Legislature(1997 - 1998)
02/18/1998 03:22 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 49 - CONSUMER PROTECT.: DIVISION & PENALTIES Number 0642 CHAIRMAN ROKEBERG announced the committee's next item of business was SSHB 49, "An Act establishing and relating to a consumer protection section in the Department of Law; increasing penalties for violation of laws relating to consumer protection; requiring special accounting for money from certain actions related to consumer protection; and providing for an effective date." He invited the bill sponsor to come forward. Number 0712 REPRESENTATIVE ERIC CROFT came forward to present SSHB 49. In background, he stated they were celebrating the 100-year anniversary of a colorful section of Alaska history. He said one of the most colorful characters of that period was Soapy Smith. Representative Croft noted Mr. Smith, who performed the type of work mentioned in this bill, was in the business of defrauding the public. Soapy received his name because he would sell soap with one bar containing a $5 or $10 bill wrapped with it. This bar would always be received by Soapy's henchman, but this practice led to huge soap sales from people looking for the money. Representative Croft stated those kinds of "scams" are still practiced today, noting he has received letters telling him he could get a snowmobile, but he said the notice actually says getting the snowmobile is a one in a million or one in a billion chance, and he's really going to get the worthless watch. He said every time this is done by a "scam artist," it undermines legitimate businesses who sometimes use that approach, noting, "Open an account with me ...." However, he said, if someone's been burned by that approach a couple of times the person is not going to patronize those legitimate businesses. Representative Croft noted Mr. Smith was also in the business of selling shoddy equipment to gold-miners. He said that also happens today. He commented that the most recent consumer protection case receiving a lot of publicity in the Anchorage area was a tire seller selling refurbished tires as new. Representative Croft noted this was a very difficult thing for a consumer to figure out, and even a sophisticated consumer who did figured it out and complained may have simply received a new tire. He indicated it is an extremely difficult practice for individual consumers to stop, and that is where the state comes in. Number 0820 REPRESENTATIVE CROFT commented that Alaska, like most states, had a consumer protection division in the mid-1980s; in fact, he said, every state had a consumer protection division. He said as the state slowly felt the effect of budget cuts, the consumer protection division was dissolved and reduced to about 1.5 attorneys covering the entire state for scams for anything from permanent fund dividend fraud (attempts to get individuals' dividends through some fraudulent means) to every one of the ways discussed above. He said this bill was intended to be a step toward curing some of that, noting Alaska is now the only state in the nation without a consumer protection division. Representative Croft explained the bill, as originally drafted, restored it as a division, but after discussions with the Administration they are now convinced that the section level would be appropriate and would raise awareness. He said they believe this is the minimum step in beginning to correct this declining trend. Representative Croft noted the bill adds one supervisory position which would not only prosecute these actions on behalf of the defrauded members of the state, but also work to annually make recommendations to the governor and the legislature to keep this updated. He commented that is, to some extent, what Daveed Schwartz (Assistant Attorney General, Commercial Section, Civil Division, Department of Law (DOL)), who is the 1 in this 1.5, does anyway in his spare time. Representative Croft said he has been with Mr. Schwartz on a number of his radio shows, noting Mr. Schwartz is a fount of personal and accumulated statistical knowledge in this area, and so, to some extent, is serving as the unofficial head of the division of consumer protection the state does not currently have. Number 0904 REPRESENTATIVE CROFT said the bill, besides establishing the section, also does two other important things. It increases the fine from $5,000 to $10,000, and it attempts to cure the chronic under-funding of this area by allowing the section to keep a designated fund of fines successfully obtained from defrauding businesses. If the court imposes a fine on a business that is found to have committed a crime, that fine can stay there to provide a pool of money to operate the section ["division" stated on tape]. He noted the fiscal note was approximately $140,000 because of the added position and attached support. Representative Croft said they have gone from about $800,000 to $1,000,000 for the state's consumer protection division in the mid-1980s down to 1.5 positions with paralegal support costing about $250,000. He noted the state's population has actually increased during that time. Representative Croft said this attempts to put some "teeth back," increase the fine, and provide a separate amount of money so that the fines pay for continued policing. Number 0971 REPRESENTATIVE RYAN stated that, to his historical recollection, Soapy Smith was mayor of Leadville, Colorado before he came to Skagway, where Representative Ryan also thought Mr. Smith was mayor. Representative Ryan noted he thought Mr. Smith had run as a Democrat. Number 0980 REPRESENTATIVE CROFT said he doubted that, but would look into it if Representative Ryan wished. Number 0986 CHAIRMAN ROKEBERG stated the committee would proceed to teleconference testimony. He noted the presence of Julia Coster, Assistant Attorney General, Commercial Section, Civil Division, Department of Law, on teleconference in Anchorage to answer questions. Chairman Rokeberg requested witnesses limit their testimony to three minutes. Number 1036 DAN KECK, Chairperson, State Legislative Committee, American Association of Retired Persons (AARP) testified via teleconference from Sitka. He thanked the sponsors of the legislation, and gave some background information on the AARP's legislative committee. He said each year the committee works on four or five issues it thinks are most important to AARP members. He said that, looking at the telemarketing fraud the last few years, it is at the top of their list this year and the legislative committee is pushing hard to get legislation passed that will help. He stated HB 49 is most certainly a step in the right direction to help curb fraudulent activity in Alaska, commenting he has been told $10 million dollars was taken out of Alaska last year in fraud, and he noted that is a lot of money to go out of a state the size of Alaska. Mr. Keck stated senior citizens appear to be most affected by this and they are the group which can least afford to lose their money. He encouraged the members of the committee to move SSHB 49. Number 1128 DON PEACOCK, President, Alaska Federation, National Association of Retired Federal Employees (NARFE), was scheduled to testify via teleconference from Anchorage, but had to leave. A short statement in support of HB 49 was faxed to the committee which read: The some 1200 members of the National Association of Retired Federal Employees residing here in Alaska strongly endorse the intent of HB 49. We believe greater protection is needed for the elderly so that they may feel more secure in being able to avoid fraudulent practices, and if they are unable to avoid such practices, to understand that such perpetrators will be brought to justice. Number 1163 LES GARA testified next via teleconference from Anchorage. He stated he was an Alaska Public Interest Research Group (AKPIRG) member, and was formerly an attorney with the attorney general's office. He wanted to tell the committee that, as an attorney, he has received dozens of consumer complaints from people which have not been resolved by the state attorney general's office because the state does not have the funding to deal with these matters. Mr. Gara said he could guarantee them that if a position was funded to represent these Alaskans, the position would be cost effective because at the end of a year the state attorney general's office would have collected more money in the way of fines than it cost the state to represent these people. He stated, "You'll see that and the accounting provisions under this bill, I think, would - would provide for that." Number 1209 MR. GARA gave the most recent example of a case involving someone who came into their office who couldn't afford legal representation and couldn't be helped by the state. He related the story of Ruby Riley (ph), a 75-year-old woman whose husband died and who couldn't afford the lease payments on a car she had purchased at a local dealership. She brought the car in, traded down for four-year older Ford Taurus, and was told that, with the trade, she wouldn't owe any more money on her lease. She took the older car - she was living on a fixed income - and a few months later she started receiving bills from the lease company. She was told she owed $4,000 plus penalties. Mr. Gara said the state attorney general's office couldn't help her, but his office was fortunate enough to have a break in their work and were able to help. He noted he put in about 40 or 50 hours for Ms. Riley (ph), and he said that the leasing company, at the courthouse steps right before they were going to file a complaint, finally said they wouldn't pursue the bill. Mr. Gara commented that this kind of thing happens all the time, and, for better or worse, the private bar doesn't seem to be able to handle all of these cases on a pro bono basis, and the state can't handle them. He noted that the Ruby Rileys (ph) of the world go unrepresented, receiving these $4,000 bills which turn into collection agency notices. Mr. Gara said a large number of Alaskans are harassed every year by what is unethical conduct and there is nobody to stand up for them. He noted that was exactly where the state needed to act: where the claims are of such a size that the person can't afford an attorney. Mr. Gara noted there is a resource at the state attorney general's office in most other states to help these people. He strongly encouraged the committee to take note that this was not an ideological issue, stating, "It's not a Republican issue, it's not a Democratic issue; as far as I can see it's an issue of whether or not we're going to help Alaskans who have to deal with the daily stresses of consumer fraud." Mr. Gara commented he has a list of other cases that would fall under this Act's definition of fraud. Number 1352 CHAIRMAN ROKEBERG asked Mr. Gara if he could provide that information to the committee in writing. MR. GARA noted he was on his way out of town, but would try to meet the Chairman's request. Number 1375 JAMES BEVERIDGE, Consumer Advocate, Alaska Public Interest Research Group, testified next via teleconference from Anchorage. Mr. Beveridge noted AKPIRG is a nonprofit consumer research and advocacy organization, with approximately 3,000 members statewide. He stated that, through the research and advocacy they do at AKPIRG, they are exposed on a daily basis to many of the frustrations and financial losses experienced by Alaskan consumers every year, noting many of those were reflected in Mr. Gara's testimony. Mr. Beveridge stated that those people are mislead and taken advantage of by unscrupulous businesses which seem to be attracted up here. He said that was in no small way due to the lack of a fully-funded consumer protection division in Alaska, and was certainly exacerbated by a lack of resources in the DOL to be able to effectively respond to many of the consumer complaints and to enforce current laws. He said this bill certainly seemed like it would go a long way toward addressing a lot of these problems, particularly because it provides for a section ["division"] with a clear mission and intent, and a source of funding. Mr. Beveridge said he echoed Mr. Gara's words in that they believe the funding of a section ["division"] like this would certainly be covered by the revenue generated from fines and "things to do with the enforcement of those laws." He said they believe the package of this bill would benefit all Alaskan consumers and small businesses alike. Number 1512 FLOYD E. HEIMBUCH, Executive Director, Older Persons Action Group, Incorporated (OPAG), testified next via teleconference from Anchorage. Mr. Heimbuch noted OPAG is a statewide group which advocates for senior citizens. He stated he and Representative Croft had spent quite a bit of time discussing consumer protection. Mr Heimbuch said OPAG has a great concern for consumer protection, and he hopes something is done this legislative session. Number 1573 EUGENE E. (GENE) DAU, Capital City Task Force, State Legislative Committee, American Association of Retired Persons, testified next from the committee chambers in Juneau. Mr. Dau distributed some hand-outs to the committee before beginning his testimony. He stated, as Mr. Keck had testified, that the defrauding of citizens is one of the four issues most important to AARP Alaska, and HB 49 was a step in the right direction. Mr. Dau urged the committee to quickly expedite the bill to the next committee. He said he would like to see every member of the committee vote to move this bill, see them continue to support it as it moved through the House, and, at the end of the session, he would like them to be able to mark this as up as one of their major accomplishments. Number 1668 CHAIRMAN ROKEBERG noted he was a member of AARP, and other committee members expressed their eligibility for membership. Number 1690 MARIE DARLIN, Legislative Chair and Past-President, Alaska Federation, National Association of Retired Federal Employees, testified next in Juneau. She stated she wanted to urge the committee to pass HB 49, noting this has been an issue of concern to their retiree group in Alaska for sometime. Ms. Darlin commented that she had distributed a resolution passed at their convention last May in support of HB 49, stating they would like to see something like this legislation happen. She said they have done considerable work on it since that time; they continue to support HB 49 and anything that will help consumer protection issues. She noted that their members have received a lot of contact this last year identified as fraud-related, and she commented that $10 million leaving the state through some type of scam was criminal and almost hard to believe. Ms. Darlin brought the committee's attention to a letter she had received last week, one those famous "Nigeria-types of things." She noted that the committee has already heard about many of "these kinds of things that go on," and knows that senior citizens are particularly targeted. She asked the committee where she should send the original letter to, if they weren't going to have somewhere to send these kinds of things to, and she wondered how these fraudulent groups obtain peoples' addresses. Ms. Darlin said, "These are the kinds of things that are going on, and when we tell people -- or they call and say, 'What do I do?' We've said, 'Well, send it to the attorney general's office.' And they say, 'Well, I contacted the Better Business Bureau. They (indisc.) anybody that can handle anything like this, they just for work for businesses and stuff that are their members.' So this is an example of what really does go on, and then, that our concern is, even with the resolution that's going to be worked on for our convention coming up the last of April, we will not be letting up on the importance of this issue." Number 1925 CHAIRMAN ROKEBERG asked, regarding the letter from Nigeria, if they were asking her to give them her bank account information. Number 1934 MS. DARLIN answered in the affirmative, and noted, "We've been hearing about these Nigerian -- things from all these countries for years, and they're still going on." Number 1965 REPRESENTATIVE RYAN made an observation that among the people who conduct these con games, there is an old axiom: "You can't con an honest person." Number 1979 CHAIRMAN ROKEBERG noted, for general information, he had inquired with Willis Kirkpatrick, Director, Division of Banking and Securities, Department of Commerce and Economic Development, about the multitude of various mail loan solicitations, to see if there was anything they could do to restrict this activity. He noted Mr. Kirkpatrick had checked with the attorney general's office, et cetera, and to make a long story short, Chairman Rokeberg said there was nothing they could really do, (indisc.) it was in the federal purview. However, he said he was directed to a United States Senator with a bill that endeavors to put some guidelines on that type of activity. Chairman Rokeberg noted he was speaking about banking by mail and solicitation of banking by mail, which he thought preyed on some people, particularly if they got into situations where they had high interest rates and bank fees which started compounding through a number of loan rollovers. Number 2071 PEGGY MULLIGAN, Capital City Task Force, State Legislative Committee, American Association of Retired Persons, testified next in Juneau. She said she had appeared previously before the committee on another bill and knew Representative Ryan felt that people should be responsible for their actions. However, she said she thinks the very fact $10 million goes out of this state testifies to the fact that, yes, everybody should be responsible for their actions, but, obviously, there are some very clever scams which do catch people, and it would be great if this money went to Alaska's own businessmen instead. She added that the AARP's state legislative committee had a meeting in Juneau last week and they again voted that this one of their biggest interests. They wanted to support several bills, and they would love to see the committee pass SSHB 49 on to the House Judiciary Standing Committee. Number 2144 CHAIRMAN ROKEBERG commented that an amendment was necessary to change the effective date from 1997 to 1998. Number 2163 REPRESENTATIVE CROFT noted the suggestion of the amendment changing the effective date. He also responded to Representative Ryan's comment that a lot of scams rely on the greed of the victim. Representative Croft indicated a tremendous amount could cheat even an honest person, citing the tire seller example he had mentioned previously. He said those buyers were not dishonest; they were going to what they thought was a legitimate business, purchasing a falsely advertised product. He noted in many of these situations it is not greed, it is fraud. He indicated people need to be careful, but that was only part of the answer, effective enforcement was still needed. Number 2239 REPRESENTATIVE KUBINA moved that they change the effective date to 1998. Number 2240 CHAIRMAN ROKEBERG stated Amendment 1, a conceptual amendment, was before the committee and asked if there were any objections to the amendment. Hearing none, he stated Amendment 1 had been adopted. Number 2254 REPRESENTATIVE RYAN stated he did not have any objections to moving SSHB 49 out of the committee, but said he would "arm-wrestle" the sponsor in the House Finance Standing Committee regarding the fiscal note. Representative Ryan referred to the concept of "caveat emptor" (let the buyer beware), and said he believed the buyers had a personal responsibility, but he noted the point was well-taken; there were some people a lot more clever than the average person who would take advantage of them. Number 2292 CHAIRMAN ROKEBERG stated he had no objection to moving the bill, noting he had not thought the committee would make it through the public testimony during this meeting. Number 2308 REPRESENTATIVE HUDSON made a motion to move SSHB 49, as amended, with individual recommendations and the attached fiscal note, out of committee with unanimous approval. Number 2324 CHAIRMAN ROKEBERG asked if there were any objections. Hearing none, he stated CSSSHB 49(L&C) was so moved.
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