Legislature(2019 - 2020)BARNES 124

03/13/2020 03:15 PM LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved CSHB 91(L&C) Out of Committee
<Bill Hearing Canceled>
-- Public Testimony --
Heard & Held
-- Public Testimony --
Heard & Held
-- Testimony <Invitation Only> --
+ Bills Previously Heard/Scheduled TELECONFERENCED
        HB 146-MOTOR VEHICLE DEALERS: APPLIC.; INSURANCE                                                                    
3:57:42 PM                                                                                                                    
CHAIR SPOHNHOLZ announced that the  final order of business would                                                               
be SPONSOR  SUBSTITUTE FOR HOUSE  BILL NO. 146, "An  Act relating                                                               
to an application  for a license to operate as  a dealer in motor                                                               
vehicles; and  requiring a dealer  in motor vehicles  to maintain                                                               
liability and property insurance."                                                                                              
3:58:04 PM                                                                                                                    
REPRESENTATIVE  MATT  CLAMAN,  Alaska  State  Legislature,  prime                                                               
sponsor,  introduced   HB  146.    He   paraphrased  the  sponsor                                                               
statement [included in the committee packet], which read in its                                                                 
entirety as follows [original punctuation provided]:                                                                            
     The purpose  of House Bill  146 is to  improve consumer                                                                    
     protections  for  those  purchasing motor  vehicles  by                                                                    
     strengthening  the   requirements  for   motor  vehicle                                                                    
     dealers. Under  current law, a motor  vehicle dealer in                                                                    
     Alaska  must  register  biennially by  filling  out  an                                                                    
     application that  requires an address, but  not a valid                                                                    
     telephone number.  The application must  be accompanied                                                                    
     by  a  $50  registration  fee  and  a  surety  bond  of                                                                    
     $50,000. There  is no current requirement  that dealers                                                                    
     carry  liability  insurance   even  though  we  require                                                                    
     drivers to have liability  insurance for their vehicles                                                                    
        and  dealers may  allow  uninsured  drivers to  take                                                                    
     dealer-owned cards for a test drive.                                                                                       
     Alaska's  current  statutory   requirements  for  motor                                                                    
     vehicle dealers are some of  the least stringent in the                                                                    
     country.  By  way  of  comparison,  for  an  automobile                                                                    
     dealership application to be valid in other states:                                                                        
     ?  Oregon     Chapter  822  of  Oregon  State  Statutes                                                                    
     provides for  civil penalties for  acting as  a vehicle                                                                    
     dealer   without   a   certificate   (.005-.009),   the                                                                    
     processes   of  applying   for,  and   maintaining,  an                                                                    
     automobile  dealer  license   and  related  exemptions,                                                                    
     requirements, and  privileges (.025-.042),  grounds for                                                                    
     revocation,   suspension,   or  cancellation   of   the                                                                    
     dealership certificate  (.050), and  further definition                                                                    
     of  illegal practices  and associated  penalties (.055-                                                                    
     ?  Delaware    Title  21, Chapter  63  of the  Delaware                                                                    
     State    Statutes   provides    for   proof-of-location                                                                    
     requirements  and   recordkeeping  (?   6303),  license                                                                    
     expiration and renewal  procedures (? 6304), retainment                                                                    
     of bill of  sale records for a period of  at least five                                                                    
     years (?  6305), in addition to  grounds for revocation                                                                    
     of dealer licenses (? 6313);                                                                                               
     ? Texas    Title  14, Subtitle A,  Chapter 2301  of the                                                                    
     state's Occupations  Code provides for  public interest                                                                    
     information  and complaint  procedures (Subchapter  E),                                                                    
     licensing   requirements    (Subchapter   F),   license                                                                    
     expiration   and   renewal   (Subchapter   G),   dealer                                                                    
     operations   (Subchapter   H),  grounds   for   license                                                                    
     revocation (Subchapter  N), as  well as  procedures for                                                                    
     complaint  hearings,  judicial  review,  and  penalties                                                                    
     (Subchapters O, P, and Q).                                                                                                 
     Comparatively  speaking,   Alaska  Statutes   Title  8,                                                                    
     Chapter 66  addresses the  application form  (.040) and                                                                    
     registration  renewal  (.050);  sets the  minimum  bond                                                                    
     amount (.060),  defines allowable  action on  bonds and                                                                    
     defines  failure   to  file  a   bond  as  a   class  A                                                                    
     misdemeanor   (.070,  .080);   and  holds   the  dealer                                                                    
     responsible  for maintaining  a  record  of each  motor                                                                    
     vehicle transaction  (.320). Unlike Texas,  Oregon, and                                                                    
     Delaware,  there are  no statutes  explicitly providing                                                                    
     for a  grievance process nor grounds  for revocation of                                                                    
     the license in question.                                                                                                   
     HB  146  aims  to  strengthen  consumer  protection  by                                                                    
     addressing two  scenarios that may create  problems for                                                                    
     both consumers and dealers:                                                                                                
     HB  146 seeks  to  provide better  protection when  one                                                                    
     selling  dealer sells  multiple  vehicles  to a  buying                                                                    
     dealer  and receives  payment without  providing titles                                                                    
     (the titles are being held  by the bank that provides a                                                                    
     credit  line  for  purchasing  vehicles).  The  selling                                                                    
     dealer  plans  to pay  for  the  vehicles and  get  the                                                                    
     titles  but runs  into  financial  difficulties and  is                                                                    
     unable to continue making  payments. When this happens,                                                                    
     the  bank  repossesses  the vehicles  from  the  buying                                                                    
     dealer. The  buying dealer has  now lost the  money and                                                                    
     decides to  seek recompense  from the  selling dealer's                                                                    
     bond. At present, the bond  requirement under state law                                                                    
     is $50,000,  which, depending on the  type and quantity                                                                    
     of vehicles,  may be only  a fraction of what  is owed.                                                                    
     Raising the  bond amount will  help protect  the buying                                                                    
     dealer  in the  event that  the bank  repossesses their                                                                    
     new stock.                                                                                                                 
     Another   scenario   that   this  bill   addresses   is                                                                    
     "curbstoning,"  which  is  the   act  of  selling  used                                                                    
     vehicles under  the false pretense  of being  the car's                                                                    
     owner in  order to  evade regulations that  are imposed                                                                    
     on  state-licensed automobile  dealers.  When a  dealer                                                                    
     obtains a license, they are  qualified to purchase cars                                                                    
     at "dealer only" auctions at  steep discounts. In these                                                                    
     scenarios, the  dealer is not required  to disclose the                                                                    
     fact that  they are a  licensed car dealer or  that the                                                                    
     vehicle  has   a  reconstructed  title  or   has  known                                                                    
     defects. If  deemed a personal vehicle,  the vehicle is                                                                    
     not subject to a  routine safety inspection. Often, the                                                                    
     title is not  placed in the dealer's  name, the contact                                                                    
     information provided  is not the  dealer's information,                                                                    
     or the transaction takes place  in cash, leaving little                                                                    
     paper  trail  for  the consumer  to  follow  if  issues                                                                    
     arise.  Requiring a  verified working  telephone number                                                                    
     increases the consumer's ability to locate the dealer.                                                                     
     HB 146  would help protect against  these two scenarios                                                                    
     by requiring  that those  registering as  motor vehicle                                                                    
     dealers include  more detailed information  about their                                                                    
     business  in  the  application,  register  a  bond  for                                                                    
     $100,000  instead of  $50,000,  and maintain  liability                                                                    
     insurance  that  covers  collisions  with  dealer-owned                                                                    
4:01:34 PM                                                                                                                    
DAVID  CLARK, Staff,  Representative  Matt  Claman, Alaska  State                                                               
Legislature, on  behalf of Representative Claman,  prime sponsor,                                                               
presented  the sectional  analysis for  HB 146  [included in  the                                                               
committee packet],  which read  as follows  [original punctuation                                                               
     Section 1                                                                                                                
     Amends AS 08.66.030:                                                                                                       
     Adds the following  requirements to dealer registration                                                                    
     ? a valid telephone number for the business;                                                                               
     ? a statement that no  person holding a five percent or                                                                    
     greater interest in the business  has been convicted of                                                                    
     a    felony   involving    fraud,   embezzlement,    or                                                                    
     misappropriation   of   property  within   five   years                                                                    
     preceding the date of application;                                                                                         
     ?  A statement  acknowledging  that  the applicant  has                                                                    
     reviewed  the  requirements for  workers'  compensation                                                                    
     insurance  and  will   maintain  workers'  compensation                                                                    
     insurance under AS 23.30, if applicable; and                                                                               
     ?  a   copy  of  the  liability   insurance  policy  in                                                                    
     compliance with section 3 of this bill.                                                                                    
     Section 2                                                                                                                
     Amends AS 08.66.060(a):                                                                                                    
     Raises  the  amount of  the  bond  required for  dealer                                                                    
     registration applicants from $50,000 to $100,000.                                                                          
     Section 3                                                                                                                
     Adds a new section to AS 08.66:                                                                                            
     Sec.  08.66.085 Insurance  requirements: Requires  that                                                                  
     dealers maintain  public liability and  property damage                                                                    
     insurance  of  not  less   than  $50,000  for  property                                                                    
     damage,  $100,000 for  injury to  a single  person, and                                                                    
     $200,000 for injury, including death,  to more than one                                                                    
4:03:17 PM                                                                                                                    
REPRESENTATIVE  STORY   sought  clarification  on  the   cost  of                                                               
4:04:11 PM                                                                                                                    
STEVE ALWINE, President, Mendenhall  Auto Center, stated that the                                                               
need for  further regulation is  because its  easier to  obtain a                                                               
dealers  license in the state of  Alaska than in any other state.                                                               
He explained  that a  dealer's license  grants access  to  dealer                                                               
only  auctions wherein  inventory swaps occur.   He addressed the                                                               
expense  of a  bond, reporting  that his  bond for  $50,000 costs                                                               
$700 and  renews every two years.   He noted that  the premium is                                                               
linear    if the bond  rises from  $50,000 to $100,000  the price                                                               
increases from $700  to $1500.  He added that  its  not a barrier                                                               
to entry, nor is it supposed  to be - however, he emphasized that                                                               
he expects  those entering the  industry to act in  a responsible                                                               
4:07:28 PM                                                                                                                    
CHAIR SPOHNHOLZ sought  to clarify that the bond  expense is $700                                                               
every two years.                                                                                                                
MR. ALWINE answered yes.                                                                                                        
4:07:42 PM                                                                                                                    
TROY  JARVIS, President,  Alaska Automobile  Dealers Association,                                                               
expressed  his support  for HB  146.   He informed  the committee                                                               
that he has  been in the car  business in Alaska for  the last 40                                                               
years  and recently,  the  amount of  deception  in the  dealers                                                                
industry  has increased.   He  shared an  anecdotal example.   He                                                               
reiterated that as  dealers, they are not trying to  make it more                                                               
difficult  to get  licensed, but  they  do want  to regulate  and                                                               
monitor peoples  actions  to ensure that car dealers  have a good                                                               
reputation in Alaska.  He added  that the leniency of the current                                                               
law allows individuals to obtain a  license at little cost.  Some                                                               
of  those  individuals  then  compound  the  problem  by  selling                                                               
vehicles under  false pretenses.  He  said he wants to  make [the                                                               
industry]  legitimate and  safe  and to  protect  consumers.   To                                                               
conclude, he reiterated his support for the bill.                                                                               
CHAIR SPOHNHOLZ  sought to clarify  the problem  being presented.                                                               
She summarized  that there are  people registered as  dealers who                                                               
are  potentially  buying  defective  cars  through  auctions  and                                                               
selling  them  on  Craigslist  to  people  without  transparently                                                               
revealing  that they  could  be held  responsible  for the  known                                                               
defects.  She asked if that is correct.                                                                                         
MR. JARVIS confirmed that.                                                                                                      
4:11:24 PM                                                                                                                    
MARCUS WAEHLER,  Alaska Automobile Dealers Association,  shared a                                                               
personal  anecdote  to  exemplify  the   problem  at  hand.    He                                                               
expressed his  hope that  HB 146 will  benefit the  consumers, as                                                               
well as the reputation of [car] dealers in Alaska.                                                                              
4:14:38 PM                                                                                                                    
REPRESENTATIVE  HANNAN asked  if the  Division of  Motor Vehicles                                                               
(DMV)  has seen  an increase  in fraudulent  behavior by  dealers                                                               
acting   as  private   parties   to  sell   used  vehicles   with                                                               
reconstructed titles.                                                                                                           
4:15:17 PM                                                                                                                    
JOANNE OLSEN,  Director, Division  of Motor  Vehicles, Department                                                               
of Administration, stated  that she has worked for  over 31 years                                                               
and during  that time has  experienced that behavior.   She noted                                                               
that  another problem  is when  dealers  do not  provide a  valid                                                               
phone number.   She offered  her belief that increasing  the bond                                                               
might help because the cost of vehicles has increased.                                                                          
4:16:11 PM                                                                                                                    
CHAIR  SPOHNHOLZ  asked  if  the requirements  in  HB  146  would                                                               
adequately prevent this problem from continuing to happen.                                                                      
MR. WAEHLER  said hopefully it  would deter some people  and curb                                                               
their  behaviors;  however, it  will  not  eradicate the  problem                                                               
completely.   He offered his  belief that  the bill will  have an                                                               
CHAIR SPOHNHOLZ  asked if there  is a requirement  for registered                                                               
dealers  to post  their information  whenever they  make a  sales                                                               
MR.  WAEHLER   offered  his  understanding  that   disclosure  is                                                               
required but it's not being followed through on or enforced.                                                                    
CHAIR  SPOHNHOLZ asked  if Mr.  Waehler  filed a  report when  he                                                               
witnessed this deceptive behavior.                                                                                              
MR. WAEHLER said,  its  a  little difficult to track down because                                                               
[the  dealers]   title had  already  been  transferred into  [the                                                               
buyers]   name."   He added  that the  buyer didnt   remember the                                                               
dealers  name    only that she  had found the car  on Craigslist.                                                               
He said he connected the dots based on that information.                                                                        
CHAIR SPOHNHOLZ asked if the buyer was acting in good faith.                                                                    
MR. WAEHLER shared his belief that she was.                                                                                     
4:20:24 PM                                                                                                                    
CHAIR SPOHNHOLZ asked  what protections could be put  in place to                                                               
ensure   that   unscrupulous   dealers   arent    misrepresenting                                                               
themselves.   She asked for  additional recommendations  in terms                                                               
of offering  more transparency or  enforcement to help  solve the                                                               
MS. OLSEN stated  that HB 146 should help  deter dishonest people                                                               
from applying  for a  license.  She  said currently,  theres  not                                                               
much the DMV can do to protect the public from these situations.                                                                
CHAIR SPOHNHOLZ asked  what the DMV does when  they identify that                                                               
someone has been a victim of this kind of fraud or deception.                                                                   
MS. OLSEN  said theres  not much  they can do when  the title has                                                               
already been  transferred to [the  buyers]  name.  She  shared an                                                               
anecdotal example.                                                                                                              
4:23:26 PM                                                                                                                    
REPRESENTATIVE CLAMAN  added that in terms  of consumer remedies,                                                               
the  automobile  dealers  are subject  the  Alaska  Unfair  Trade                                                               
Practices  and  Consumer  Protection  Act  [AS  45.50.471].    He                                                               
explained that  if they are found  liable in a civil  claim, they                                                               
are subject  to treble damages.   He noted that a  key feature of                                                               
HB  146  is  adding  required liability  insurance,  which  would                                                               
provide a  source of money  if someone  brings a claim  against a                                                               
dealer.   He  said  the liability  insurance  would also  provide                                                               
coverage  for potential  buyers that  [test] drive  a car  on the                                                               
dealers lot.                                                                                                                    
CHAIR  SPOHNHOLZ  said  that  is  helpful;  however,  it  doesnt                                                                
address the  problem of individuals who  deceptively misrepresent                                                               
themselves.   She  observed that  there  doesnt  appear  to be  a                                                               
meaningful accountability mechanism, which  is problematic from a                                                               
consumer protection standpoint.                                                                                                 
REPRESENTATIVE CLAMAN  agreed.   Nonetheless, he stated  that the                                                               
DMV does  not have  adequate resources  to take  on that  kind of                                                               
investigative capacity given the current budget environment.                                                                    
CHAIR SPOHNHOLZ said  they may not have the  investigators or the                                                               
personnel; however, the  DMV is one of the few  state agencies in                                                               
Alaska that generates a profit.   She suggested equipping the DMV                                                               
with   FTE  [full   time  equivalent]   to  invest   in  consumer                                                               
4:27:30 PM                                                                                                                    
CHAIR SPOHNHOLZ announced HB 146 was held over.                                                                                 

Document Name Date/Time Subjects
HB 146 Sectional Analysis v. S 2.25.2020.pdf HL&C 3/13/2020 3:15:00 PM
HB 146
HB 146 Sponsor Statement v. S 2.25.2020.pdf HL&C 3/13/2020 3:15:00 PM
HB 146
HB 146 Supporting Document - Alaska Automobile Dealers Association Bill Narrative 2.25.2020.pdf HL&C 3/13/2020 3:15:00 PM
HL&C 3/20/2020 3:15:00 PM
HB 146
HB 146 Supporting Document - AS. 45.25.400-45.25.990 Motor Vehicle Dealer Practices 11.25.2019.pdf HL&C 3/13/2020 3:15:00 PM
HB 146
HB 146 Supporting Document - Dealer Licensing Requirements (WA, TX, HI, OR, MT, DE, OH, AK) 2.25.2020.pdf HL&C 3/13/2020 3:15:00 PM
HB 146
HB 146 Supporting Document - Letter received 3.11.2020.pdf HL&C 3/13/2020 3:15:00 PM
HL&C 3/18/2020 3:15:00 PM
HL&C 3/20/2020 3:15:00 PM
HB 146
HB 146 Supporting Document - Letters Received by 3.2.2020.pdf HL&C 3/13/2020 3:15:00 PM
HB 146
HB 146 Supporting Document - Surety Bond Requirements (All 50 states and Washington, D.C.) 2.28.2020.pdf HL&C 3/13/2020 3:15:00 PM
HL&C 3/18/2020 3:15:00 PM
HB 146