Legislature(2013 - 2014)BARNES 124
04/09/2014 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| Board of Professional Counselors | |
| HB206 | |
| HB116 | |
| HB384 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| *+ | HB 206 | TELECONFERENCED | |
| += | HB 116 | TELECONFERENCED | |
| += | HB 203 | TELECONFERENCED | |
| *+ | HB 384 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 206-MOTOR VEHICLE SERVICE CONTRACTS
3:33:39 PM
CHAIR OLSON announced that the next order of business would be
HOUSE BILL NO. 206, "An Act relating to motor vehicle service
contracts; and exempting motor vehicle service contracts from
regulation as insurance."
3:33:53 PM
REPRESENTATIVE GABRIELLE LEDOUX, Alaska State Legislature,
stated that HB 206 will bring Alaska's regulation of motor
vehicle service contracts in line with how the industry is
regulated in most of the states. She said that similar laws
have been passed in 38 states and have been endorsed by a
variety of entities, including the Automobile Protection
Corporation, Ford Motor Company, Ally Financial, CNA National
Warranty Company, Toyota Financial Services, the Service
Contract Industry Council, and the National Trade Association.
This bill would protect consumers and and ensure the long-term
viability of the motor vehicle service contract industry. This
bill is necessary, not only for motor vehicle service contract
providers and automobile providers, but it is also good for
Alaskan consumers. She urged members to support HB 206.
3:35:12 PM
REPRESENTATIVE REINBOLD moved to adopt the proposed committee
substitute (CS) for HB 206, labeled 28-LS0501\C, Wallace, 2/6/14
as the working document.
CHAIR OLSON objected for the purpose of discussion.
3:35:33 PM
THOMAS BROWN, Staff, Representative Gabrielle LeDoux, Alaska
State Legislature, stated that HB 206 brings forth a fair and
comprehensive regulatory framework for motor vehicle service
contracts that protects consumers and ensures the long-term
viability of the motor vehicle contract industry. He said that
at the moment Alaska law is unclear at best as to how a motor
vehicle service contract provider should do business in the
state. He related that HB 206 sets a clear path for how a motor
vehicle service contract provider is regulated in Alaska,
consistent with the treatment of the industry in the majority of
the states. The industry supports this bill since it will
provide regulatory certainty and increased uniformity for motor
vehicle service contract programs. This bill would also create
a level playing field for providers to transact motor vehicle
service contracts and provides consumer protections.
Additionally, it would provide protection to consumers by
requiring providers to allow consumers to review the contract
after purchase and cancel the contract within a specified period
of time and receive a full refund of the purchase price.
MR. BROWN stated that HB 206 provides clear directives as to how
the industry is regulated and protects Alaska's consumers by
creating a regulatory structure which will allow the Division of
Insurance (DOI) to ensure that Alaskan consumers are treated
uniformly with other state consumers when purchasing a motor
vehicle service contract.
3:37:38 PM
MR BROWN reviewed the section-by-section analysis of the bill.
Section 1 would amend current law to remove motor vehicle
service contracts from the list of items excluded from the
current law's definition of "service contract." Section 2
creates new subsections clarifying certain provisions of motor
vehicle service contracts including which ones are governed by
Alaska law and defining the provisions of the contracts.
Section 3 makes a change to existing statutes that is necessary
as a result of HB 206. Section 4 would clarify that these laws
do not apply to a person but apply to the motor vehicle service
contract provider.
MR. BROWN related that Section 5 adds a new title to AS 21.61
which sets forth the following: It identifies specific services
that would be offered through any motor vehicle service contract
and identifies specific disclosures that must be included on a
motor vehicle service contract, including cancellation rights,
coverage provided, name and contact information, and "so forth."
3:39:23 PM
MR. BROWN continued his section-by-section analysis of HB 206.
Section 5, AS 21.61, includes language on party identification
and exemptions to the motor vehicle service contract. This
section contains provisions related to providing receipts and
copies of the motor vehicle service contract within a specified
period of time. Proposed AS 21.61.050 requires biennial renewal
of motor vehicle service contract provider license. Proposed AS
21.61.060 would require registration of an entity providing
motor vehicle service contracts and AS 21.61.070 would provide
the requirements for return and cancellation of a motor vehicle
service contract, including refunds, and information that must
be provided by the contractor to the consumer.
MR. BROWN stated that proposed AS 21.61.080 provides financial
responsibility requirements for motor vehicle service contract
providers to the consumer and liabilities that may accrue.
Proposed AS 21.60.090 and AS 21.60.100 would set forth
definitions and authorize the director of the Division of
Insurance to conduct examinations or investigations of licensees
and contract providers. Finally, Section 6 would clarify any
language used in these new sections.
3:41:11 PM
CHAIR OLSON stated that his office has not received any calls or
e-mails in opposition to HB 206. He asked whether the sponsor
has received any calls.
MR. BROWN responded that they had not.
3:41:26 PM
REPRESENTATIVE SADDLER asked whether he could provide a little
more information on service contracts and differentiate between
service contracts and maintenance agreements. He further asked
whether this is something provided by the dealers.
3:42:20 PM
STEPHEN MCDANIEL, Assistant Executive Director and Assistant
General Counsel, Service Contract Industry Council (SCIC),
related that HB 206 is consistent with the regulatory treatment
of the service contract industry across the country and will
bring Alaska's law into line with how the service providers and
industry is regulated. It puts forth important consumer
protections by providing for cancellation rights and acquiring
financial responsibility of those providers of service contracts
that are being sold in Alaska, while it creates regulatory
certainty for the industry with respect to how business is done
in the state. The language in HB 206 is largely based on a
model act adopted by the National Association of Insurance
Commissioners in the early 1980s. This has been the foundation
for similar legislation adopted across the country. The SCIC's
67 member companies support this, and it is a good step forward
for the regulation of motor vehicle service contracts in Alaska.
3:43:54 PM
REPRESENTATIVE JOSEPHSON asked whether the bill was seen as
being mutually beneficial for salesmen and the purchaser.
MR. MCDANIEL indicated this bill provides a regulatory framework
that the industry believes is beneficial to the salesmen.
Typically, auto dealers sell these contracts to the consumers.
It ensures individuals and entities that are making the promises
in service contracts have the financial ability on contractual
promises to consumers and customers of the automobile dealers.
In the worst case scenario, if the providers "go under" the
consumer would be left "holding the bag." A dealer will honor
the contract since they don't want the consumer to go away
upset. Also, the bill would ensure that appropriate financial
backing for the providers is available as well as to clarify the
way they are to be offered in the state. This is good for the
sellers, consumers, and contract providers, he said.
3:45:39 PM
REPRESENTATIVE SADDLER asked for clarification on service
contracts and a sense of how important this is to dealers.
MR. MCDANIEL answered that typically the contracts offer
coverage for defects in materials and workmanship as well as
some additional provisions for things such as road hazards,
which would cover tire and wheels for punctures. The benefits
vary from provider to provider, but typically will range from
five to seven years. The terms are chosen by the consumers and
by and large it is an extension of the manufacturer's warranty
and includes emergency roadside assistance to assist consumers
when the vehicle has a breakdown.
3:47:12 PM
REPRESENTATIVE SADDLER related his understanding that this is
not a network of mechanical shops but is an actual service that
arranges coverage and reimburses shops in Alaska for consumers
who have purchased contracts.
MR. MCDANIEL answered that is correct. The providers actually
pay for the repair so it isn't a reimbursement to consumers in
most instances. There is usually no outlay from the consumer
unless the contract has a deductible.
REPRESENTATIVE SADDLER asked for an estimate of the annual cost
to consumers.
MR. MCDANIEL responded that it would depend on contract. He
suggested that the standard cost for five years runs between
$1,200 to $1,500.
3:48:19 PM
REPRESENTATIVE CHENAULT recalled the service contract package
may provide oil changes and brake pads and can be crafted to
include all sorts of things can go wrong once the regular
warranty is up.
3:49:15 PM
LORI WING-HIER, Director, Division of Insurance, Department of
Commerce, Community & Economic Development, related that this
bill has been worked on for several years and the division has
finally reached a consensus that this bill will protect
consumers. She thanked the sponsor's staff and Mr. McDaniel,
who have been very patient with the division. She indicated
that the division is comfortable with Version C of HB 206.
3:50:03 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on HB 206.
CHAIR OLSON withdrew his objection.
3:50:47 PM
REPRESENTATIVE REINBOLD moved to report the proposed committee
substitute (CS) for HB 206, labeled 28-LS0501\C, Wallace, 2/6/14
out of committee with individual recommendations and the
accompanying fiscal note. There being no objection, CSHB
206(L&C) was reported from the House Labor and Commerce Standing
Committee.