Legislature(2013 - 2014)CAPITOL 120
03/13/2013 01:00 PM House JUDICIARY
| Audio | Topic |
|---|---|
| Start | |
| Confirmation Hearing(s): || Select Committee on Legislative Ethics | |
| HB9 | |
| HB57 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | HB 9 | TELECONFERENCED | |
| *+ | HB 57 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 9 - SECURED TRANSACTIONS AND FUNDS TRANSFERS
1:14:16 PM
CHAIR KELLER announced that the next order of business would be
HOUSE BILL NO. 9, "An Act relating to secured transactions under
the Uniform Commercial Code and to the regulation of funds
transfers, including remittance transfers, under the Uniform
Commercial Code and federal law; and providing for an effective
date."
1:14:25 PM
REPRESENTATIVE GRUENBERG, as the sponsor, characterized HB 9 as
an important bill, and relayed that Sections 1 and 2 address
[changes made in 2012 by the National Conference of
Commissioners on Uniform State Laws (NCCUSL) to] Article 4A of
the Uniform Commercial Code (UCC) - pertaining to [funds
transfers]; and that the remaining sections address [changes
made in 2010 by the NCCUSL to] Article 9 of the UCC - pertaining
to secured transactions.
1:15:43 PM
DEBORAH E. BEHR, Chief Assistant Attorney General - Statewide
Section Supervisor, Legislation & Regulations Section, Civil
Division (Juneau), Department of Law (DOL); Commissioner,
National Conference of Commissioners on Uniform State Laws
(NCCUSL), after providing some general information about the
NCCUSL, uniform laws, and the UCC, added that HB 9's proposed
updates to Alaska law pertaining to Article 4A and Article 9 of
the UCC need to be adopted by July 2013. She offered a few
examples to illustrate how the UCC can impact commerce conducted
across state lines - a common practice that individuals and
businesses frequently engage in for both buying/selling products
and borrowing/lending money - and relayed that all 50 states
[and the District of Columbia] adopted the UCC to ensure the
reliability and predictability of such transactions. She
indicated that the bill would [among other things] set out clear
rules for secured transactions - [transactions involving a
security interest in specified collateral intended to serve as
security against default] - with regard to how to engage in such
transactions, what state to file the associated documents in,
what shall occur in instances wherein one of the parties
relocates, and what shall occur in instances wherein the name of
one of the parties is misspelled in the associated documents.
MS. BEHR mentioned that in Alaska, [certain] secured
transactions are filed with the Department of Natural Resources'
(DNR's) Recorders office. With regard to situations involving
misspelled names on documents associated with secured
transactions, she indicated that the bill would specify that the
name used on a person's most-recently-issued valid driver's
license, valid commercial driver's license, or valid state-
issued identification (ID) shall be considered the name of the
person, even if the person's name is also misspelled on those
forms of ID. She referred to the latter proposed stipulation as
a "safe harbor" provision. The goal of providing uniform rules
pertaining to how to handle misspelled names is to avoid
litigation, make things smoother, and make commerce run better
across the states; such misspellings occur frequently and have
nothing to do with fraud, she noted.
1:19:38 PM
MS. BEHR, in response to a question regarding what would occur
should HB 9's proposed changes fail to be adopted by July 2013,
relayed that Alaska would then be one of very few states in the
nation not to have adopted [the NCCUSL's] updates to the UCC as
thus far 32 states have adopted the updates and 16 states have
legislation to do so pending. Therefore, she expected that
should a question arise the court would look to the rules and
attempt to apply them to the extent that it could. Without
adoption of the rules, it could make issues more confusing. The
banking industry and [securities] industry really like to have
rules that everybody understands, and so it would be to Alaska's
advantage to adopt the proposed changes in HB 9 by July 2013,
she remarked.
1:20:12 PM
MS. BEHR explained that HB 9 also addresses what she referred to
as "registered organizations." Since the code was adopted a
number of years ago, many new business organizations have come
into existence. The main goal [of HB 9] is to specify that the
state in which a new organization is formed is where the
security agreement would be filed. In Alaska the new
organization would file the security agreement with the
Department of Commerce, Community & Economic Development. The
third change in Article 9 deals with "after acquired property"
such that the security agreement filed where the new
organization is formed carries the perfection for four months
after the organization moves and then the bank must file where
the organization has moved. The fourth change addresses UCC
Article A, which deals with funds transfers. Currently, paper
checks are unusual to see as everything is usually performed by
wire.
1:23:52 PM
MS. BEHR concurred with Representative Gruenberg that this
language does address a glitch in the wire transfers portion of
the banking statutes. Before Congress made a change with the
Dodd-Frank Act it was clear that the electronic transfers
dealing with consumer transactions were performed under federal
law whereas commercial transactions were performed under state
law. With the recent change in federal law there is debate as
to whether remittance transfers are a specialty kind of
electronic transfer or covered under [any state's] law. The
proposed change in HB 9 would clearly specify that [remittance]
transfers fall under state law. She reiterated that 32
states/jurisdictions have already adopted these changes with
virtually no controversy. In terms of the Article 4 changes,
five jurisdictions have adopted them and are pending in 28
legislatures. She pointed out that committee members' packets
include a letter of support from the Alaska Bankers Association
dated January 8, 2013.
1:26:07 PM
MS. BEHR, in response to Representative Gruenberg, explained
that the letter in committee members' packets from DOL merely
suggests scheduling a hearing for HB 9 as the department
believes it's important that the UCC remain current. In
response to Chair Keller, Ms. Behr specified that the Article 9
changes have been adopted in 32 jurisdictions, which includes
Guam and Puerto Rico and pending in 16 more jurisdictions. The
Article 4A changes have been adopted in five jurisdictions and
pending in 28 other jurisdictions. She characterized the
aforementioned as a rapid movement to complete [the changes]
this year.
1:27:25 PM
REPRESENTATIVE LEDOUX asked whether all 50 states, including
Louisiana, use the UCC.
MS. BEHR replied yes.
REPRESENTATIVE GRUENBERG concurred.
1:28:00 PM
WILLIAM H. HENNING, Commissioner, National Conference of
Commissioners on Uniform State Laws (NCCUSL), relayed that he
was on the drafting committee that produced the portion of HB 9
that addresses the revisions to Article 9 of the UCC. In
response to a request, he clarified that for the Article 4A
revisions there are now 6 enactments and 29 introductions that
have occurred in a very short time as it came to the forefront
just late last year because of some changes in federal law.
With regard to the Article 9 provisions, he confirmed that there
have been 32 enactments in jurisdictions but are now 18
introductions with only three jurisdictions that haven't yet
introduced the act, which are Maine, New York, and the U.S.
Virgin Islands. It's important that this be [enacted/adopted]
by July 1 because Article 9 is a national system. There was a
major revision of Article 9 that became effective July 1, 2001.
That legislation was put before the states in 1999 and requested
those states that adopted it early to defer effectiveness. He
explained that if all the states don't come online together on
the same date, then problems could arise wherein the courts in
one state will look to the law of that state, which may refer to
the law of another state. There are situations that could
result in no answer. Currently, all states but Arizona, for
which there are technical reasons, will come online in July.
Although it seems Arizona will come on line on September 1
rather than July 1, the hope is to get that changed.
MR. HENNING, in response to an earlier question, said that
currently [the UCC] doesn't envision a national filing system to
merge all the filings, although there has been a lot of
discussion regarding that possibility since there is the
electronic capacity to do so. Still, there would be many
barriers, even within just one state. For instance, within a
state a common name could generate many false positives, which
on the national level would create issues. Although no one is
actively working on that at the moment, he said he wouldn't be
surprised if in the next 5-10 years the first steps in such a
project began.
1:33:52 PM
MR. HENNING explained that the 2010 revisions attempt to solve
practical problems that have arisen under the new version of
Article 9. He informed the committee that the drafting
committee made it a policy not to revisit previously made policy
decisions rather the drafting committee viewed itself as
technicians working to get things to work right. Therefore,
HB 9 is a technical bill that will fix problems and provide far
greater certainty in a number of areas such that transaction
costs are reduced. Ultimately, HB 9 is very pro-business and
pro-growth.
1:35:10 PM
REPRESENTATIVE LEDOUX again asked if there is a way to review
online whether a company is encumbered with UCC filings for all
50 states.
MR. HENNING answered that currently there is not a national
system, and therefore the review would have to be done on a
state-by-state basis. In further response to Representative
LeDoux, Mr. Henning agreed that there would be advantages to
such a searchable system. However, that hasn't occurred yet
partially because the new version of Article 9 that was adopted
in 2001 was actually written in the 1990s and the electronic
capacity available today wasn't clear at the time. Therefore,
the revision was drafted to continue the state filing system.
He offered that although there would be impediments, such as
false positives, the impediments could be overcome. To achieve
[a national online system] would require the will, time, and
funding, he opined. Furthermore, such action would likely
result in some level of defunding of state offices, which causes
disruption. Mr. Henning said he did agree with the premise and
it may very well happen, however, it hasn't yet.
1:38:09 PM
CHAIR KELLER asked whether there has been resistance [to the
revisions].
MR. HENNING responded that he is unaware of any resistance. He
noted that folks from every sector in the economy participated
in drafting the revisions. He noted that when the Uniform Law
Commission drafts an act it brings in representatives from all
interested parties. To his knowledge, there hasn't been a state
- of those states where the revisions are at the point of
adoption - where the revisions have been turned down.
1:40:31 PM
PAULA KELSEY, Recorder Manager, State Recorders Office,
Department of Natural Resources, in response to a question,
confirmed that the State Recorders Office, with its current
staff, is capable of handling the changes necessitated by HB 9.
1:42:13 PM
STACY SCHUBERT, Director, Governmental Affairs & Public
Relations, Alaska Housing Finance Corporation (AHFC), Department
of Revenue, provided the following testimony:
AHFC through its multi-family lending department
utilizes Article 9 of the UCC in securing some of its
collateral when financing multi-family projects. The
collateral, such as kitchen appliances, furniture,
equipment, and the like is perfected through the
recording of a UCC financing statement. The amendments
as proposed in HB 9 enhance AHFC's as well as other
creditors secured position by providing: 1) greater
guidance as to the name of the debtor that is to be
provided on the financing statement; 2) greater
protection for an existing secured creditor having a
security interest in after acquired property when the
debtor moves to another state or merges with another
entity. As an example, in the event that AHFC
forecloses on a property and is also trying to
repossess and sell the furniture and appliances, the
amendments proposed in the bill would protect AHFC if
the debtor has merged with another entity after the
loan has closed. AHFC supports the revisions as
proposed in HB 9 because they enhance AHFC's ability
to repossess its security.
1:43:43 PM
LUKE FANNING, Vice President, First National Bank Alaska; Alaska
Bankers Association, provided the following testimony:
I'm here today on behalf of the Alaska Bankers
Association, which represents eight state, national,
and federal savings banks in Alaska. Our member banks
are responsible for 85 percent of the nonpublic
commercial lending in Alaska as well as 2,500
employees across 130 branches statewide. The Alaska
Bankers Association supports HB 9 because it provides
for necessary amendments to Article 9 of the Uniform
Commercial Code. Article 9 has been adopted in all 50
states and this legislation is necessary to address
recent amendments made to the Article in 2010. The
amendments have already been adopted in 32 other
states and similar legislation is pending in many
others. It is important that this bill be passed this
session because the amendments will be effective July
1, 2013. If the bill is not passed this year, then
Alaska will be inconsistent with the amendments
already adopted in the majority of the states. The
bottom line for us is that the bill is necessary to
keep Article 9 up to date and to ensure that Alaska
law is consistent with financial practices in the rest
of the country. Failure to pass the bill could result
in additional costs and uncertainty for Alaska
businesses and financial services customers. Thank
you for your time and consideration on the Alaska
Bankers Association's position on this bill.
MR. FANNING, in response to a question, related that the Alaska
Bankers Association is also in support of the Article 4A portion
of HB 9.
1:46:22 PM
CHAIR KELLER, after ascertaining that no one else wished to
testify, closed public testimony on HB 9.
1:46:48 PM
REPRESENTATIVE LYNN moved to report HB 9 out of committee with
individual recommendations and the accompanying fiscal notes.
There being no objection, HB 9 was reported from the House
Judiciary Standing Committee.