card debt
was a major problem in the United States (U.S.) with
interest rates of 30 to 32 percent; payday loans were over
300 percent or higher over the period of a year due to
repeat borrowing. He observed that it did not make sense
for someone struggling with a significant debt load to add
unaffordable debt that compounded the problem.
Representative Stapp referenced an opposition letter from
Hudson Cook [Hudson Cook, LLP, Attorneys at Law; Catherine
Brennan, partner Hudson Cook LLP,] (copy on file) arguing
that Senate Bill 39, Section 10, would impair highly
regulated US banks from making legal loans to Alaskans. He
offered that he did not extrapolate the conclusion from
reading Section 10, but he wondered whether someone could
address the concerns.
2:30:42 PM
Senator Dunbar deferred the question to AKPIRG.
CLAIRE LUBKE, ECONOMIC JUSTICE LEAD, ALASKA PUBLIC INTEREST
RESEARCH GROUP (via teleconference), asked for
clarification regarding what the letter said about Section
10.
2:32:03 PM
AT EASE
2:32:13 PM
RECONVENED
Representative Stapp noted that he was reading some of the
objections included in members' packets. He referenced a
letter from Hudson Cook [dated March 20, 2025]:
The Small Loans Act ("SLA")ii provides an optional
licensing scheme for the purpose of making loans in
amounts of $25,000 or less at "a greater rate of
interest, discount, or consideration than the lender
would be permitted by law to charge if the person were
not a licensee." iii The SLA exempts a person doing
business under and as permitted by any law of Alaska
or of the United States relating to banks, savings
banks, trust companies, building and loan
associations, or credit unions from its licensing
requirements. However, an exempt entity must still
comply with all other provisions of the SLA if it
chooses to contract for interest at a greater rate of
interest than permitted under Alaska's usury limit on
loans of $25,000 or less. The SLA does not currently
require entities that broker, purchase or service
consumer loans to obtain a license. In hearings thus
far, discussion around this anti-evasion language has
been focused on stopping unregulated, potentially
offshore entities from circumventing Alaska law and
even federal law. There is likely no argument over
that objective. However, the way it is written, Senate
Bill 39 would impair highly regulated US banks from
making legal loans to Alaskans. Senate Bill 39 would
incorporate an anti-evasion provision into the SLA
that recharacterizes a bank's partner/service provider
as the "true lender" on the credit transaction.
Senator Dunbar believed that the letter was from a law firm
representing one of the lenders' associations. He explained
that the argument was the provision was a novel anti-
evasion provision and thus somehow was afoul of federal
law, which was not the case. The language in SB 39 was used
in the 19 other states without it being struck down. Alaska
had the ability to institute its own statutes and
regulations. He deferred to Mr. Kushner.
Mr. Kushner agreed with the statements made by Senator
Dunbar. The provision merely stated that for certain online
lenders that partner with state banks were subject to
Alaska law, to prevent a situation called "rent-a-bank
lending." He delineated that an online lender would route a
loan through a bank headquartered out-of-state to evade
Alaska law. Several states had adopted statutes with
similar language without issue. Representative Stapp asked
for verification that there was nothing in the bill that
would hinder "U.S. banks" from making legal loans in
Alaska. Mr. Kushner replied in the negative. He elaborated
that there was nothing the legislature could do to regulate
national banks who were immune from regulation. He did not
understand the objection as it applied to national banks,
which he interpreted were U.S. banks.
2:38:01 PM
Representative Stapp commented that he was reviewing the
oppositional letters making numerous claims. He did not
know the validity of the claims. He was merely getting them
on the record.
Representative Johnson asked what brought the issue to
Senator Dunbar's attention. She thought that payday loans
could help young people without established credit or small
businesses. Senator Dunbar stated that former
Representative Stanley Wright brought the issue to his
attention. He shared that he was an economic major and had
been opposed to the bill thinking it benefitted a segment
of the market. He was convinced to introduce the
legislation, due to Representative Wright, the prior bill
passing the House, and by AKPIRG's research. He
reintroduced the bill in the current year feeling it was a
"useful reform. He had taken out short-term loans but
through more traditional financial institutions. He
mentioned businesses like Chime, creating more low dollar
loans products subject to the 36 percent interest cap for
people without great credit who were in need. He believed
that people depending on payday type lending should be
protected in the same way almost every other kind of loan
was protected by the cap. The bill was not eliminating
small loans, and he did not want the market to go away. The
bill imposed a 36 percent cap, which he stressed was still
a high interest rate and there were profits to be made.
Representative Johnson was not entirely certain who the
bill would help. She inquired about pawn shops.
2:42:04 PM
Senator Dunbar discussed the two changes from the bill
passed by the House the previous year. He remarked that
mutual savings banks and pawnbrokers were exempted from the
bill and added to the list of exempted entities. He
expounded that Mutual Savings Banks were added at the
request of a mutual savings bank in Fairbanks. Some
pawnbrokers engaged in payday lending, which would be
subject to the 36 percent cap. Pawnbrokers engaged in pawn
loans" that was already exempt in the prior bill, but it
was not apparent, so the exemption was clarified in the SB
39. He commented that it was never anyone's intent to get
rid of that type of business that engaged in collateralized
loans. Representative Johnson did not have any real desire
to protect pawn loans and acknowledged that the transaction
was based on collateral. She made comments regarding pawn
shops that their terms were more expensive than payday
loans. She discerned that the bill might force people to
use pawn shops and asked for comment. Senator Dunbar agreed
that pawn shops could be more expensive, but since the loan
was collateralized that was the cap or end point of the
loan. Payday loans were repeatedly taken out, which
compounded the loan balance. He noted that Alaskan pawn
shops were brick and mortar businesses and the money stayed
in the state versus payday loans that were mostly online.
He indicated that the statement would be corroborated via
public testimony. He acknowledged that pawn shops were not
"the greatest option" and including them was a much broader
reform with greater impact on small businesses. He deferred
to Mr. Kushner regarding pawn shops.
2:46:34 PM
Mr. Kushner replied that the Alaska Small Loan Act always
excluded pawn shops making pawn loans. The current
exemption clarified a longstanding exemption. The reason
was pawn loans were done very differently because the loan
was capped at the value of the item. He agreed that they
were not a great product, but the potential harm was not
equal to payday loan consequences.
2:47:57 PM
Representative Johnson expressed further doubt regarding
how certain borrowers would access funds if the bill was
adopted.
Representative Bynum agreed that pawn loans were
problematic and relayed how they work; using an item of
value. He calculated that the APR of 36 percent after two
days was 20 cents on $100 and he did not think it was
"worth it." He added that at a flat fee of $5.00 for one
week on $100 loan it amounted to 261 percent APR. He
indicated that he was attempting to apply APR language to a
loan structure for high risk loans. He believed that it was
obviously problematic." He asked if there had been any
consideration of limiting a fee structure on payday loans
to protect their businesses while lessening the risk on the
borrower. Senator Dunbar thought the question cut to the
heart of the policy question and dovetailed well with
earlier questions from Representative Stapp. The challenge
was for repeat borrowers where the payday loans started to
rack up. He thought it was a public policy choice. He
acknowledged that the profit margin was low, and the risk
seemed high for lenders but there were other types of
lenders in the space; Fintech companies like Chime and some
credit unions, etc. He added that the experience in the
other regulated states was not that the market went away
but there was innovation where ways were found to mitigate
the risk to lenders and borrowers.
2:53:11 PM
Representative Bynum reported that he was looking at the
Military Lending Act that instituted a 36 percent cap on
lending. He discussed the reasons the military did so due
to potential consequences affecting military readiness.
However, that was not a problem for civilians. He thought
that there was still a lot to learn about whether or not
the payday loan businesses would survive. He commented that
he was not in favor of adopting the bill and subsequently,
forcing more people into using pawn shops that were often
relinquishing tangible goods that were family heirlooms or
other items.
2:55:15 PM
Senator Dunbar was not suggesting that the only other
alternative was to push people to the pawn market. He
merely noted that the law already exempted pawn brokers
from the bill. He agreed regarding the comments that active
miliary member were more susceptible to the effects of
payday loan debt and could be targeted by foreign or other
adversaries and become a security threat, which was not the
case for civilians in most cases. He believed that the
federal statutes prohibiting active military members from
participating in the high interest loans were considered a
success by the federal government. He reiterated that the
19 states, which included red and blue states, that
implemented the law had not repealed it.
Representative Tomaszewski stated that he fortunately had
never had to participate in a payday loan. Currently,
Alaska law included a maximum limit of a $500 loan. He
asked for comment.
ARIELLE WIGGIN, STAFF, SENATOR FORREST DUNBAR, replied that
she believed so but deferred the answer.
ROBERT SCHMIDT, DIRECTOR, DIVISION OF BANKING AND
SECURITIES, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC
DEVELOPMENT (via teleconference), asked for clarification
on the question.
Representative Tomaszewski restated the question and asked
about the loan cycles based on 14 or 30 days. Mr. Schmidt
answered that payday loans were on a 14-day cycle. He
deferred the answer about the mechanics of payday loans.
TRACY RENO, CHIEF OF EXAMINATIONS, DIVISION OF BANKING AND
SECURITIES, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC
DEVELOPMENT (via teleconference), confirmed that the loan
cycle was 14 days with an extension allowed and the limit
was $500.
2:59:14 PM
Representative Tomaszewski indicated that in Alaska law the
loans could be extended two consecutive times. He expounded
that there was a $5.00 origination fee and a 15 percent
flat rate. He attempted to calculate the cost of a payday
loan that was rolled over two times at current law. He
asked what recourse a payday lender had when a borrower
defaulted on payment. Ms. Reno answered that an individual
notified their lender if they were not able to make their
payment prior to the due date. She elaborated that under
current law the borrower could renew the loan twice and at
some point, if payments could not be made, the state
allowed the parties to work out a payment plan so that the
loan did not keep accruing interest subsequent to the
agreement. Representative Tomaszewski surmised that the
loan did not actually accrue interest except for the fees
involved. He added that currently, in Alaska law, a lender
may only recover a maximum amount of $700 over the amount
owed and if a borrower could not pay back the loan in full
the borrower could pay back their loan in equal
installments over a 6 month period without additional fees
or interest. He asked whether he was correct. Ms. Reno
responded in the affirmative. Representative Tomaszewski
thought going to a 36 percent APR would accrue $15 at the
end of one month. He deduced that if the intent of the
legislation was to shut the payday loans down completely it
would likely do so based on earning $15 interest on a $500
loan especially if many borrowers defaulted.
3:04:16 PM
Representative Jimmie asked if payday lenders garnished the
PFD. Senator Dunbar responded affirmatively. He reiterated
that payday lenders garnished $3.7 million from 2017 to
2022. Representative Jimmie asked if that fact made it a
guaranteed loan. Senator Dunbar answered that the reason
why the bill had drummed up so much out-of-state opposition
was because he believed Alaska was a uniquely popular place
to do payday lending due to the PFD and the ability to
garnish it. Representative Jimmie shared that people took
out the loans when they had an emergency or needed an
essential item. Someone under those circumstances may be
signing up for something they did not understand. She asked
when someone obtained a payday loan what was done to ensure
they understood the terms of the loan. Senator Dunbar
strongly agreed that it was an important question and noted
that some people do not understand the terms of the loan.
He deferred to Ms. Lubke at AKPIRG who had research
regarding the question and regarding Representative
Tomaszewski's question regarding the laws that established
caps and guardrails. He recalled that the actual situation
that happened was the lenders found a work around for the
laws and loans were often repeated 5 times with a much
higher payback than what the borrower expected.
3:07:35 PM
Ms. Lubke answered that the deferred deposit advance
licensing statute required a disclosure prior to making a
loan found in AS.06.50.510. She commented that if people
understood the cost of the loan they were engaging in, they
would not make 5 consecutive loans per year. She addressed
comments by Representative Tomaszewski. She pointed out
that the deferred deposit advance licensing statute placed
a minimum loan term of 14 days but not a maximum. Therefore
some payday loans were offered at longer terms. The statute
required the lender to offer a payment plan, but there was
an extensive communication threshold in order to obtain
information about the payment plan. She did not have the
data to know whether the plans were offered or if the
lender understood they had a right to those plans. She
deduced that if there was an increased use of the payment
plans, borrowers would likely not take out consecutive
loans. She reminded the committee that payday loans did not
require a credit check or financial information to obtain a
payday loan, which supported the cycle of consecutive loans
with compounding interest rates. She referred to the fees
associated with the payday loans that were set at a 15
percent interest rate. She expounded that if the lenders
charged that amount, they would be in compliance with the
state's Small Loan Act that limited interest to a maximum of
36 percent APR. She noted that the interest rate was not
included in a deferred deposit advance loan.
3:10:54 PM
Representative Stapp reiterated Ms. Lubke's statements
regarding consecutive loans and asked for confirmation.
Ms. Lubke responded affirmatively. She emphasized that the
maximum fees were established in statute, but the maximum
interest rates were not, therefore, the fees were not the
only charges associated with the loans. She added that
there was a continuance assumption on an originating loan
that maxed out after two continuances. But a person could
merely take out a new loan accruing charges beyond the
continuing maximum. Representative Stapp provided an
example of a person who was about to be evicted and needed
money for their rent due in two weeks. He asked if he could
not get a payday loan what options were available. Ms.
Lubke referenced the company called "Chime." She reiterated
that it was an online financial tech company with the scale
to offer loans to high risk borrowers. The company was
relatively new and there had been more innovations within
the prior 5 years. The company recently started offering
loans through an app ranging from $100 to $500 for a $5
fee, allowing installment payments at a minimum of $35 and
were offering a 30 percent APR. The Chime product was
available to people who could not pay their rent.
3:14:59 PM
Representative Stapp asked what happened if a person did
not have access to an online option. He reiterated that he
was not a fan of payday loans, but he wanted to know what
other options existed.
Senator Dunbar answered that according to his staff's
research, Global Credit Union (7 percent to 15 percent APR)
and Wells Fargo (20 percent to 25 percent APR) both offered
small loan options. Representative Stapp wondered how
someone obtained the loan. He observed that the reason
payday loans were popular because people only had to show
they had a paycheck. He asked what a person had to show if
they wanted one of the loans mentioned by Senator Dunbar.
Senator Dunbar replied with the information Global Credit
Union required to obtain the loan that included similar
information as payday lenders; name, address, social
security number, employment information, gross monthly
income, and date of birth. Representative Stapp spoke to
the gross monthly income and deduced that if it was
inadequate a bank would deny the loan. He asked how big a
factor gross income was. Senator Dunbar answered that he
would follow up in writing.
3:18:21 PM
Representative Bynum thought there had been some confusing
messaging. He understood that a person could get a payday
loan at $500. He relayed the requirements in statute. He
deduced that someone could take out 2 consecutive loans.
And there was no limit on the number of payday loans they
could get in a year. He wondered whether a loan could be
rolled over more than twice. Senator Dunbar responded that
a loan could only roll over twice and there was not a
restriction on taking out a new loan to pay off the
original loan. He noted that it was the lived experience of
people who use payday loans. Representative Bynum heard the
PFD being mentioned. He asked if there was any mechanism
allowing lenders to determine eligibility for the loan via
the PFD. Senator Dunbar offered to follow up. He did not
believe payday lenders asked individuals whether they
received the PFD, but it was able to be garnished by the
lenders.
3:22:33 PM
Co-Chair Foster turned the gavel over to Co-Chair
Josephson. He reviewed the schedule for the following
Monday.
Co-Chair Josephson mentioned that the Senate had funded
Alaska Housing Finance Corporation (AHFC) grants to end
homelessness in the Capital Budget. He asked if Senator
Dunbar wanted to speak to the grants. Senator Dunbar
replied that there were programs offered by the state and
also non-profits to help alleviate homelessness.
Representative Hannan supported the bill. She noted that
much of the bill dealt with $25 thousand loans beginning in
Section 4. She requested additional information. Senator
Dunbar answered that the $25 thousand limit currently
existed in the Small Loan Act. He expounded that the vast
majority of loans were subject to the 36 percent cap.
There was a carve out for other types of loans and instead
of imposing a cap the bill removed exceptions. He thought
that she was referring to the section of the bill that
included specific anti-evasion language. He deferred to Mr.
Kushner.
Mr. Kushner replied that with respect to longer term
installment loans, the bill did two things. Currently, the
Small Loan Act covered loans up to $25 thousand with a
tiered interest rate system depending on the amount of the
loan. He delineated that the bill got rid of the tiered
system for loans and put a maximum interest amount of 36
percent. The provision on anti-evasion was controversial.
There was a small subset of online lenders that tried to
take advantage of the fact that most states' interest rate
limits did not apply to banks headquartered in other
states. Some lenders used the situation to take advantage
of borrowers and charged significantly higher rates like
160 percent APR. Section 4 specified that if the lender
routed or issued the loan through a bank headquartered out
of state, the loan had to comply with states interest
rates. He characterized the provision as a commonsense
solution to out of state lenders evading Alaska's or other
states' laws.
3:30:51 PM
Representative Hannan asked to hear from Mr. Schmidt on the
same question. Mr. Schmidt responded on the commentary
related to the Small Loan Act. He delineated that much of
the Small Loan Act was implemented in 1955 and much of the
law was territorial law. The division asked the sponsor to
include modernizations to the Small Loan Act in the
legislation. He commented that the act was one of the last
program areas where applications were sent "written on clay
tablets." The bill included a significant amount of
language to utilize the nationwide multi-state licensing
system and otherwise update "antiquated" statutes to make
it easier for the regulators and the regulated to do
business in Alaska. He offered to provide further
information. Representative Hannan did not need more
information on the anti-evasion act. She understood the
reason it was included was to modernize antiquated statutes
dealing with the Small Loan Act.
CSSB 39(FIN) was HEARD and HELD in committee for further
consideration.
Co-Chair Josephson reviewed the schedule for the following
Monday.
ADJOURNMENT
3:34:13 PM
The meeting was adjourned at 3:34 p.m.
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