02/01/1996 01:45 PM Senate L&C

         SB 157 SMALL LOANS & RETAIL INSTALLMENT SALES                        
                                                                              
  CHAIRMAN TIM KELLY  called the Labor and Commerce Committee meeting          
 to order at 1:45 p.m.  The first order of business was SB 157.                
 SENATOR KELLY asked witnesses to confine testimony to the proposed            
 committee substitute before committee members.                                
                                                                               
 JOHN HIGGINS, general manager for Northland Credit Corporation,               
 gave the following overview of the measure.  The purpose is to                
 modernize and update the Alaska Small Loans Act.  It will expand              
 the availability of credit to the Alaska consumer, and will allow             
 Alaska-based lenders to compete with out-of-state lenders who                 
 import interest rate structures from their home states into Alaska.           
 This legislation will create and retain jobs in Alaska's financial            
 industry, will provide more local financing to rural communities              
 and provide credit to a broader base of Alaskan consumers who might           
 otherwise not have access to the credit they deserve.                         
                                                                               
 MR. HIGGINS explained the changes made to the proposed committee              
 substitute.  Additional fee enhancements were worked out with the             
 Administration and added in the first two pages.  In particular,              
 the bonding requirement was increased to $25,000.  An adjustment              
 was also made to the amount of the annual licensing fee.  In                  
 Section 8 on page 4, language changes were made to the joint loan             
 provision.  Under the current statutory loan provision, a business            
 cannot have two open loans simultaneously.  Language was added to             
 Section 9 related to non-filing insurance in lieu of filing a UCC1            
 (insurance in lieu of perfecting a security interest as long as the           
 premiums do not exceed the fees that would otherwise be charged if            
 one did file a UCC or security interest).  In Section 10 the late             
 payment fee was changed to $25 or ten percent of the payment due,             
 rather than what was commercially reasonable.  The Administration             
 did not want to have to keep revisiting the issue of what is                  
 commercially reasonable.  Section 14 is an attempt to deregulate a            
 particular part of the market to equalize the competitive field               
 with out-of-state lenders who import rate structures into the                 
 state.  He informed committee members that the industry component             
 behind this legislation is: Northland Credit, Norwest Financial,              
 AVCO Financial, JC Penney and other retailers under portions of the           
 statute, Affordable Loan, and Superior Financial Services.                    
                                                                               
 Number 126                                                                    
                                                                               
 WILLIS KIRKPATRICK, Division of Banking, Securities and                       
 Corporations, Department of Commerce, limited his comments to the             
 Savings and Loan portion of the bill.  He noted his appreciation              
 for the cooperation of the industry in straightening out some of              
 the problems caused by obsolescence.  The changes made in the                 
 proposed committee substitute are well within the reasons of                  
 consumer protection, and the Division does not object to them.  The           
 major change under the installment retail portion, which eliminates           
 credit limitations, has a broad scope.  The Division does not                 
 regulate, or have enforcement powers over the regulation of,                  
 interest rates with the exception of those found in the Alaska                
 Banking Code.  The Division often receives comments and complaints            
 from consumers concerning consumer lending.                                   
                                                                               
 SENATOR KELLY asked if the Division supports the bill.  MR.                   
 KIRKPATRICK responded affirmatively.                                          
                                                                               
 Number 154                                                                    
                                                                               
 SENATOR DUNCAN asked Mr. Kirkpatrick if the Division supports the             
 change to the competitive market rate.  MR. KIRKPATRICK stated it             
 does.  He explained the Division conducts a lot of interstate                 
 banking with the states of Washington, Oregon, and Idaho.  In those           
 states the marketplace determines the interest rate and they do not           
 understand why Alaska doesn't go with the market rate.                        
                                                                               
 Number 179                                                                    
                                                                               
 SENATOR TORGERSON moved adoption of the committee substitute for SB
.  There being no objection, the motion carried.  SENATOR                  
 TORGERSON moved CSSB 157 (L&C) out of committee with individual               
 recommendations.  There being no objection, the motion carried.               
                                                                               
 SENATOR KELLY announced SB 186 would be postponed until next                  
 Thursday.  He adjourned the meeting at 1:55 p.m.