05/02/2024 01:30 PM Senate COMMUNITY & REGIONAL AFFAIRS

            SB 264-LOANS UNDER $25,000; PAYDAY LOANS                                                                        
                                                                                                                                
1:34:57 PM                                                                                                                    
CHAIR DUNBAR announced  the consideration of SENATE  BILL NO. 264                                                               
"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."                                                                                                         
                                                                                                                                
This is the second hearing of  SB 264 in the Senate Community and                                                               
Regional Affairs  Committee. The  intention is to  re-open public                                                               
testimony.                                                                                                                      
                                                                                                                                
1:35:55 PM                                                                                                                    
CHAIR DUNBAR opened public testimony on SB 264.                                                                                 
                                                                                                                                
CHAIR DUNBAR noted  that SB 264 picked up a  positive fiscal note                                                               
and would have a positive fiscal effect.                                                                                        
                                                                                                                                
1:36:59 PM                                                                                                                    
ANDY BARTEL,  representing self, Anchorage, Alaska,  testified in                                                               
support of  SB 264. He stated  that the Alaska Conference  of The                                                               
United  Methodist   Church,  representing  a   diverse  political                                                               
spectrum, unanimously supported HB 145,  the companion bill to SB
. He quoted  the church's resolution emphasizing  the need for                                                               
banking  regulations  to  prevent predatory  lending  that  traps                                                               
people in  cycles of debt and  stated that SB 264  addressed this                                                               
issue.  He argued  that payday  lending  extracted millions  from                                                               
Alaska's most  impoverished citizens despite the  availability of                                                               
small-dollar loan  alternatives from Credit Union  One, Spirit of                                                               
Alaska Credit  Union, and  Wells Fargo.  He cited  South Dakota's                                                               
enactment of a similar 36  percent cap, which saved residents $81                                                               
million annually  in fees, and  urged legislators to pass  SB 264                                                               
and HB 145 to protect Alaska's most vulnerable citizens.                                                                        
                                                                                                                                
1:39:54 PM                                                                                                                    
LORI  PICKETT,  Executive   Director,  Alaska  Literacy  Program,                                                               
Anchorage,  Alaska, testified  in support  of SB  264. He  stated                                                               
that  the Alaska  Literacy Program  serves individuals  who often                                                               
struggle to  access traditional  banking, making  them vulnerable                                                               
to  high-risk  lenders. She  noted  that  rising inflation,  high                                                               
housing  costs,  and  the  end  of  the  Affordable  Connectivity                                                               
Program  leaves  many  hardworking  families with  little  to  no                                                               
disposable  income, limiting  their options  in emergencies.  She                                                               
shared a  personal experience of loaning  her babysitting savings                                                               
to  her single  mother to  avoid debt  from unexpected  expenses,                                                               
emphasizing that many  families lack a financial  safety net. She                                                               
said  she  supports SB  264  to  establish clear  guidelines  and                                                               
manageable interest  rate caps,  preventing families  from losing                                                               
their homes due to minor financial crises.                                                                                      
                                                                                                                                
1:42:05 PM                                                                                                                    
CORT  WALKER,  Vice  President, Product  and  Risk,  Check  City,                                                               
Representative, Provo,  Utah, testified in opposition  to SB 264,                                                               
stating he represents  Check City and is testifying  on behalf of                                                               
InFin, a  national trade association for  the community financial                                                               
services industry.  He argued that  while SB 264 is  presented as                                                               
consumer-friendly, it would  effectively prohibit licensed short-                                                               
term  lending   in  Alaska,  driving  borrowers   to  unregulated                                                               
offshore  lenders. He  stated that  similar legislation  in other                                                               
states  led  to  the  closure   of  legitimate  lenders,  leaving                                                               
consumers  with  fewer  borrowing  options.  He  emphasized  that                                                               
licensed lenders  follow Alaska's existing  regulations, evaluate                                                               
borrowers'  ability to  repay,  and have  a  strong incentive  to                                                               
ensure  successful  repayment,   citing  the  Consumer  Financial                                                               
Protection  Bureau's   2024  report,  which  recorded   only  one                                                               
complaint against lenders in Alaska in 2023.                                                                                    
                                                                                                                                
1:44:54 PM                                                                                                                    
TIM SULLIVAN,  President, Alaska Credit Union  League, Anchorage,                                                               
Alaska,  testified in  support  of  SB 264.  He  stated that  the                                                               
Alaska  Credit  Union  League  is   comprised  10  credit  unions                                                               
operating  in Alaska.  Nine are  headquartered in  the state.  He                                                               
expressed  the  league's  support  for   SB  264  and  urged  the                                                               
committee to  consider the companion  bill, HB 145. He  noted one                                                               
concern about  the inclusion  of fees  in calculating  loan costs                                                               
and the annual  percentage rate in Section 9  but otherwise fully                                                               
supports SB 264.                                                                                                                
                                                                                                                                
1:46:03 PM                                                                                                                    
SCOTT  PEARSON,  representing   self,  Los  Angeles,  California,                                                               
testified with  concerns about  SB 264. He  stated that  he leads                                                               
the Consumer  Financial Services  practice at Manatt,  Phelps and                                                               
Phillips,  a national  law  firm  based in  Los  Angeles, but  is                                                               
testifying in  a personal capacity  rather than on behalf  of his                                                               
firm or  clients. He  expressed concern that  bills like  SB 264,                                                               
which   are   spreading   nationwide,   often   have   unintended                                                               
consequences. He  said he did not  wish to address the  aspect of                                                               
rate   cap,  but   specifically  opposes   the  bill's   language                                                               
restricting  fintech   and  non-bank  partnerships   with  banks,                                                               
arguing  that it  would  limit  access to  credit  in Alaska.  He                                                               
explained that  banks play an  active role in  such partnerships,                                                               
ensuring regulatory oversight, and  warned that restricting these                                                               
relationships would  make it harder for  underbanked and unbanked                                                               
individuals to obtain credit.                                                                                                   
                                                                                                                                
1:49:08 PM                                                                                                                    
PATRICK  BRENNER, President,  Southwest Public  Policy Institute,                                                               
Rio Rancho, New Mexico, testified  with concerns about SB 264. He                                                               
stated  that similar  legislation to  SB 264  was enacted  in New                                                               
Mexico in January  2023 to address alleged  predatory lending but                                                               
had failed  to deliver its  intended benefits. He  explained that                                                               
traditional banks and credit unions  had not filled the void left                                                               
by short-term  small-dollar lenders,  limiting credit  access for                                                               
consumers. To test  the real-world impact, he  applied for small-                                                               
dollar loans at  major banks and 15 credit unions  in New Mexico,                                                               
finding that  most banks declined  his application, and  only two                                                               
credit  unions  approved  loans   after  a  lengthy  and  complex                                                               
process. He emphasized that the  process was unfeasible for those                                                               
in urgent  need, harmed his credit  score by over 100  points due                                                               
to  multiple inquiries,  and ultimately  increased his  borrowing                                                               
costs.  He  urged the  committee  to  recognize these  unintended                                                               
consequences,  particularly for  those  grappling with  financial                                                               
vulnerabilities, before advancing SB 264.                                                                                       
                                                                                                                                
1:51:43 PM                                                                                                                    
MARGE STONEKING,  Advocacy Director, The American  Association of                                                               
Retired Persons  (AARP), Anchorage, Alaska, testified  in support                                                               
of SB  264. She stated that  AARP is committed to  protecting the                                                               
financial resilience  of older  adults and  urged support  for SB
  to  extend  the  same   36  percent  maximum  interest  rate                                                               
protections  granted to  active-duty military  under the  Federal                                                               
Military Lending  Act. She  explained that  high-cost installment                                                               
loans  are  particularly harmful  to  older  borrowers, who  have                                                               
fewer  options  to recover  from  debt,  often relying  on  fixed                                                               
incomes  from Social  Security, pensions,  or veteran  disability                                                               
payments.   She   noted   that  payday   lenders   target   these                                                               
individuals, leading  to cycles  of repeat borrowing  with severe                                                               
financial   consequences.   She   thanked   the   committee   for                                                               
introducing the  bill and expressed AARP  Alaska's strong support                                                               
for SB 264 to protect consumers from predatory lending.                                                                         
                                                                                                                                
1:53:52 PM                                                                                                                    
JOSEPH  RUBIN,   Director,  Public  Policy   and  Communications,                                                               
Opportunity   Financial,   Chicago,  Illinois,   testified   with                                                               
recommendations  for  SB 264.  He  stated  that  he works  for  a                                                               
fintech company  that partnered with  community banks  to provide                                                               
loans to subprime consumers and  facilitated a significant number                                                               
of loans  in 2023,  receiving strong  consumer ratings.  He noted                                                               
that many  borrowers expressed gratitude,  stating that  no other                                                               
lender was  willing to help  them. He explained that  his company                                                               
operates Turn  Up, a program  sending loan applications  to banks                                                               
and  lenders who  testified  in support  of SB  264,  but only  2                                                               
percent of applicants were  approved, indicating that alternative                                                               
lenders were unlikely  to fill the gap. He cautioned  that SB 264                                                               
would  negatively impact  not just  payday loans  but also  small                                                               
business loans,  and he urged  the legislature  to find a  way to                                                               
ensure continued access to credit without predatory practices.                                                                  
                                                                                                                                
1:56:45 PM                                                                                                                    
CHAIR DUNBAR closed public testimony on SB 264.                                                                                 
                                                                                                                                
1:57:05 PM                                                                                                                    
CHAIR DUNBAR solicited the will of the committee.                                                                               
                                                                                                                                
1:57:07 PM                                                                                                                    
SENATOR  GRAY-JACKSON moved  to  report SB  264,  work order  33-                                                               
LS1575\A,  from  committee  with individual  recommendations  and                                                               
attached fiscal note(s).                                                                                                        
                                                                                                                                
1:57:14 PM                                                                                                                    
CHAIR DUNBAR found no objection and  SB 264 was reported from the                                                               
Senate Community and Regional Affairs Standing Committee.