Legislature(2025 - 2026)BELTZ 105 (TSBldg)
02/24/2025 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| SB39 | |
| SB24 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 39 | TELECONFERENCED | |
| *+ | SB 24 | TELECONFERENCED | |
SB 39-LOANS UNDER $25,000; PAYDAY LOANS
1:32:06 PM
CHAIR BJORKMAN announced the consideration of SB 39 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."
CHAIR BJORKMAN announced that the committee adopted Amendment 1
on February 19, 2025. SB 39, as amended, was before the
committee.
1:32:46 PM
RACHEL LEVY, Staff, Senator Forrest Dunbar, Alaska State
Legislature, Juneau, Alaska, provided the sectional analysis for
SB 39 as follows:
[Original punctuation provided.]
SECTIONAL ANALYSIS
SB 39: LOANS UNDER $25,000; PAYDAY LOANS
Version A
2.12.2025
"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."
Section 1 Amends AS 06.01.020(a) to remove payday
lenders from the list of financial institutions exempt
from federal financing limitations.
Section 2 Amends AS 06.01.050(3) to remove payday
lenders from the definition of "financial institution"
under state law.
Section 3 Adds new sections to AS 06.20.010:
(c) Expands the definition of a lender to close
loopholes and prevent businesses from evading
small loan regulations.
(d) Clarifies that a loan is considered to
originate in Alaska if the borrower resides in
the state and completes the transaction while
physically present.
1:33:35 PM
MS. LEVY continued the sectional analysis of SB 39.
Section 4 Amends AS 06.20 to allow the Department of
Commerce, Community and Economic Development to
utilize the Nationwide Multistate Licensing System and
Registry, manage the registration process, and adopt
regulations for implementation.
Section 5 Amends AS 06.20.030(a) to enable
applicants to pay investigation expenses through the
registry.
Section 6 Amends AS 06.20.030(b) to enable
applicants to pay licensing expenses through the
registry. Makes a licensing change that requires
applicants to pay $500 per branch, website, or mobile
app location, instead of a single office license, and
$2000 for a company license instead of a multiple
office license.
Section 7 Repeals and Reenacts AS 06.20.090 to (a)
require applicants to submit separate applications for
each business location and (b) allow the department to
set application requirements, procedures, and
licensing periods.
Section 8 Amends AS 06.20.170 to have the department
conduct period examinations as needed instead of every
18 months. 1 Session: Alaska State Senate Interim:
Senator Forrest Dunbar Alaska State Capitol Juneau,
Alaska 99801 (907) 465-6944 Proudly Serving Senate
District J 1500 W. Benson Blvd. Anchorage, Alaska
99503 (907) 269-0246 Mountain View | Airport Heights |
Russian Jack | U-Med | Campbell Park
Section 9 Amends AS 06.20.230 to simplify the
previous tiered interest rate structure for (a) loans
under $25,000 and (b) open-ended loans, creating a
uniform rate of 3 percent per month. Adds language
that requires interest rate calculations on payday
loans to consider only the relevant charged fees,
costs, and premiums as detailed in AS 06.20.260(a)(1)-
(5).
1:35:24 PM
MS. LEVY continued the sectional analysis of SB 39.
Section 10 Amends AS 06.20.310 to render payday
loans with interest rates greater than 3 percent per
month invalid.
Section 11 Amends AS 06.20 to add section 06.20.325
to prohibit payday lenders from threatening to
prosecute borrowers in the event of defaults.
Section 12 - Amends AS 06.20.900 to define "registry"
as the Nationwide Multistate Licensing System and
Registry.
Section 13 Amends AS 08.76.500 to subject payday
lenders to the same regulations as small loan
companies.
Section 14 Amends AS 45.45.020 to mandate interest
calculations include all service charges paid by the
borrower to ensure transparency in interest
calculations. "Service charge" is defined as fees
charged by the lender but doesn't include fees related
to delinquency.
Section 15 - Repeals AS 06.20.330 to eliminate the
exemption that allows pawnbrokers and loan shops where
separate and individual loans do not exceed $750 and
$500 respectively to charge interest rates exceeding
the maximum rate established by AS 06.20.230, and
repeals regulations applying to lenders which have
operated under that exemption.
Section 16 - provides for an effective date of July 1,
2025.
MS. LEVY stated that the sponsor proposed an amended version
[Amendment 1, adopted February 19, 2025] of SB 39 that passed
through the House Finance Committee last session and addresses
the concerns of financial institutions.
1:37:47 PM
CHAIR BJORKMAN opened public testimony on SB 39.
1:38:41 PM
PATRICK BRENNER, President, Southwest Public Policy Institute,
Rio Rancho, New Mexico, testified in opposition to SB 39 and he
warned the committee that rate caps like New Mexico's 36 percent
limit have failed and SB 39 will do the same in Alaska. After
New Mexico's cap, banks and credit unions didn't fill the void,
causing more people to lose credit and turn to costly
alternatives. He said that he tested 15 credit unions and
several banks, finding 86 percent denied loans or added
burdensome conditions, with only one approval from a credit
union due to prior membership. This system doesn't help the
unbanked or underbanked most affected by such caps. Alaska needs
balanced regulations that protect consumers while preserving
credit access and responsible lending.
1:41:55 PM
EDWARD D'ALESSIO, Executive Director, INFiN, Financial Services
Alliance, Washington, D.C., testified in opposition to SB 39 and
stated that SB 39 would eliminate access to regulated short-term
small-dollar loans from licensed Alaska lenders. These loans are
transparent, legal, and offer essential liquidity with strong
consumer protections like $500 loan limits, renewal caps, and
extended payment plans. He said borrowers report high
satisfaction and few complaints under current laws. SB 39's
arbitrary rate cap would force lenders to exit, removing a vital
credit option. Similar laws in other states led to lender
shutdowns, with banks and credit unions failing to fill the gap,
leaving borrowers to risky, unregulated alternatives.
1:44:27 PM
SENATOR MERRICK asked how many of the INFiN members are
physically located in Alaska.
1:44:34 PM
MR. D'ALESSIO answered that the INFiN members operating in
Alaska are operating online.
1:44:58 PM
CORT WALKER, Vice President, Product and Risk, Check City,
Provo, Utah, testified in opposition to SB 39 and stated SB 39
claims to lower costs but would effectively ban short-term loans
in Alaska. History shows bans don't work because licensed
lenders leave, and unregulated offshore lenders take over,
creating more risk. He said Check City loans are already
regulated, capped at $500, short-term, and based on ability to
repay. If borrowers default, they take the loss, so they're
motivated to help borrowers succeed. He said in 2024, the
Consumer Financial Protection Bureau (CFPB) received just one
complaint about an Alaska licensed lender. This shows the system
works. He said Alaska's laws have been effective for 20 plus
years. He stated that SB 39 wasn't data driven and didn't
include all stakeholders. He said reform should strengthen
protections without eliminating access.
1:48:24 PM
ERIN DAY, Economic Justice Organizer, Alaska Public Interest
Research Group, Anchorage, Alaska, testified in support of SB 39
and stated that she helped lead House Bill 145 to cap payday
loan rates in Alaska at 36 percent, calling it a fair limit
backed by credit union alternatives. She said with average APRs
of 435 percent; payday loans are predatory and unsustainable.
She stated that Alaska's Division of Banking reports payday
lending drains $20 million annually from vulnerable residents.
Pay day lending use has declined in the last 5 years but remains
a problem with 70 percent of loans online, affecting both rural
and urban areas. She stated that statewide the relief project
showed borrowers are trapped by high-interest online loans. She
said lenders claiming to help often just roll over debt with
more fees. This widespread issue needs real reform, not defense
of harmful lending.
1:51:43 PM
JOSEPH RUBIN, Vice President, Opportunity Financial, Chicago,
Illinois, testified with concerns on SB 39 and stated that
consumers need access to short-term loans, and SB 39 would cut
off this vital support. He said about 60 million Americans lack
credit and savings. According to the federal reserve nearly half
of the loans were denied in 2024, especially those with low
scores. He stated that in Alaska, Opportunity Financial
facilitated 2,000 loans annually in 2023 and 2024, mostly for
credit union members, but fewer than 1 percent were approved
when routed to banks at 36 percent. Alternatives like working
extra hours or borrowing from family aren't practical during
emergencies, and SB 39 even raises pawn shop rates, making
options more costly. He said while protecting consumers is
important, a 36 percent cap would leave many without credit when
they need it most.
1:55:13 PM
DANIELLE ARLOWE, Senior Vice President, American Financial
Services Association, Washington, D.C., testified with concerns
on SB 39 and stated that SB 39 creates confusion, disrupts
commercial lending, and risks cutting off access to credit for
those who need it most.
1:58:41 PM
ANDREW DUKE, CEO, Online Lenders Alliance (OLA), Arlington,
Virginia, testified in opposition to SB 39 and stated that OLA
supports expanding credit access and choice, especially in
Alaska where one-third of residents are credit constrained and
carry the nation's highest credit card debt. He said SB 39
assumes lenders can offer small loans at very low rates, but
that's not feasible; lenders won't cover costs, so credit
options will vanish. In Illinois, similar laws led to reduced
credit access and more financial hardship. He said banks and
credit unions aren't meeting demand, so many rely on the loans
SB 39 would eliminate. SB 39 would only limit credit for those
who need it most.
2:02:32 PM
NOWEL LOWE, Owner, Alaska Fast Cash, Wasilla, Alaska, testified
in opposition to SB 39 and stated that his company is no longer
involved with payday loans and wanted to correct some inaccurate
claims made earlier. He said these loans don't charge $80 per
month for a year, and borrowers can only extend a loan twice
before they must pay it off in full. If eligible, they can apply
for a new loan after repayment. He stated that Alaska law
requires lenders to offer a six-month, interest-free repayment
plan if the borrower can't pay, and interest stops accumulating
at default. This protection isn't offered by banks or most
online lenders. He said the high fees reflect the high default
risk, making this an unprofitable business for small lenders
like him. He stated that he left the market because state audits
cost more than the earnings and auditors review every
transaction, and if an error was made, the lender must refund
the borrower. He said rural Alaskans now turn to online lenders,
often draining borrowers' accounts completely.
2:05:55 PM
CHAIR BJORKMAN closed public testimony on SB 39.
2:06:03 PM
SENATOR DUNBAR stated that the amendment first came from the
House Finance Committee at Global Credit Union's request. He
said both Global Credit Unit and Wells Fargo already offer
short-term loans at 36 percent APR, suggesting Alaska's market
may differ from states like New Mexico. He said a South Dakota
study shows credit unions do meet consumer needs, and the bill
includes a non-evasion clause to help regulators address online
predatory lenders. Similar policies exist in 19 other states
without major issues. He said that concerns about definitions
are new to his office, but he is open to working on language
changes in future committees if needed.
2:09:05 PM
CHAIR BJORKMAN solicited the will of the committee.
2:09:08 PM
SENATOR MERRICK moved to report SB 39, work order 34-LS0357\A as
amended, from committee with individual recommendations and
attached fiscal note(s).
2:09:23 PM
CHAIR BJORKMAN found no objection and CSSB 39(L&C) was reported
from the Senate Labor and Commerce Standing Committee.