Legislature(1997 - 1998)
05/05/1997 03:28 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SSHB 142 - BUSINESS PRACTICE REGULATIONS Number 267 CHAIRMAN ROKEBERG announced the next order of business would be SSHB 142, "An Act relating to the sale or transfer of new or used motor vehicles; relating to the confidentiality of certain information related to attorney general investigations of unlawful trade practices and antitrust activities; establishing additional unlawful trade practices; relating to the exemptions from telephonic solicitation regulation; regulating the sale of business opportunities; amending Rules 4 and 73, Alaska Rules of Civil Procedure; and providing for an effective date." Number 315 REPRESENTATIVE GARY DAVIS, prime sponsor of SSHB 142, came forward to explain the bill. He informed the committee members the bill was initiated, drafted and introduced quite awhile ago. He said the reason a request to hear the bill was just recently submitted to the committee was because there has been a lot of work done between him and the department to get a clean bill. He informed the committee they ran into complications with the Automobile Dealers Association. He indicated he attended the Automobile Dealers Association meeting held in Juneau. Representative Davis stated he understands a lot of the association's concerns and also agrees with a lot of their concerns as indicated in the sponsor statement. A large portion of the test in the bill relates to used car dealers and how they expose problems that may exist on a vehicle. At the Automobile Dealers Association meeting, the association indicated that over the years there has been numerous pieces of legislation that deal with the used car dealers. Of course a lot of people will associate used car dealers reputations right along with politicians. So there is a lot of public concern with how things are dealt with. REPRESENTATIVE DAVIS said it would be his recommendation to simplify the bill and delete Section 2, that deals with public disclosure. This section is questionable and probably needs some work. He indicated he thinks the department will agree with the change. Representative Davis said, "Section 2 of the bill that deals with problems with the vehicles that not only the used car dealers, but new car dealers and manufacturers must convey, what is felt in a reasonable fashion in the bill, to the consuming public." Number 576 REPRESENTATIVE DAVIS pointed out Section 1 deals with the inspection/emissions certification that is required in Anchorage and Fairbanks. There have been some problems. Some people would say significant problems and others would say they are relatively minor problems. He indicated there are people to testify. REPRESENTATIVE DAVIS said, "The other sections of the bill relate to some consumer problems that have come up in court cases and also some tweaking of recent legislation that the Consumer Affairs Section of the Department of Law, I believe is how it can be presented - I'm not exactly who - what Daveed Schwartz office is called, but they've come across some problems that I believe are just some housekeeping measures in the bill relating to catalog sales. And our telemarketing legislation that we passed, I believe last year, they found a loophole in the catalog exemption sales or it's not addressed properly. That's being addressed in here. It's just closing a loophole there. Then in some recent situations around the state with some of these business opportunity sales people that come in and give some high power speeches in how to go into business and make a quick buck and they're the ones making the quick buck and there isn't much chance for anybody else. So that's being addressed also. So of course having being familiar with the sections, I feel there is just some technicalities being cleaned up, but of course I hope I can convince the committee of the same and other testifiers of the same." Number 745 REPRESENTATIVE COWDERY asked if the legislation would also pertain to private transactions. REPRESENTATIVE DAVIS said the same question came up by the Automobile Dealers Association. He noted that is not addressed in Section 2. It should be addressed if that section stays in the bill. Number 780 CHAIRMAN ROKEBERG said he would like to take public testimony. He noted it is his intention to move the bill to a subcommittee for interim study as it is a very broad and major bill dealing with consumer protection in other areas. CHAIRMAN ROKEBERG said, "As it relates to Section 2, as suggested by the sponsor, it is the desire of the chair right now to leave that in the bill because we want to review to see, if in all probability reviewing it, that perhaps another bill would be generated out of it to make sure that those concerns are properly covered in whatever vehicle. We'll be working with the bill sponsor on that." Number 865 ANGELA ARD testified via teleconference on behalf of herself as a citizen of Anchorage. She read the following statement into the record: "On July 29, 1996, I purchased an $11,000 GMC Sierra from a well- known Anchorage known Anchorage used auto dealer. During negotiations, I indicated that I would like to take the vehicle to a mechanic for an inspection before purchasing it. I was told by the salesman that an inspection wasn't necessary and the truck was in great shape. I proceeded to close the deal. The following morning, upon attempting to start the truck, it made a horrible grinding noise and had to be towed back to the dealership for repairs. I was informed by the dealership that the truck would not pass I/M certification and had to have part of the engine repaired because of extensive smoke damage. Had I known that this $11,000 vehicle would not pass I/M certification, I never would have purchased it. The dealership, however, required me to sign a disclosure guaranteeing that my trade-in auto would pass I/M certification, and that if it failed, I would pay to fix it. They offered no such guarantee on the truck they were selling me. "After the dealership made the necessary repairs to the truck, I took it to a mechanic for an inspection and learned that the truck had been in a prior wreck and had no air conditioning. I had asked a mechanic at the dealership why the air wasn't working, and he told me to, quote, let it run a little longer. In actuality, the entire air conditioning system had been removed from the vehicle because of the wreck it had suffered. "After failing to find me a decent vehicle, I asked the dealership to unwind the deal. They refused. I finally sought legal assistance, at which time they unwound the deal. "It was very frustrating and disappointing to be mislead and taken advantage of by this auto dealership. If this bill were in effect when I was in the market for purchasing a used vehicle, it would have saved me from purchasing this `lemon.'" Number 986 CHAIRMAN ROKEBERG said Ms. Ard's fact pattern is very similar to something he heard last session. REPRESENTATIVE COWDERY asked Ms. Ard if she bought the vehicle from a dealer in Anchorage. MS. ARD said that is correct. REPRESENTATIVE COWDERY asked if he was right in saying the dealership wouldn't make the deal good until after she sought legal assistance. MS. ARD responded that was correct. She noted several times they tried to give another vehicle which they keep increasing in price. She stated she had those vehicles checked out and they had several mechanical problems. She said she spoke to Mr. Schwartz and he spoke and wrote a letter to the dealership. The dealership then agreed to unwind the deal after that. REPRESENTATIVE COWDERY questioned if the dealer is still in business. MS. ARD indicated they are still in business. Number 1077 CATE REMME, Consumer Advocate, Alaska Public Interest Research Group, testified via teleconference from Anchorage in support of SSHB 142. She stated he has the same feelings as Ms. Ard. She referred to Representative Davis' discussion regarding removing Section 2 and said the whole concept of consumer protection revolves around the notion consumers should get what they paid for, be aware of the contents of the items when purchased, be guaranteed the safety of those products and be aware of any policies and practices affecting the finances of their private lives and have recourse for breaches of any of these principles. Ms. Remme said without legal recourse, these consumer issues are very often unresolved. REPRESENTATIVE COWDERY informed the committee he owns four vehicles. He said he sells them when he starts seeing that the repair bills increase, but there isn't anything particularly wrong at the time. Representative Cowdery asked Ms. Remme if the legislature should address this kind of a scenario towards the private section. MS. REMME said it is her understanding that there is no jurisdiction over private sale. One of the major complaints they receive is dealers, who are posing as private citizens, sell previously wrecked vehicles that have been totaled by insurance companies. They create very dangerous driving situations. She said she doesn't have answer to Representative Cowdery's question, but currently there is no jurisdiction that addresses that. Number 1183 REPRESENTATIVE DAVIS said he would like to assure Ms. Remme if Section 2 does get deleted from the bill, the issue will still be looked at, but may not be a part of this legislation. PEGGY MULLIGAN, Capital City Task Force of the American Association of Retired Persons, testifying from Juneau, stated she thinks her organization will probably support the legislation. Ms. Mulligan stated she would like to wait to testify until the bill comes out of the subcommittee. Number 1225 CHRYSTAL SMITH, Legislative Liaison, Civil Division, Department of Law, came before the committee. She stated she would like to express the division's support for SSHB 142. Ms. Smith said she reviewed the bill from the view of a consumer. She stated she would like to make it clear that nothing in the bill is intended to harm honest straight forward business people. It is her belief that people who are in business in Alaska are doing it according to the rules. If there are bad actors in a profession, it harms those who are not bad actors. MS. SMITH said the bill has five parts. One is the emissions certificate that would let a person know what the status is before a sales contract is signed. She noted that cleans up legislation which was passed in 1992. MS. SMITH referred to Section 2 and said it deals with confidentiality of investigative records for consumer protection antitrust cases. MS. SMITH referred to the telemarketing and said there has been problems with people saying that they were exempt from the telemarketing registration requirement because they were mail order catalog people. Ms. Smith stated there are certain requirements for being a legitimate mail order business. MS. SMITH referred to the question of business opportunities and said, "I guess it wasn't one of you although I'm sure you have all had this experience with your constituents, we did get a call recently - somebody saying - a legislator saying `Well what can we do about these, quote, business opportunities?' The one that I think Representative Davis said they're making more money off them then the folks we get taken in by the deals. So there is a comprehensive statute included in this bill that would require registration of business opportunity people." Ms. Smith indicated the department would also would be willing to work on the bill over the interim. Number 1404 REPRESENTATIVE COWDERY said when he was a legislator in the 1980s, the "lemon law" was established. He asked if SSHB 142 would impact that law. MS. SMITH said it is her understanding that this legislation would supplement the "lemon law." She noted that as she understands, the "lemon law" is for new vehicles. Number 1443 REPRESENTATIVE RYAN said when he was a young man, there were many jokes going around about the fellow that bought the horse. He said it seems to him it has now moved to automobiles. You have to really be careful of what you're buying because if you don't, you could get stuck with something. He asked where the responsibility comes on the person who is laying their money down. MS. SMITH informed Representative Ryan that she just bought a used car. She went to every dealer in Juneau. She said she felt uncomfortable enough in that she went to her mechanic and asked him to help her find a used car because she believes if a person doesn't know something in a specific area, you can get taken advantage of. Number 1586 DAVEED SCHWARTZ, Assistant Attorney General, Commercial Section, Civil Division, Department of Law, testified via teleconference from Anchorage. He said he would give technical comments on the legislation when it comes up in the subcommittee. Mr. Schwartz said he believes Ms. Smith has articulated the philosophy behind the Department of Law's interest in supporting the legislation. MR. SCHWARTZ explained Section 1 ensures that a person who is buying a used car, that requires an auto emissions inspection, is going to be notified up front prior to the sale of the emissions of the status of the vehicle. He said Ms. Ard's testimony illustrates the need for Section 1. Mr. Schwartz noted he personally deals with the Anchorage I/M Office frequently regarding problems and they have told him that on an average, over a year, they receive about ten complaints per month from people who buy a used car from a used car dealer. They find out after they have obligated themselves to the sale that the car will not pass I/M and they will have to invest quite a bit of additional funds to get it to pass I/M so they can register it and legally drive the vehicle. Number 1659 MR. SCHWARTZ referred to Section 2 and said there are all kinds of situations that arise in terms of the failure to disclose damage that used car dealers may know that a vehicle has. The Office of the Attorney General prevailed in a three week jury trial against a major Anchorage auto dealer, who was found to be liable on 18 of 22 counts of civil fraud in that he failed to disclose that 8 vehicles that had been sold were previously wrecked and totalled. He noted some of the vehicles were extreme safety hazards. MR. SCHWARTZ referred to Sections 4, 5 and 6 and said these sections clarify the existing state of affairs with regard to the confidentiality in the investigative records in the Office of the Attorney General for consumer protection antitrust investigations. It would ensure sure that businesses that have alleged to have violated the law don't have their names (indisc.) about simply because there are allegations that may turn out to be unfounded. It also ensure that witnesses who may want to testify for or against business that have been alleged to have violated the law will not be subjected to a lot of publicity simply because they have offered testimony to the Office of the Attorney General. MR. SCHWARTZ explained Section 7 deals with clarification of the existing exemptions, the provision that deals with the mail order catalog exemption to the telemarket or registration law. He said there was a case involving a San Diego telemarketer who had a catalog that they only distributed in San Diego, but they were telemarketing to Alaskans. They refused to register under our 1993 Telemarketing Registration Act. The Alaska supreme court agreed in January of this year that the mail order catalog exemption did not cover that particular instance. He said they are now trying to clarify the existing statute to make sure that everyone knows what it takes to qualify as a mail order catalog operation and, therefore, be exempt from telemarketing registration. Number 1774 MR. SCHWARTZ informed the committee that Section 8 is the Comprehensive Business Opportunities Disclosure Act legislation which will get primarily at the Lower 48 business opportunity sellers who largely work with sales kits/business kits to Alaskans, particularly around permanent fund dividend time. They then use the sale of the kits, which usually range anywhere from $500 to several thousands of dollars, as an entree to sell Alaskans even more services that range up to $10,000 to $15,000 per year. This would require registration, disclosure, bonding and other protections for people who have an entrepreneurial spirit, but really get caught up in the excitement and high pressure sales that occur in the large hotel ballroom where most of these sales of business opportunity (indisc.) are pitched. Number 1826 CHAIRMAN ROKEBERG said, "I've got a really significant concern here because this committee is in the process of rewriting the entire real estate statute, if I can only recall the title right now, but business opportunities are something that, in part but not exclusively, have been handled by real estate brokers. And I appreciate at what you're getting at here - those folks who advertise on late night T.V. for these seminars I guess is the thrust of your thing here. I'm kind of concerned about the sweep here and what you're getting into as it relates to some of these other things and, in essence, creates some type of kinds of a defacto licensure, if you will, or something going here that might more properly be under another title or something. What you're getting at is -- are you endeavoring to prohibit these types of sales activities, regulate them or infringe on real estate brokers? What's the thrust here?" MR. SCHWARTZ indicated he is not trying to do that at all. The bill actually has a series of exemptions and tend to be exact. He noted that they can be found on page 17, line 8 through page 18, line 11. He pointed out the tenth exemption deals with if the seller or the buyer is licensed as a real estate broker, associate real estate broker or real estate sales person under Title 8 of the Alaska statutes and the sales or offers regulated by Title 8. He said it is not their intent to create a new licensure for real estate agents, brokers or other people already regulated. Mr. Schwartz said this whole registration scheme is modeled after the existing telemarketing registration law. The two policies driving the exemptions in the telemarketing law and in this bill for business opportunity registration would be that there would be no attempt to require registration of those activities that are otherwise regulated by statute in a similar way. Also, there would be no attempt to require registration of activities that don't seem to pose a problem. He noted the last thing the Department of Law wants to do is to duplicate existing registration and regulations. Number 1951 CHAIRMAN ROKEBERG questioned which department they register with. MR. SCHWARTZ referred to telemarketing and said the bill would require registration with the Office of the Attorney General. CHAIRMAN ROKEBERG asked if it is correct to say that if you weren't a member of the Bar or if you weren't a licensed real estate broker, you would have to registered with the Office of the Attorney General to do something like selling businesses. MR. SCHWARTZ responded that there are some exemptions, but he would have go over each and every exemption with the committee members. He said, "After you get past the exemptions, what this bill really gets at is the kind of sale where it's advertised on a late night T.V. info commercial and what they're selling are T-shirt businesses, 900 number businesses, distress merchandise businesses for anywhere from $500 to $3,000 or more and it's that kind of sale that this registration is aimed at rather than activities that are already regulated or don't seem to pose a problem. One exemption, for example, is the sale of a business opportunity to an ongoing business, just as an example of the many (indisc.) exemptions to narrow the scope of this registration requirement. The goal here would be to really target the problem." Number 2019 CHAIRMAN ROKEBERG asked if it is a new Chapter 66. MR. SCHWARTZ responded it would be a new chapter in the Consumer Protection Act. CHAIRMAN ROKEBERG asked if the areas about down payments, escrow accounts only relates to this particular chapter. MR. SCHWARTZ responded that was correct. He continued by saying Section 8 goes from page 6, line 31, to page 21, line 8. Mr. Schwartz said he would answer any questions the committee may have. Number 2073 CHAIRMAN ROKEBERG said it is his intention to appoint a subcommittee to look into the legislation, SSHB 142, during the interim. He then appointed himself, Representative Ryan and Representative Brice to the subcommittee. He closed the public hearing.
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