Legislature(2025 - 2026)BELTZ 105 (TSBldg)
02/19/2025 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| Presentation: How Workers' Compensation Works | |
| SB39 | |
| SB98 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | SB 98 | TELECONFERENCED | |
| *+ | SB 39 | TELECONFERENCED | |
SB 39-LOANS UNDER $25,000; PAYDAY LOANS
2:27:32 PM
CHAIR BJORKMAN reconvened the meeting and announced the
consideration of SENATE BILL NO. 39 "An Act relating to loans in
an amount of $25,000 or less; relating to the Nationwide
Multistate Licensing System and Registry; relating to deferred
deposit advances; and providing for an effective date."
2:28:10 PM
CHAIR BJORKMAN solicited a motion.
2:28:11 PM
SENATOR MERRICK moved to adopt Amendment 1, work order 34-
LS0357\A.1, to SB 39.
34-LS0357\A.1
Gunther
2/17/25
A M E N D M E N T 1
OFFERED IN THE SENATE BY SENATOR DUNBAR
TO: SB 39
Page 4, line 30:
Delete "AS 06.20.260(a)(1) - (5)"
Insert "AS 06.20.260(a)(1) and (3) - (5)"
Page 5, following line 11:
Insert a new bill section to read:
"* Sec. 12. AS 06.20.330(b) is amended to read:
(b) This chapter does not apply to a
financial institution chartered under 12 U.S.C.
38 (National Bank Act) or 12 U.S.C. 1751 - 1795k
(Federal Credit Union Act) [INDIVIDUAL LOANS BY
(1) PAWNBROKERS WHERE SEPARATE
AND INDIVIDUAL LOANS DO NOT EXCEED $750; IN THIS
PARAGRAPH, "PAWNBROKER" MEANS A PERSON WHO IS
REGULATED UNDER AS 08.76.100 08.76.590; OR
(2) LOAN SHOPS WHERE SEPARATE AND
INDIVIDUAL LOANS DO NOT EXCEED $500]."
Renumber the following bill sections accordingly.
Page 5, line 31:
Delete ", 06.20.330"
2:28:18 PM
CHAIR BJORKMAN objected for purposes of discussion.
2:28:24 PM
SENATOR DUNBAR speaking as sponsor, explained Amendment 1. He
stated that SB 39 was introduced last session and went through
several changes. He said Amendment 1 updates the current version
to reflect the final version that came out of House Finance.
2:29:07 PM
SENATOR YUNDT asked whether there has been an outreach to banks
about offering small, non-collateralized loans in this sector.
2:29:39 PM
SENATOR DUNBAR stated his belief that the bank were working with
the prior sponsor, which led to this amendment. He said some
banks supported the change. He said later he will cover how
traditional lenders still operate in states with similar laws.
2:30:26 PM
CHAIR BJORKMAN removed his objection; found no further objection
and Amendment 1 was adopted.
2:30:40 PM
SENATOR DUNBAR presented the following sponsor statement for SB
39:
[Original punctuation provided.]
Senate Bill 39 brings regulations for payday lending
businesses in line with those already governing
traditional lenders and those offering loans to
active-duty service members and their families. This
bill, sponsored by former Representative Wright,
passed through the other body last session and was
considered in Senate Community and Regional Affairs.
Session ended before it could come under consideration
at the Senate Finance Table.
2:31:10 PM
SENATOR DUNBAR continued:
Payday loans are typically short-term, high interest
loans, secured by providing the lender with
authorization to debit the loan amount plus interest
and fees from their bank.
Currently, payday lenders have a carveout in state law
that permits them to change APR rates far beyond the
cap on traditional loan products. The customers for
these loans are typically in urgent financial need,
and they frequently end up paying back multiple times
the original loan amount and further engage in cycles
of debt.
The Annual Percentage Rate (APR) of these loans is on
average 421 percent in Alaska, according to data
gathered by Alaska Public Interest Research Group in
2023. It would take $137 to keep up with the first
month's interest on the average $440 payday loan taken
in Alaska. Those needing less than $500 to survive the
month are not able to pay that amount several times
over, which this statutory carveout allows for.
Alaska law already sets a 36 percent annual percentage
rate (APR) limit on most other small dollar loans, and
lenders are federally barred form offering loans with
interest rates above 36 percent to active-duty service
members and their families. SB 39 eliminates a
loophole that puts Alaskans in vulnerable financial
positions and brings these corporations in line with
existing law. A non-evasion clause makes it so that
any entity doing business in Alaska (including those
operating online, out of state, or out of country)
would have to comply with these regulations as well.
With the passage of SB 39, Alaska would join 19 other
states, including South Dakota, New Mexico, Montana,
West Virginia, and Nebraska, that have established a
36 percent APR rate cap for these loans. I urge your
support.
2:33:32 PM
SENATOR YUNDT stated that predatory lending is terrible, and
while it's highly regulated in Alaska, his understanding is
lenders can only charge high APRs for about 6 to 8 weeks. After
that, they stop charging and usually recover payment around PFD
time. He asked how long lenders are legally allowed to charge a
customer.
2:34:27 PM
SENATOR DUNBAR answered that others with deeper expertise can
provide more detail. He said his current understanding is that
payday lenders in Alaska can charge 15 percent of the loan
amount every two weeks, and that interest compounds, meaning
borrowers pay not only on the original loan but also on any
accumulated interest and fees. While it's true that these
lenders are regulated, the structure of these loans can make the
actual cost to the borrower significantly higher than what is
initially advertised. He said even though the APR may be capped
in theory, the compounding interest every two weeks makes the
effective rate much steeper in practice. It really depends on
how the borrow analyzes the repayment terms and timing.
2:35:25 PM
SENATOR YUNDT asked Senator Dunbar's office to get back to the
committee with the exact maximum time limit. He stated that his
concern is that shutting down the few brick-and-mortar payday
lenders in Alaska might push people toward unregulated online or
overseas lenders. While the state tries to regulate those, if
they're based in another country and drain someone's bank
account, there may be little the state can do to recover the
money. He said the Center for Responsible Lending has useful
information on how people can fall victim to these practices.
SENATOR DUNBAR answered that the concern raises an important
point about online lenders, especially those operating illegally
from outside the U.S. He stated that's a criminal issue his
office hopes to be addressed. He said his research shows 19
states have passed similar laws, and in many of them, brick-and-
mortar lenders still offer short-term loans within a 36 percent
cap. He said the industry may change, but these loans remain
available. He stated that this law would help regulators crack
down on harmful online lending while still allowing local
lenders to operate within new rules.
2:37:58 PM
CHAIR BJORKMAN announced invited testimony on SB 39.
2:38:18 PM
TREVOR STORRS, CEO, Alaska Children's Trust (ACT) Anchorage,
Alaska, testified by invitation on SB 39 and read the following:
[Original punctuation provided.]
The Alaska Children's Trust offers its strong support
for Senate Bill 39, which seeks to establish
reasonable consumer protections for payday lending
practices in Alaska.
As the statewide lead organization focused on the
prevention of child abuse and neglect, ACT fully
supports enacting legislation to prevent the long-
term, negative impacts on Alaskan families that can
result from high-interest small-dollar loans.
The detrimental impact of economic hardships and
poverty on family well-being is widely acknowledged,
serving as a major risk factor for child abuse and
neglect. Financial strain can have far-reaching
effects on family dynamics, amplifying stress,
anxiety, and frustration within households.
Parents may find it increasingly difficult to provide
for their children's basic needs, such as food, a safe
place to live, clothes, and medical care. This
scarcity of resources and the constant pressure to
become financially solvent can lead to increased
parental stress, increasing the risk of child abuse
and neglect.
To alleviate short-term economic hardships, Alaskan
families often rely on payday loans. However,
financial strain resulting from payday loans can both
cause and further exacerbate these challenges. The
appeal of payday loans lies in their easy
accessibility and quick cash disbursement. However,
these types of loans are not ways of building credit
and instead trap many Alaskans in a cycle of debt and
poverty.
In recent years, banks and credit unions have begun to
introduce alternatives to pay day loans with
reasonable interest rates, helping families build
credit instead of trapping them in poverty.
In 2020, neglect and medical neglect made up 75
percent of all substantiated child maltreatment cases
in Alaska, illustrating how distinctly tied economic
hardship is to Alaska's incredibly high rates of child
abuse and neglect.
2:40:51 PM
MR. STORRS continued:
Senate Bill 39 addresses the need to standardize
rational safeguards for low-income families who face
financial instability, by ensuring payday loans are
subject to a reasonable maximum interest rate in line
with other small-dollar loans.
As Alaska continues to face one of the highest rates
of child abuse and neglect in the nation, we must
explore every possible solution to support and
strengthen our children and families. Establishing
consistent consumer protections during times of
greatest need ensures economic stability and
prioritizes the well-being of Alaska's children.
2:41:48 PM
ASHLEY URISMAN, Director, State Government Affairs, American
Fintech Council (AFC), Washington, DC, testified by invitation
in support of SB 39 and read the following:
[Original punctuation provided.]
AFC is a standards-based organization and the premier
trade association representing the largest financial
technology (Fintech) companies and innovative banks.
Our mission is to promote a transparent, inclusive,
and customer-centric financial system by supporting
responsible innovation in financial services and
encouraging sound public policy. AFC members foster
competition in consumer finance and pioneer products
to better serve underserved consumer segments and
geographies.
AFC represents responsible fintech companies of all
sizes. We recognize that not all bank-fintech
partnerships are created equal, but that certain
guardrails are critical to protect consumers. Our
association's position is that interest rates for
consumer loans should not exceed 36 percent. This rate
is nationally recognized as one that protects
consumers and fosters healthy competition among
lenders.
2:43:00 PM
MS. URISMAN continued:
As such, we applaud the Alaska State Senate for
proposing this bill capping monthly interest for loans
under $25,000 at 36 percent. This rate gives consumers
who need access to affordable credit the ability to
take out the loans without being burdened with debt.
Responsible fintech companies partnering with
regulated financial institutions have created safe,
transparent, and affordable credit options for
families long forgotten by traditional financial
institutions. Our members have committed to advocating
for a regulatory gold standard that offers access to
credit without compromising consumer protection or
regulatory compliance.
2:43:56 PM
CLAIRE LUBKE, Economic Justice Lead, Alaska Public Interest
Research Group (AKPIRG), Anchorage, Alaska, testified by
invitation on SB 39 and paraphrased the following:
[Original punctuation provided.]
I responded to a question from Senator Yundt regarding
the typical term of payday loans. AS 06.50.470
establishes a minimum term of 14 days for a payday
loan and a maximum loan renewal of two consecutive
terms. Alaska Statute does not set a maximum term for
payday loans. In practice, the typically short term of
a payday loan is a driving factor behind the fact that
individual borrowers take out an average of over five
payday loans in a single year. Borrowers use payday
loans one after the other in order to pay off an
original payday loan once the loan term has been
surpassed, which triggers pressure from debt
collectors and threatens legal proceedings.
Economic justice means we have an economy that works
for every Alaskan who chooses to participate in it.
One important aspect of economic justice is having
access to fair financial services and products. Payday
lending in Alaska, which was legalized in 2004 by the
creation of "deferred deposit advance" licenses,
violates reasonable standards for fairness.
2:46:34 PM
MS. LUBKE continued:
I want to share some details about who gets the short
end of the stick when it comes to payday lending.
Because deferred deposit advance licensees in Alaska
are not required to collect any demographic data on
their borrowers, we're faced with some gaps in data.
However, we have some informative examples and can
also look at national data for broad themes.
First, there's a common misconception that payday
lending is an urbanor at least a road system issue.
This just isn't true. In 2022, 62 percent of all
payday lending in Alaska was done online. The next
year, AKPIRG partnered with the Mutual Aid Network of
Anchorage to pay off payday loans held by Alaskans.
The Payday Jubilee project aided individuals living in
Fairbanks, Juneau, Eagle River, and Wasilla, but also
in Bethel, Dillingham, and Teller.
Another important example of who is impacted by payday
lending comes from Texas. A 2018 survey of over 150
Veterans in the Houston area found that 45 percent of
Veterans had used a payday loan, compared to only 7
percent of the civilian adult population. In this
report, Veterans recount haunting experiences of
facing eviction or being harassed by debt collectors
after taking out a payday loan for essential
activities like repairing a car or paying a medical
bill. I'd gladly share this report with Committee
members to help illustrate how payday lenders target
Veterans with their extortive financial products.
Please keep in mind that Congress passed the Military
Lending Act in 2007, which required any business that
provides a loan to an Active Duty servicemember to
comply with a 36 percent rate cap. This was after a
study found payday lenders were actively targeting
military bases. The Department of Defense had lost
billions of dollars as active-duty members were found
unfit to serve because of steeply declining credit
scores that resulted from predatory loans. While
active-duty members are now protected by a 36 percent
rate cap, we're all left to wonder why this protection
was not extended to Veterans.
Alaska has the highest percentage of Veterans in our
population of all 50 states. 10.1 percent of Alaskans
are Veterans. With SB 39, Alaska has the opportunity
to join 18 other states in extending minimum standards
of fairness in small dollar lending to the thousands
of Veterans that call this state home.
2:50:39 PM
[CHAIR BJORKMAN held SB 39, as amended, in committee.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| DOLWD Presentation to SLAC-Workers' Compensation 02.19.25.pdf |
SL&C 2/19/2025 1:30:00 PM |
Workers' Compensation |
| SB39 ver A.pdf |
SL&C 2/19/2025 1:30:00 PM |
SB 39 |
| SB39 Draft Proposed Amendment ver A.1.pdf |
SL&C 2/19/2025 1:30:00 PM |
SB 39 |
| SB39 Sponsor Statement verA 02.10.25.pdf |
SL&C 2/19/2025 1:30:00 PM |
SB 39 |
| SB39 Sectional Analysis ver A 02.12.25.pdf |
SL&C 2/19/2025 1:30:00 PM |
SB 39 |
| SB39 Fiscal Note-DCCED-DBS-02.14.25.pdf |
SL&C 2/19/2025 1:30:00 PM |
SB 39 |
| SB39 Public Testimony-Combined as of 01.31.25.pdf |
SL&C 2/19/2025 1:30:00 PM |
SB 39 |
| SB39 Public Testimony-Email-Tracy Fischbach 02.09.25.pdf |
SL&C 2/19/2025 1:30:00 PM |
SB 39 |