Legislature(2001 - 2002)

04/25/2001 03:30 PM House L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 106 - FINANCIAL INSTITUTIONS                                                                                               
[Contains discussion of HB 184 and SB 66]                                                                                       
Number 0081                                                                                                                     
CHAIR MURKOWSKI announced that the  first order of business would                                                               
be HOUSE  BILL NO.  106, "An Act  relating to  the authorizations                                                               
for  state  financial   institutions;  relating  to  confidential                                                               
financial  records   of  depositors  and  customers   of  certain                                                               
financial  institutions; relating  to  the  Alaska Banking  Code,                                                               
Mutual  Savings Bank  Act,  Alaska Small  Loans  Act, and  Alaska                                                               
Credit Union Act; and providing for an effective date."                                                                         
CHAIR MURKOWSKI  reminded members that during  a previous hearing                                                               
she had emphasized the necessity of  working on HB 106 in concert                                                               
with  HB 184,  to ensure  uniformity with  regard to  the related                                                               
privacy  issues  including   financial  disclosures  and  certain                                                               
health information disclosures.                                                                                                 
Number 0255                                                                                                                     
REPRESENTATIVE  HALCRO  made  a  motion  to  adopt  the  proposed                                                               
committee  substitute   (CS),  version   22-GH1026\F,  Bannister,                                                               
4/19/01, as  a work draft.   There being no objection,  Version F                                                               
was before the committee.                                                                                                       
Number 0290                                                                                                                     
FRANKLIN TERRY  ELDER, Director, Division of  Banking, Securities                                                               
and   Corporations,   Department   of  Community   and   Economic                                                               
Development,  stated   that  he  understands  that   [Version  F]                                                               
reflects much of  the work done in the Senate  Labor and Commerce                                                               
Standing  Committee  on  SB  66.    However,  a  large  exception                                                               
regarding policy is that the  reference to the Gramm-Leach-Bliley                                                               
Act (GLBA)  was removed in  HB 106  from the privacy  section, AS                                                               
06.01.028, making  it essentially an  opt-in bill.   That removal                                                               
is  the department's  preference, he  indicated, and  although it                                                               
also  was requested  of the  Senate Labor  and Commerce  Standing                                                               
Committee [regarding SB 66], that  change wasn't made.  Mr. Elder                                                               
expressed hope that  the change could be done on  the Senate side                                                               
as well.                                                                                                                        
MR. ELDER  highlighted two small "nonpolicy"  differences between                                                               
HB  106 and  SB  66.   First,  [Version  F of  HB  106] adds  the                                                               
reference  to the  National Credit  Union Administration  (NCUA),                                                               
which didn't make  it into the Senate bill.   Mr. Elder remarked,                                                               
"As  a  policy, we  work  with  both  the FDIC  [Federal  Deposit                                                               
Insurance Corporation] and the NCUA  when we do examinations; and                                                               
so I was, I guess, a little  surprised that didn't make it in, in                                                               
the  Senate bill,  but  you've taken  care of  that  ... in  this                                                               
committee substitute."   He noted that second,  [Version F] takes                                                               
care  of  the slight  difference  in  the ATM  [automated  teller                                                               
machine] section on credit unions,  with the small wording change                                                               
being the same as for ATMs at banks.                                                                                            
Number 0502                                                                                                                     
MR. ELDER  informed members that  the other major event  from the                                                               
department's viewpoint, in conjunction  with the committee's work                                                               
on  Version F,  has been  to  have further  discussions with  the                                                               
Alaska Bankers  Association to find common  ground for protecting                                                               
Alaskans'  privacy  while  still  making  the  everyday  work  of                                                               
financial  institutions  run smoothly,  while  at  the same  time                                                               
considering the  differences between small banks,  which may have                                                               
few or no affiliates, and larger ones.                                                                                          
MR. ELDER pointed out that  when talking about sharing or selling                                                               
information  for banks  and  credit unions  covered  by the  Fair                                                               
Credit Reporting  Act (FCRA), the  FCRA regulates the  sharing of                                                               
information   among   affiliates.     It   preempts   any   state                                                               
restrictions  on sharing  among  affiliates  until January  2004,                                                               
after  which time  [the legislature]  needs to  pass a  bill that                                                               
references  the FCRA  in order  to overcome  the preemption.   By                                                               
contrast, the Gramm-Leach-Bliley Act only  deals with the sharing                                                               
of information with nonaffiliates.                                                                                              
Number 0655                                                                                                                     
MR.  ELDER reported  on  the  department's further  conversations                                                               
with  the  Alaska  Bankers  Association.    He  said  it  is  his                                                               
understanding that the department  and the association had agreed                                                               
upon some clarifying language in  subsection (d) of AS 06.01.028,                                                               
which  allows for  financial  institutions  to share  information                                                               
necessary to  provide services.   In  testimony on  that section,                                                               
both  on  the Senate  side  and  in  a letter  to  Representative                                                               
Halcro, Mr. Elder  said he had stated that he  thought that would                                                               
also  cover joint  marketing efforts.   He  expressed the  belief                                                               
that the  language agreed upon  by the department and  the Alaska                                                               
Bankers Association  clarifies that  it includes  joint marketing                                                               
CHAIR  MURKOWSKI  asked  Mr.  Elder  whether he  had  a  copy  of                                                               
proposed  amendment  F.1   [22-GH1026\F.1,  Bannister,  4/23/01],                                                               
which read:                                                                                                                     
     Page 3, lines 24 - 25:                                                                                                     
          Delete all material and insert:                                                                                       
               "(1) the disclosure is necessary to                                                                              
                (A) provide the services of the                                                                                 
     financial institution to a depositor or customer; or                                                                       
            (B) market financially related products                                                                             
        or services of the financial institution and its                                                                        
     marketing partners; and"                                                                                                   
MR.  ELDER affirmed  that Amendment  F.1 is  the language  agreed                                                               
upon by the  department and the bankers association.   He pointed                                                               
out  that the  specific  clarifying language  is in  subparagraph                                                               
Number 0775                                                                                                                     
MR. ELDER  emphasized that [under Amendment  F.1] the information                                                               
to   be  shared   must  be   necessary,   not  just   extraneous.                                                               
Furthermore,  it  must be  financially  related  services of  the                                                               
financial institution and its marketing  partners.  He noted that                                                               
subsection (d)  requires a contractual relationship,  in writing,                                                               
between  the financial  institution  and  the marketing  partner,                                                               
saying that the marketing partner  will be subject to the privacy                                                               
restrictions  of  AS 06.01.028.    Mr.  Elder characterized  that                                                               
provision as  "fairly powerful," emphasizing that  it truly would                                                               
be a  marketing partner,  rather than  a telemarketer,  who might                                                               
not be willing to enter into such an [agreement].                                                                               
Number 0840                                                                                                                     
REPRESENTATIVE  HALCRO  asked  whether an  unaffiliated  mortgage                                                               
company having a  brochure in a bank is  "sharing information" or                                                               
whether  Mr.  Elder  is  talking   about  the  banks  giving  out                                                               
information about a specific customer.                                                                                          
MR. ELDER suggested  that a decision to allow a  company to put a                                                               
brochure  in the  lobby,  which anyone  could  pick up,  probably                                                               
wouldn't be contemplated  here.  Rather, this  relates to privacy                                                               
in terms  of providing, for marketing  purposes, information that                                                               
is in  the possession of  a financial  institution.  It  may have                                                               
been  obtained from  a variety  of sources,  he noted,  including                                                               
directly from the consumer, or  indirectly from credit reports or                                                               
other  reports.     Amendment  F.1  limits   it  to  "financially                                                               
related," and there  would have to be a  contractual agreement if                                                               
one company were receiving any of that nonpublic information.                                                                   
REPRESENTATIVE  HALCRO said  one  argument for  the "opt-out"  is                                                               
that the current  law is so strict that it  doesn't provide for a                                                               
mortgage company  to put a brochure  in the lobby.   He expressed                                                               
concern  that privacy  should relate  to the  sharing of  account                                                               
information, for example, or payees on checks.                                                                                  
MR. ELDER concurred.                                                                                                            
Number 1031                                                                                                                     
REPRESENTATIVE CRAWFORD  referred to subparagraph  (A), Amendment                                                               
F.1.  He inquired about defining  the term "services"; he said it                                                               
seems very broad.                                                                                                               
MR. ELDER  reported that he had  come to agree with  the bankers'                                                               
position that ten  people, when making a list  of services, would                                                               
provide ten different lists; a  month from now, those lists would                                                               
change.  Therefore,  it would be difficult to lock  in a specific                                                               
list of services of a  financial institution.  Changing that list                                                               
later would  require either  a regulatory  action or  a statutory                                                               
change.  Mr.  Elder also expressed his belief that  if there were                                                               
an issue regarding  this - whether in front of  a hearing officer                                                               
if the department had brought an  action, or before a court - the                                                               
court [or hearing officer] could  look at something and determine                                                               
whether it is a service offered by the institution.                                                                             
REPRESENTATIVE CRAWFORD noted that the  committee is trying to go                                                               
with  opt-in, and  this is  an exception.   He  asked whether  it                                                               
shouldn't,   therefore,  be   the   fewest   services  that   are                                                               
exceptions, such  as check-printing  and other services  that had                                                               
been discussed previously.                                                                                                      
MR.  ELDER  answered  that  he believes  this  language  is  more                                                               
workable than having a list,  and that it is sufficiently limited                                                               
by the word "necessary".   He said subparagraph (A) isn't talking                                                               
about marketing in that regard,  because these people already are                                                               
customers,  including depositors.    Furthermore,  it relates  to                                                               
providing  services  of the  institution  for  which people  have                                                               
chosen to have a customer relationship.                                                                                         
REPRESENTATIVE  CRAWFORD asked  whether, for  example, a  bank or                                                               
credit union  would be able  to share with its  insurance company                                                               
how  timely a  customer had  been  regarding payments  for a  car                                                               
loan.  He asked whether that could be construed as a service.                                                                   
MR.  ELDER  replied,  "Not  under (A),  because  under  (A)  it's                                                               
talking about the  financial institution, and so  ... it wouldn't                                                               
be sharing ...  the information for somebody else  to provide the                                                               
services."  He said it is more  limited than one might think.  He                                                               
cited  as  obvious  examples the  statement-printing  and  check-                                                               
printing.   He restated his concern  about coming up with  a list                                                               
of all the possible services of an institution.                                                                                 
Number 1345                                                                                                                     
REPRESENTATIVE  CRAWFORD  turned  the  committee's  attention  to                                                               
subparagraph (B)  of Amendment F.1,  noting that it  says "market                                                               
financially related  products".  He asked  whether an institution                                                               
would be able to share without a customer's opting in.                                                                          
MR. ELDER answered  that under (B), he would  say that "insurance                                                               
product"  is a  financially related  service  - if  the two  were                                                               
affiliated, there could  be sharing anyway.  If the  two were not                                                               
affiliated, and if there were  a contractual relationship between                                                               
the insurance  company and the financial  institution, they could                                                               
provide  information  that  is  relevant -  necessary  -  to  the                                                               
REPRESENTATIVE CRAWFORD asked whether that  would be true even if                                                               
the consumer didn't opt in.                                                                                                     
MR. ELDER  affirmed that.   He added that otherwise,  small banks                                                               
such  as  many   Alaskan  banks  would  be   at  a  significantly                                                               
competitive  disadvantage  when  compared  to  larger,  generally                                                               
national, banks that  have an affiliate structure.   For example,                                                               
having an  affiliate insurance company would  force smaller banks                                                               
either to not  compete, to seek out those  kinds of affiliations,                                                               
or to be purchased by bigger institutions.                                                                                      
Number 1501                                                                                                                     
REPRESENTATIVE  HALCRO reported  that he  had received  an e-mail                                                               
that  day   from  the  Alaska  Public   Interest  Research  Group                                                               
(AkPIRG), which  said HB 106  would strip  the cap off  of credit                                                               
card interest rates.  He asked whether it would, in fact, do so.                                                                
MR. ELDER referred  to Section 13, page 9, Version  F, saying the                                                               
division and  the state had  proposed that it remove  the current                                                               
cap  of 17  percent on  credit card  charges.   He explained  the                                                               
reason for that language.  He said  "our" view is that a cap such                                                               
as this essentially  has no effect on the interest  rates paid by                                                               
most Alaskans on  their charge cards.  Instead,  it only prevents                                                               
smaller, state-chartered  institutions from participating  in the                                                               
credit card business.   He noted that of  the six state-chartered                                                               
institutions  in  Alaska, three  don't  offer  credit cards,  and                                                               
three  offer  them but  don't  "push"  them.   He  surmised  that                                                               
[offering credit cards] comes more from a desire to be a full-                                                                  
service institution or  from the fact that credit cards  may be a                                                               
means of providing overdraft protection for checking accounts.                                                                  
MR. ELDER reported that [the  department] also looked at what the                                                               
legislature did in 1996 in  amending the retail installment sales                                                               
Act,  which is  in  Title 45.    The cap  on  interest rates  was                                                               
changed  at  that time  to  essentially  whatever was  negotiated                                                               
between the institution  and the borrower.  Noting that  he has a                                                               
background as  an economist,  Mr. Elder said  a cap  is effective                                                               
only if  the market rate  would be  higher; otherwise, all  a cap                                                               
does is  create a shortage,  because the demand would  exceed the                                                               
supply at  that price.  Mr.  Elder said that is  what he believes                                                               
has  happened, since  half  of  the state-chartered  institutions                                                               
don't offer credit cards.                                                                                                       
Number 1713                                                                                                                     
MR. ELDER suggested that one test  is looking at the credit cards                                                               
in one's  wallet; if they  are from  major banks, the  rates will                                                               
vary widely - having no relationship  to the 17 percent - because                                                               
federal law allows  banks that operate in more than  one state to                                                               
"export"  interest rates.   Mr.  Elder suggested  that a  cap may                                                               
even  go  against  economic  development  by  ensuring  that  the                                                               
decisions will be made outside of  the state, because in order to                                                               
export interest  rates, they must  be made  in other states.   He                                                               
then stated:                                                                                                                    
     We  honestly  don't  believe that  if  House  Bill  106                                                                    
     passes and becomes law this  way, and that [the] cap is                                                                    
     removed,  ... people  will see  any  difference in  the                                                                    
     interest rates that  they pay on the  credit cards that                                                                    
     they  are likely  to have  in their  wallet.   The only                                                                    
     possible  difference would  be  that  perhaps a  state-                                                                    
     chartered financial institution  that they otherwise do                                                                    
     business with will also offer credit cards.                                                                                
     ... I don't think it  is anti-consumer or anything like                                                                    
     that.  But having said  that, the will of the committee                                                                    
     and the will  of the legislature are fine  with me. ...                                                                    
     It's  not a  Gramm-Leach-Bliley  issue.   I think  it's                                                                    
      more of ... a fairness-to-state-banks-versus-out-of-                                                                      
     state-banks  and   ...  a  small-bank-versus-large-bank                                                                    
     issue. ...                                                                                                                 
     I'd like to  see bipartisan support of  House Bill 106,                                                                    
     and if  that is  the only  section that  was preventing                                                                    
     bipartisan support  for the bill,  then ...  I wouldn't                                                                    
     have any strong  feeling, one way or the  other, if the                                                                    
     legislature chose not to include it.                                                                                       
Number 1851                                                                                                                     
REPRESENTATIVE HALCRO  summarized his  understanding of  what Mr.                                                               
Elder was  saying:  first, it  doesn't come into play  for people                                                               
whose credit  cards come from  outside of Alaska, and  second, it                                                               
impedes the success  of state banks, which can't  charge a decent                                                               
rate in order to make money.                                                                                                    
MR. ELDER concurred, again saying it  is a matter of what is fair                                                               
to  state-chartered institutions,  which  is the  reason for  its                                                               
Number 1903                                                                                                                     
CHAIR MURKOWSKI  brought attention  to an e-mail  that referenced                                                               
"an Office  of the Comptroller of  Currency decision, apparently,                                                               
OCC letter number 822," which  provides that when a national bank                                                               
has branch offices in a  state and makes credit determinations in                                                               
that state,  that bank must  follows the  state's law.   She said                                                               
the  individual's  concern was  that  if  there  were no  cap  in                                                               
Alaska,  then a  Wells  Fargo Bank  could  issue an  out-of-state                                                               
credit card and charge usurious rates.                                                                                          
MR.  ELDER said  the  federal  law that  governs  the ability  to                                                               
export interest rates  does say that; one criterion  is where the                                                               
credit decision  is made.   He said the  banks know that  and can                                                               
structure their operations to show  that the credit decisions are                                                               
made in  whatever state  they need to  have the  credit decisions                                                               
made in.   Therefore,  a 17  percent cap  in Alaska  means almost                                                               
nothing to a  true multi-state bank.  Furthermore,  nobody puts a                                                               
gun to  someone's head and makes  that person use a  credit card;                                                               
people sign up for credit cards,  and most people notice what the                                                               
rates are.   He  said it is  a competitive business.   If  a bank                                                               
offered a truly usurious rate,  he suggested that people wouldn't                                                               
take it.                                                                                                                        
CHAIR MURKOWSKI indicated her belief that Alaska has usury laws.                                                                
REPRESENTATIVE  ROKEBERG disagreed,  saying the  usury laws  were                                                               
abolished because they don't make  sense anymore.  He mentioned a                                                               
credit reporting Act.  He  then said market principles are there,                                                               
and  it is  clear, from  the testimony,  that state  banks cannot                                                               
compete with  national banks because  of the artificial cap.   He                                                               
indicated that  the only thing  in Alaska's statutes  relating to                                                               
usury is  "some nonfloating-rate legal interest  rates," which he                                                               
said he was going to look into.                                                                                                 
CHAIR  MURKOWSKI said  she would  like to  hear from  the bankers                                                               
before there  was a  motion to  adopt Amendment  F.1.   She asked                                                               
whether  there were  further questions  of Mr.  Elder; none  were                                                               
Number 2107                                                                                                                     
JOE SCHIERHERN,  Senior Vice President, Northrim  Bank, testified                                                               
via teleconference, noting that he  was a charter employee of the                                                               
bank and  has worked primarily  in the commercial loan  area over                                                               
the last  ten years.   He informed  members that he  formerly was                                                               
president of the  Alaska Bankers Association.  He  added that the                                                               
Alaska  Bankers Association  and Northrim  Bank are  in favor  of                                                               
Version F and concur with Mr. Elder's testimony.                                                                                
MR. SCHIERHERN addressed the need  for Amendment F.1 to allow the                                                               
marketing of  bank services to  the public.   He referred  to Mr.                                                               
Elder's testimony that the FCRA  preempts any regulation of banks                                                               
with affiliates.   Mr. Schierhern  said a bank with  an insurance                                                               
affiliate would be  allowed to freely market its  services to the                                                               
affiliate;  by contrast,  a smaller  state bank  without such  an                                                               
affiliate  could  not   do  that  without  the   amendment.    He                                                               
emphasized the  importance of the  amendment in order  to provide                                                               
fairness,  allowing  state-regulated  banks  to be  on  an  equal                                                               
footing with  larger national  banks with  affiliates.   He added                                                               
that  another  central point  is  the  ability for  consumers  to                                                               
receive a free flow of  information.  Without these provision, he                                                               
said he thinks  the opportunity to choose and  the opportunity to                                                               
receive information would be inhibited.                                                                                         
Number 2252                                                                                                                     
LAURA  WALDON,  Alaska  Public   Interest  Group,  testified  via                                                               
teleconference.   She stated that  she doesn't think HB  106 will                                                               
focus  on the  local people,  because  it allows  [the banks]  to                                                               
charge people anything they want.   She said people don't realize                                                               
that their  [interest] rates  are changing  until they  get their                                                               
LISA  BELL,  Senior  Vice  President,  Chief  Operating  Officer,                                                               
Alaska Pacific  Bank, testified on  behalf of the  Alaska Bankers                                                               
Association.  She noted that  [the Alaska Bankers Association] is                                                               
in complete  agreement with the  Division of  Banking, Securities                                                               
and Corporations,  and is  in support  of the  proposed committee                                                               
substitute and the proposed amendment.  She remarked:                                                                           
     We as  bankers are not  interested in selling  lists of                                                                    
     customer  information to  third parties.   We  have our                                                                    
     reputation  to  protect.   What  we  are interested  in                                                                    
     doing  is being  able to  market our  own products  and                                                                    
     services, and to be able  to market financially related                                                                    
     products and services that we  may not be able to offer                                                                    
     in-house. ...  We believe  that this  legislation, with                                                                    
     the proposed  amendment, does exactly that  for us, and                                                                    
     also protects the privacy interest of Alaskans.                                                                            
Number 2396                                                                                                                     
REPRESENTATIVE CRAWFORD  asked Ms.  Bell what  personal financial                                                               
information she would  share if she were  only marketing products                                                               
to somebody the bank has a relationship with.                                                                                   
MS.  BELL  answered  that  it is  possible  that  some  household                                                               
characteristics would be shared, which  might allow [the bank] to                                                               
determine if the product would  be of interest to that household.                                                               
For example,  it could be  household income or  average balances.                                                               
The  bank might  want  to  know who  would  be  interested in  an                                                               
account that would have a  minimum balance requirement of $2,500;                                                               
therefore, [the  bank] would  not be marketing  it to  people who                                                               
would be outside that range.                                                                                                    
REPRESENTATIVE  CRAWFORD asked,  if  based  on that  information,                                                               
whether someone would  be able to receive  services that wouldn't                                                               
be  offered  to  someone  who  didn't  have  the  $2,500  minimum                                                               
MS.  BELL replied  that  she  could have  given  a poor  example;                                                               
however, it's  possible.   Depending on  the product  or service,                                                               
[the  bank] may  want  to  offer it  to  everyone.   However,  it                                                               
depends  on  what  the  products  are.    They  could  be  trust,                                                               
brokerage, or insurance  services, which she thinks  are the most                                                               
common three  things her bank  would want to market  to customers                                                               
that  can't be  offered in-house.    She added  that small  banks                                                               
probably don't  have a  long list  of things  they would  want to                                                               
engage in.                                                                                                                      
TAPE 01-67, SIDE B                                                                                                              
MS. BELL continued  [inaudible due to tape failure].   She stated                                                               
that it  is quite  possible that database  sorting would  be done                                                               
within  the bank  and not  even need  to be  shared with  a third                                                               
party, because  in the end,  the bank  is possibly paring  down a                                                               
list and only sharing names and  addresses in order for a mailing                                                               
to go out.                                                                                                                      
Number 2455                                                                                                                     
REPRESENTATIVE  CRAWFORD  asked  Ms.  Bell  if  she  wouldn't  be                                                               
adverse to  limiting what would  be shared  to just the  name and                                                               
address, if the list has already been limited within the bank.                                                                  
MS. BELL replied that she  would be concerned if limitations were                                                               
placed on what  is shared without knowing  what the opportunities                                                               
in the  future might  be.   She said this  could create  an undue                                                               
restriction on the  kinds of financial services  [the bank] might                                                               
be able to offer.                                                                                                               
REPRESENTATIVE CRAWFORD  remarked that  it seems  to him,  if the                                                               
bank wants  to share more  information, [the bank] should  get an                                                               
opt-in  provision whereby  the consumer  would  say it  is OK  to                                                               
share  something more  [than just  name,  address, phone  number,                                                               
birthday, or occupation].                                                                                                       
MS.  BELL responded  that she  would feel  that [the  bank] would                                                               
have to be very careful in  placing those limitations.  A smaller                                                               
bank  may not  have thought  of all  the possible  opportunities.                                                               
For example, there could be a  situation in which the partner [of                                                               
a  smaller bank]  has  a more  sophisticated  system that  sorts,                                                               
looks at the demographics, and  determines what products a person                                                               
would be interested in.                                                                                                         
REPRESENTATIVE CRAWFORD  commented that he is  concerned that [HB
106]  may  be  discriminating  against a  large  segment  of  the                                                               
marketplace based on other information.                                                                                         
MS.  BELL  replied  that  she   wouldn't  want  to  mislead  [the                                                               
committee] on guessing what types  of information might be shared                                                               
or what  kinds of demographics might  be used in a  "sort," since                                                               
she  has  never  engaged  in   that  kind  of  a  joint-marketing                                                               
agreement with a third party.                                                                                                   
REPRESENTATIVE  CRAWFORD   added  that  if  someone   could  more                                                               
specifically show him a need  to share more information, he might                                                               
be more amenable to going along with it.                                                                                        
Number 2337                                                                                                                     
REPRESENTATIVE ROKEBERG  referred to Amendment  F.1, subparagraph                                                               
(B),  and stated  that he  thinks the  theory is  it would  allow                                                               
state banks to have "equal  footing" with large national banks by                                                               
granting  them the  disclosures necessary  to market  financially                                                               
related  products or  services of  the financial  institution and                                                               
its marketing partners.                                                                                                         
MS. BELL agreed.                                                                                                                
REPRESENTATIVE ROKEBERG  stated that  he'd read the  provision in                                                               
the  context  of  the  exceptions   that  were  delineated  under                                                               
subparagraphs (A), (B),  and (C) [on page 2 of  the proposed CS].                                                               
He  asked  Ms.  Bell  whether she  would  consider  the  proposed                                                               
subparagraph (B)  as an opt-in or  an opt-out.  He  said it seems                                                               
that the  way it's drafted,  it is  an opt-out, and  the customer                                                               
would  have  to  declare  that  he  or  she  wouldn't  want  that                                                               
information divulged.                                                                                                           
MS.  BELL answered  that  her interpretation  is  it really  does                                                               
stick with  a default opt-in  for many circumstances,  except for                                                               
the  basic exceptions  already included  in the  statute for  the                                                               
normal  course  of banking.    She  said this  amendment  allows,                                                               
particularly, the  smaller banks the  opportunity to go  a little                                                               
further in marketing  other products and services  that cannot be                                                               
offered in-house.                                                                                                               
REPRESENTATIVE ROKEBERG asked whether  her interpretation is that                                                               
this would occur without the permission of the customer.                                                                        
MS. BELL  agreed, and stated that  this would be an  exception to                                                               
opt-in;  however, there  are still  requirements  under the  GLBA                                                               
that would  require the bank  to have  a contract with  the third                                                               
REPRESENTATIVE ROKEBERG  asked Mr. Elder if  conformance with the                                                               
GLBA is in the bill.                                                                                                            
Number 2225                                                                                                                     
MR. ELDER answered that there are  aspects of the GLBA that apply                                                               
to the  bank regardless  of what  is done in  terms of  opt-in or                                                               
opt-out.   He explained  that subsection  (f) [on  page 3]  is an                                                               
exception to the  general rule that disclosure  of information is                                                               
not allowed, and  subsections (a) through (c) state  when that is                                                               
allowed.  The purpose of subsection  (d) is to level the "playing                                                               
field"  between the  small state-charted  banks  that don't  have                                                               
affiliate structures and the larger banks that do.                                                                              
REPRESENTATIVE ROKEBERG asked whether  it would not be consistent                                                               
with the GLBA  to say "state-chartered banks", if  there were any                                                               
enforcement on the national level.                                                                                              
MR. ELDER  responded that  the idea is  that in  [Alaska] smaller                                                               
banks tend to be state-chartered  banks, but nationwide there are                                                               
some  large state-chartered  banks.   He  stated  that the  issue                                                               
isn't necessarily  whether it's state-chartered or  national, but                                                               
whether it has  an affiliate structure or not.   He noted that it                                                               
just  so  happens that  in  [Alaska]  the  state banks  are  also                                                               
smaller banks  and tend not to  have an affiliate structure.   He                                                               
emphasized  that  subsection (d)  is  designed  to allow  smaller                                                               
banks to  do things that  other banks  can already do  because of                                                               
their affiliate structure.                                                                                                      
CHAIR  MURKOWSKI asked,  if  [HB  106] is  trying  to give  equal                                                               
footing  to  the  state-chartered  banks,  whether  it  could  be                                                               
specified  that the  state banks  are brought  up to  parity with                                                               
their ability to do the [agreement].                                                                                            
MR.  ELDER,   in  response,  reiterated   that  the   purpose  of                                                               
subsection (d) is  to level the playing field  between banks that                                                               
have large affiliate structures  and banks that don't, regardless                                                               
of their charter.                                                                                                               
CHAIR  MURKOWSKI asked  Mr. Elder  if  he would  be reluctant  to                                                               
specify that it is a  state financial institution because that is                                                               
just the way it is right now.                                                                                                   
MR. ELDER agreed.                                                                                                               
Number 2012                                                                                                                     
REPRESENTATIVE   ROKEBERG   asked    if,   under   the   proposed                                                               
subparagraph (d)(1)(B) and the proposed  CS, banks have the right                                                               
to opt back in.                                                                                                                 
MR. ELDER responded  that the bill and the  amendment are written                                                               
with information  that is  necessary to  provide the  services of                                                               
the institution,  or to conduct  joint-marketing efforts  of that                                                               
institution  with  its  marketing   partners  where  there  is  a                                                               
contractual  relationship.   He  explained  that  he thinks  it's                                                               
limited  by  the fact  that  it  is necessary  information,  it's                                                               
financially  related services,  and  there has  to  be a  written                                                               
contract between  the financial institution and  the partner that                                                               
they  will  be subject  to  the  limitations in  subsections  (a)                                                               
through (c).                                                                                                                    
REPRESENTATIVE   ROKEBERG  asked,   if  [the   committee]  adopts                                                               
Amendment F.1, where  in the bill it would provide  that the opt-                                                               
out provision would be sent out [to customers].                                                                                 
MR. ELDER answered that if [the  committee] passes the bill as it                                                               
is, opt-in  is in paragraph  (a)(1) [on page  2].  He  added that                                                               
the Gramm-Leach-Bliley  requirement, which the banks  - including                                                               
the state banks  - are still subject to, requires  that a privacy                                                               
notice be sent.                                                                                                                 
Number 1794                                                                                                                     
CHAIR MURKOWSKI  asked, by  opting-in, if  the Gramm-Leach-Bliley                                                               
provisions  are  still  in  play,  but there  will  be  a  higher                                                               
standard when it comes to privacy.                                                                                              
MR. ELDER agreed.                                                                                                               
REPRESENTATIVE  ROKEBERG  stated  that also,  those  institutions                                                               
with large affiliate structure have been allowed to have co-                                                                    
marketing parties.                                                                                                              
MR.  ELDER  responded  that  institutions  with  large  affiliate                                                               
structures  already have  large marketing  parties, which  is why                                                               
subsection (d) is  necessary.  Should [institutions]  not have an                                                               
affiliate in  a certain area  that's a financially  related area,                                                               
and should they  want to operate under  a contractual arrangement                                                               
just like  any other bank,  then subsection (d) would  allow them                                                               
to do  that.  He added  that the contractual obligation  is there                                                               
because it binds them to the  rest of the sections of the privacy                                                               
provision, it's limited  to financial services, and it  has to be                                                               
a joint effort.                                                                                                                 
REPRESENTATIVE  ROKEBERG  asked  Mr.  Elder whether  there  is  a                                                               
natural disincentive within the  structure of an institution with                                                               
a large number of affiliates to  compete against itself.  He said                                                               
the natural flow of things is  that this would allow the smaller,                                                               
less-affiliated institution to  be able to compete  with a larger                                                               
MR. ELDER agreed.                                                                                                               
CHAIR  MURKOWSKI remarked  that she  was trying  to suggest  that                                                               
[the  committee]  limit  the amendment  to  only  state-chartered                                                               
institutions.  However,  she said she was  reminded, for example,                                                               
that  Alaska Pacific  Bank  is a  federally  chartered bank,  but                                                               
doesn't have  any affiliates.   Therefore, if the  amendment were                                                               
limited,  [the committee]  wouldn't  really have  done what  they                                                               
want to  do, which  is to  allow the smaller  state banks  [to do                                                               
things  that   other  banks  can   because  of   their  affiliate                                                               
MR.  ELDER stated  that that  is  exactly why  subsection (d)  is                                                               
written  the way  it  is  - to  only  address  the difference  in                                                               
affiliate structures.   He added that one thing that  needs to be                                                               
kept in  mind when  talking about information  that is  shared or                                                               
sold  under  Gramm-Leach-Bliley is  that  the  restriction is  on                                                               
nonpublic information.   Therefore, there are  no restrictions on                                                               
things that are available publicly.                                                                                             
Number 1582                                                                                                                     
REPRESENTATIVE HALCRO  referred to  Ms. Bell's comment  about how                                                               
the intention is  not to sell lists.   He asked her,  if she were                                                               
to create  a prospective  list of customers  based on  an average                                                               
daily  or monthly  balance,  and  she was  going  to  do a  joint                                                               
marketing  with somebody  who offered  market accounts,  what her                                                               
bank would get for providing that list.                                                                                         
MS. BELL answered that there would  be two types of benefits from                                                               
it.   [Her bank] would  hopefully retain the customer,  who might                                                               
have  otherwise taken  his  or her  money  out and  put  it in  a                                                               
brokerage account, and [her bank]  might get an interest override                                                               
paid back on the funds that are basically sent out of the bank.                                                                 
REPRESENTATIVE  CRAWFORD  commented  that  a  few  years  ago  he                                                               
decided not to  do business with a couple of  the larger banks in                                                               
[Alaska] because he wasn't  getting good, individualized service.                                                               
He asked Ms. Bell if she  thinks one of the plusses about smaller                                                               
banks  is that  they  provide more  individualized  service.   He                                                               
remarked  that it  seems to  him that  now [these  smaller banks]                                                               
want to get bigger.                                                                                                             
MS. BELL  responded that she understands  Representative Halcro's                                                               
point  and she  agrees with  him.   She stated  that she  doesn't                                                               
think  any small  bank in  Alaska has  an intention  of "stuffing                                                               
people's  mailboxes" with  all kinds  of  offers.   She said  she                                                               
thinks they want  the ability to do selective  kinds of marketing                                                               
for products that they think will help retain customers.                                                                        
REPRESENTATIVE  HALCRO   stated  that   it  seems  to   him  from                                                               
subparagraph  (B) in  the proposed  amendment  that [the  smaller                                                               
banks  are marketing  financially related  products or  services]                                                               
without accepting an opt-in.                                                                                                    
MS. BELL remarked that paragraph (B) is an exception to opt-in.                                                                 
REPRESENTATIVE  HALCRO asked  if it  would be  OK to  first check                                                               
with [the consumers]  to see if they are  interested in receiving                                                               
that material.                                                                                                                  
Number 1346                                                                                                                     
MS.  BELL  responded that  she  thinks  the  whole point  of  the                                                               
amendment  was to  allow [banks],  without a  lot of  expense and                                                               
effort, to be  able to offer something to a  large portion of the                                                               
customer base so that they could  look at it at their leisure and                                                               
make  their own  decisions.    She stated  that  it  is far  more                                                               
expensive and  time-consuming to  seek opt-in; it  would probably                                                               
prevent some  of these offers from  ever taking place.   She said                                                               
the return rate  is not very high when people  have to say, "Yes,                                                               
I want to receive more mail."   Opt-in is still preserved in many                                                               
circumstances  under  this  legislation, and  certainly  for  any                                                               
nonfinacially related products.                                                                                                 
REPRESENTATIVE HALCRO asked  whether financially related products                                                               
are the only things that [banks want to share].                                                                                 
MS. BELL stated  that that is the only thing  her bank would want                                                               
to share.                                                                                                                       
REPRESENTATIVE HALCRO remarked that  opt-in wouldn't be preserved                                                               
in anything except for financially related products.                                                                            
MS. BELL  responded that  preserving opt-in for  the rest  of the                                                               
field of possibilities protects the privacy of Alaskans.                                                                        
Number 1151                                                                                                                     
STEVE CONN, Alaska Public Interest  Research Group, testified via                                                               
teleconference.   He stated that the  purpose of the GLBA  was to                                                               
break   down  the   barriers   between  financial   institutions.                                                               
(Indisc.)   He said the issue  of the caps on  interest rates and                                                               
the response of Mr. Elder  were quite revealing, because not only                                                               
do  working people  lose the  protection  of the  17 percent,  it                                                               
opens  the  possibility that  the  out-of-state  banks will  make                                                               
their decisions  here and that the  "sky will be the  limit."  He                                                               
concluded by  saying that  both bills  [HB 106  and HB  186] lack                                                               
private rights  of action.   This is in  high contrast to  a bill                                                               
moving  through  the   Senate  and  the  House   related  to  the                                                               
automobile  dealers   their  manufacturers,  and   the  franchise                                                               
relationships whereby  the consumers are talking  directly to the                                                               
automobile   dealers    and   to   the   Department    of   Law's                                                               
representative.   This  bill, he  said, is  outside the  realm of                                                               
consumer protection,  and it  "cries out"  for private  rights of                                                               
action to  be installed, because  "we" simply cannot  trust those                                                               
who only speak to bankers and never speak to consumers.                                                                         
Number 1042                                                                                                                     
REPRESENTATIVE  HAYES made  a motion  to adopt  Amendment 1  [22-                                                               
GH1026\F.1, Bannister, 4/23/01], which read:                                                                                    
     Page 3, lines 24 - 25:                                                                                                     
          Delete all material and insert:                                                                                       
               "(1) the disclosure is necessary to                                                                              
                (A) provide the services of the                                                                                 
     financial institution to a depositor or customer; or                                                                       
            (B) market financially related products                                                                             
        or services of the financial institution and its                                                                        
     marketing partners; and"                                                                                                   
REPRESENTATIVE  CRAWFORD objected.   He  stated that  he believes                                                               
subparagraph (B) of the amendment  takes out the opt-in provision                                                               
for  anything  financially  related,  and  therefore  "guts"  the                                                               
CHAIR MURKOWSKI disagreed.  She  stated that she thinks an effort                                                               
has been  made to  preserve the opt-in  policies in  reference to                                                               
information,  whether it  be  financial  information or  personal                                                               
health information.   When this  was first discussed, it  was all                                                               
opt-out;  however, it  is  recognized in  Alaska  that there  are                                                               
greater privacy protections.  She  remarked that she thinks there                                                               
has to  be certain  exceptions to  that in  order to  allow state                                                               
institutions to  offer the  type of  services that  are expected.                                                               
She noted  that a bank's  competition is no longer  another bank;                                                               
people are putting their money everywhere else except a bank.                                                                   
REPRESENTATIVE CRAWFORD withdrew his objection.                                                                                 
Number 0795                                                                                                                     
CHAIR MURKOWSKI announced that there  being no further objection,                                                               
Amendment 1 was adopted.                                                                                                        
REPRESENTATIVE  HAYES  moved  to  report CSHB  106,  version  22-                                                               
GH1026\F, Bannister,  4/19/01, as amended, out  of committee with                                                               
individual  recommendations and  the attached  zero fiscal  note.                                                               
There  being no  objection, CSHB  106(L&C) moved  from the  House                                                               
Labor and Commerce Standing Committee.                                                                                          

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