Legislature(2005 - 2006)CAPITOL 106

03/23/2006 08:00 AM STATE AFFAIRS

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved CSHB 383(STA) Out of Committee
<Bill Hearing Canceled>
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
HB 383-MOTOR VEHICLE TRANSACTIONS                                                                                             
8:15:09 AM                                                                                                                    
CHAIR  SEATON announced  that  the first  order  of business  was                                                               
HOUSE  BILL  NO.  383,  "An Act  limiting  motor  vehicle  dealer                                                               
charges for fees and costs;  relating to the disclosures required                                                               
for certain  motor vehicle transactions; and  requiring consumers                                                               
to be informed of finance charges  paid to a motor vehicle dealer                                                               
by a financing institution on the sale of a used motor vehicle."                                                                
[Before the committee was CSHB 383(TRA).]                                                                                       
The committee took an at-ease from 8:15:49 AM to 8:16:15 AM.                                                                
8:16:28 AM                                                                                                                    
REPRESENTATIVE LES  GARA, Alaska State Legislature,  reviewed the                                                               
committee substitute, CSHB  383(TRA), as sponsor.   He said there                                                               
had been concern raised during  the previous meeting's discussion                                                               
of the CS  [held on 3/7/2006] as to whether  the term "negotiated                                                           
price" needs  to be  better defined.   He  said Mr.  Sniffen, who                                                           
runs the [Commercial/Fair Business] Section  of the Office of the                                                               
Attorney  General has  responded  to that  question  in a  letter                                                               
saying he  does not feel  the phrase needs  further clarification                                                               
or definition.   Another question  was in regard to  the practice                                                               
of some car  dealers to imply to the consumer  that the bank loan                                                               
they offer reflects only the  interest rate the bank is charging,                                                               
when in fact the dealer is  keeping part of the total percentage.                                                               
He said  the dealer  can keep  whatever it  wants; the  bill just                                                               
asks  that  the dealer  informs  the  consumer  that it  will  be                                                               
keeping a portion of it.   He indicated that is more obvious when                                                               
the loan comes from the car  dealer that the markup will be there                                                               
than it is  when the loan comes from a  bank that is unaffiliated                                                               
with the car  dealership.  He said there is  a possible amendment                                                               
that would  say that  the dealer  reserve part  of the  bill will                                                               
only apply when  the offer in the contract is  only coming from a                                                               
bank or credit union.                                                                                                           
8:19:49 AM                                                                                                                    
CLYDE   (ED)   SNIFFEN,    JR.,   Assistant   Attorney   General,                                                               
Commercial/Fair  Business  Section, Civil  Division  (Anchorage),                                                               
Department  of  Law, said  he  spoke  with Representative  Gara's                                                               
office in  regard to  the term, "negotiated  price", and  he said                                                           
all the  attempts at  clarifying the  definition made  the phrase                                                               
more complicated  than it presently is.   He said he  thinks most                                                               
people in the  [car] industry know what that phrase  means and it                                                               
is clear enough for enforcement purposes.                                                                                       
8:21:12 AM                                                                                                                    
MR. SNIFFEN, in  response to a query  from Representative Ramras,                                                               
highlighted what his  thought process had been in  trying to come                                                               
up with a better definition of "negotiated price".                                                                          
8:22:30 AM                                                                                                                    
REPRESENTATIVE  RAMRAS indicated  that Mr.  Sniffen's trouble  in                                                               
[finding  the  right  words]  parallels   the  trouble  that  the                                                               
committee is having.                                                                                                            
8:23:18 AM                                                                                                                    
REPRESENTATIVE  GRUENBERG  said he  is  less  concerned with  the                                                               
language, "in  addition to the  advertised or  negotiated price",                                                           
than with  the words,  "Additional fees and  costs", [on  page 1,                                                           
line 6].   He directed attention  to [page 1, lines  11-13, which                                                               
read as follows]:                                                                                                               
             (b) In this section, "[DEALER] fees or                                                                             
       costs" includes dealer preparation fees, document                                                                        
        preparation fees, surcharges, and other [DEALER-                                                                        
     IMPOSED] fees and costs.                                                                                                   
REPRESENTATIVE  GRUENBERG opined  that  car  dealers are  "sharp,                                                               
both in  the intellectual sense  and the bargaining sense  of the                                                               
connotation of  that word."  He  asked, "How can we  be sure that                                                               
they  won't  impose additional  sums  in  addition to  'fees  and                                                               
8:24:29 AM                                                                                                                    
MR. SNIFFEN replied  that he doesn't know that it  is possible to                                                               
predict what  car dealers  will try  to do  with the  language of                                                               
bill,  but  typically, fees  and  costs  are what  consumers  are                                                               
required to pay  as part of the automobile transaction.   He said                                                               
the bill  "gets us 95 percent  there" and will take  care of "the                                                               
majority of all the transactions."                                                                                              
8:25:38 AM                                                                                                                    
CHAIR SEATON  asked if Mr.  Sniffen is  saying that the  fees and                                                               
costs should include  any additional charges that  would be added                                                               
on  by a  dealer at  the time  [of the  transaction], except  for                                                               
those that are specifically exempted  fees paid to a state agency                                                               
for licensing, registration, and title transfer.                                                                                
8:26:22 AM                                                                                                                    
MR. SNIFFEN answered that's correct.  He said:                                                                                  
     It's our  position that consumers are  best served when                                                                    
     they understand the  price they have to pay  for a car,                                                                    
     absent  those fees  and costs  that  a dealer  actually                                                                    
     pays  to   the  State  of   Alaska  for  a   title  and                                                                    
     registration.   And that's because some  of these other                                                                    
     fees and costs  ... can be confusing  and misleading to                                                                    
     a  consumer as  being  costs actually  paid to  someone                                                                    
     else, when in fact they're  just cost and fees that the                                                                    
     dealers keep.                                                                                                              
8:27:06 AM                                                                                                                    
REPRESENTATIVE GARA said  he doesn't think the  language needs to                                                               
be changed,  but if  the committee wants  a change,  he suggested                                                               
that adding the word "charges" would be all-encompassing.                                                                       
8:27:25 AM                                                                                                                    
REPRESENTATIVE   GRUENBERG   suggested  changing   the   language                                                               
starting  on page  1,  line 13,  to read,  "and  any other  fees,                                                               
costs, and charges of any kind."                                                                                                
8:27:49 AM                                                                                                                    
REPRESENTATIVE GARA recommended the change  should be [on page 1,                                                               
line 12], to add "charges" after "surcharges".                                                                                  
8:27:58 AM                                                                                                                    
MR. SNIFFEN said he thinks any  language that would make it clear                                                               
that fees, costs, and charges  include everything other than fees                                                               
and costs paid to the for title and registration would be good.                                                                 
8:28:26 AM                                                                                                                    
REPRESENTATIVE RAMRAS  said, "Do  you think  we could  insert the                                                               
word[s] 'and  profit' in  there also,  so that  we could  let the                                                               
consumers know that the car dealers  are there to try to generate                                                               
a profit?"                                                                                                                      
CHAIR SEATON asked Representative Ramras  if that is a rhetorical                                                               
REPRESENTATIVE  RAMRAS said  no.   He stated,  "We're going  over                                                               
everything that seems to be involved.   Don't we want to make the                                                               
consumer aware that we're going  to let the dealership generate a                                                               
profit in this transaction?"                                                                                                    
8:29:09 AM                                                                                                                    
MR. SNIFFEN  said he  thinks it is  understood by  most consumers                                                               
that car dealers generate a profit.                                                                                             
REPRESENTATIVE  RAMRAS  said he  disagrees  and  he restated  his                                                               
MR. SNIFFEN said  the intent of the  bill is not to  "let the car                                                               
dealers not make a profit," but  rather to disclose all the types                                                               
of charges  that are added  on to a transaction  that potentially                                                               
could be  misleading.  He said,  "I don't know that  profit falls                                                               
into that category."                                                                                                            
8:30:01 AM                                                                                                                    
CHAIR  SEATON  offered  his understanding  that  "this"  wouldn't                                                               
eliminate  profit; it  would just  mean that  the profit  is also                                                               
included in the negotiated price.                                                                                               
8:30:32 AM                                                                                                                    
MR. SNIFFEN said he believes that is correct.                                                                                   
8:30:42 AM                                                                                                                    
REPRESENTATIVE GRUENBERG asked  if the industry has  come up with                                                               
anything  else  that  it  feels   it  might  want  to  or  should                                                               
legitimately charge that  may still be excluded  by the language.                                                               
He  stated that  he  does  not want  to  be  unreasonable to  the                                                               
industry; he  just wants  to ensure  that the  law is  drafted as                                                               
accurately as possible.                                                                                                         
8:31:40 AM                                                                                                                    
MR. SNIFFEN responded that he is  not aware of anything else that                                                               
needs to be included at this  time.  He talked about the original                                                               
intent of the  bill and said, "I  don't know that we  want to get                                                               
this  portion  of  the  bill  headed in  a  direction  it  wasn't                                                               
intended to head ...."                                                                                                          
8:33:17 AM                                                                                                                    
CHAIR SEATON asked  Mr. Sniffen, "Does this bill  require them to                                                               
line  item  out everything  they're  charging,  or does  it  only                                                               
require them to include in the  price that they negotiate ... all                                                               
the fees that they're going to charge?"                                                                                         
MR.  SNIFFEN answered  it's the  latter.   He indicated  that the                                                               
goal is to  have the amount the dealer wants  to charge - however                                                               
that dealer wants  to line item those charges -  equal the amount                                                               
the consumer agreed to pay.                                                                                                     
8:34:11 AM                                                                                                                    
CHAIR SEATON  said the committee  was talking about  "profit" and                                                               
he  thinks the  word could  be  added possibly  elsewhere in  the                                                               
bill,  but  not  on  [page  1],  line  11,  because  "that's  the                                                               
definition of 'fees' and 'costs'."                                                                                              
8:34:35 AM                                                                                                                    
REPRESENTATIVE RAMRAS  asked Mr.  Sniffen if  he could  provide a                                                               
definition for  the words "advertised"  and "negotiated"  as they                                                               
relate to the bill.                                                                                                             
8:34:53 AM                                                                                                                    
MR. SNIFFEN replied as follows:                                                                                                 
     "Advertised  price" is  in  the  statute currently  and                                                                    
     there is  no definition for  that term in  the statute,                                                                    
     and  "negotiated  price"  does   not  have  a  separate                                                                    
     definition as well.   The way I  understand those terms                                                                    
     to mean:   an  advertised price is  the price  that you                                                                    
     advertise   for  the   vehicle.     That  can   include                                                                    
     advertisement in the newspaper,  on the radio, [and] on                                                                    
     your dealership lot, if it's  a big postcard or placard                                                                    
     in  the window  of the  vehicle.   It's  any price  you                                                                    
     advertise  to the  public in  any  way ....   And  then                                                                    
     negotiated price is the price  that the consumer agrees                                                                    
     with the dealer to purchase a vehicle for.                                                                                 
8:35:38 AM                                                                                                                    
REPRESENTATIVE RAMRAS  asked for Mr. Sniffen's  interpretation of                                                               
the phrase "advertised or negotiated".                                                                                      
8:36:04 AM                                                                                                                    
MR.  SNIFFEN offered  his  interpretation that  if  a car  dealer                                                               
advertises a  vehicle for a  specific price, that price  needs to                                                               
include "all the fees discussed in this bill."  He continued:                                                                   
     If I  go into your  dealership and I  start negotiating                                                                    
     with  you for  the  purchase  of a  vehicle  and we  no                                                                    
     longer  are  looking at  the  advertised  price of  the                                                                    
     sales price,  but another price,  and it's  [the] price                                                                    
     that  I  discussed with  you  as  the dealer  that  I'm                                                                    
     willing  to purchase  the  vehicle for  -  that is  the                                                                    
     negotiated price,  and it is  no longer  the advertised                                                                    
8:36:40 AM                                                                                                                    
REPRESENTATIVE RAMRAS  asked at what point  the transaction takes                                                               
place.  He  reminded the committee that he recently  bought a car                                                               
in Juneau  and paid a $200  doc fee.   He said he knows  what the                                                               
advertised  price  and negotiated  price  were  - and  they  were                                                               
different  prices.   However, he  said  it didn't  seem like  the                                                               
transaction took place until after that.                                                                                        
8:38:07 AM                                                                                                                    
MR.  SNIFFEN responded  that  in that  situation  it sounds  like                                                               
Representative  Ramras negotiated  a price  for the  vehicle and,                                                               
during the negotiation, the dealership  told him that price would                                                               
include a doc  fee.  He said  HB 383 would not  prevent that from                                                               
happening.  He said  if the dealer wants to include  a doc fee in                                                               
the price  of the car, then  he needs to negotiate  that with the                                                               
consumer at the time of negotiation.   He said, "If you see a car                                                               
for $3,000  on the lot, ...  that $3,000 would be  the advertised                                                               
price if it  was advertised on the  car, if it was  in the paper,                                                               
[or]  if  you knew  it  was  $3,000 for  some  reason  - ...  the                                                               
advertised price before you started negotiation."                                                                               
8:39:04 AM                                                                                                                    
CHAIR SEATON  asked, "At that point  in time, that $3,000  has to                                                               
include the documentation fee.  Is that correct?"                                                                               
8:39:25 AM                                                                                                                    
MR. SNIFFEN answered  yes, under current law.   He continued with                                                               
his example:                                                                                                                    
     And then,  when you  start negotiating perhaps  a lower                                                                    
     price,  you  say, "Well,  I'm  not  going to  give  you                                                                    
     $3,000 - I'll  give you $2,500 though,"  and the dealer                                                                    
     says, "Well, I'll take $2,500 but  I have to add a $199                                                                    
     doc fee in  there," and you say, "Okay."   Your consent                                                                    
     to  that charge  is  now part  of  a negotiated  price,                                                                    
     because that  was included in the  negotiations between                                                                    
     you and the dealer.                                                                                                        
     What this bill  would not allow the dealer to  do is to                                                                    
     say,  "Okay,  $2,500, you've  got  a  deal Mr.  Ramras.                                                                    
     Let's go do  up the paperwork."  And then  you sit down                                                                    
     there and  start eating  the free  little mints  on the                                                                    
     table   and  the   dealership  comes   back  with   the                                                                    
     paperwork,  and  as  you   said,  now  you're  confused                                                                    
     because the  paperwork shows a  final price  of $2,700.                                                                    
     And you say,  "Well, what's this $2,700?   I thought we                                                                    
     agreed on $2,500."  And  the dealer says, "Oh, that's a                                                                    
     doc prep  fee.  I'm sorry,  we have to add  that to the                                                                    
     cost of the car."                                                                                                          
     That's the practice that we're  trying to prevent here.                                                                    
     We want the dealers to  tell you everything that you're                                                                    
     going  to  have  to  pay   for  the  car  during  those                                                                    
     negotiations, so when you get  to signing the documents                                                                    
     there aren't these additional fees  that are added that                                                                    
     really are nothing more than just profit.                                                                                  
8:40:56 AM                                                                                                                    
REPRESENTATIVE  RAMRAS said  that  scenario is  what happened  to                                                               
him.  He said he bought a car  for $3,000, he "went in to close,"                                                               
and "there  was the doc  fee."  He said,  "But I thought  we were                                                               
still negotiating;  nobody was holding  a gun  to my head  to buy                                                               
that car."  He  said he had the option to get up  and leave or to                                                               
refuse to pay the doc fee.                                                                                                      
8:41:10 AM                                                                                                                    
CHAIR SEATON  said the point of  the bill is that  many consumers                                                               
are led to  believe that [the doc fee] is  a separate charge that                                                               
is  necessary to  complete the  deal other  than the  negotiation                                                               
with the dealer.   He said nobody is saying the  doc fee can't be                                                               
charged;  the bill  would just  require that  there be  no hidden                                                               
charge  that is  added later  after there  has been  an agreement                                                               
made on the price of the car.                                                                                                   
8:41:55 AM                                                                                                                    
REPRESENTATIVE RAMRAS  responded, "I  think that's  precisely the                                                               
axle that I'm  getting wrapped around, which is:   What does this                                                               
word  'hidden' mean?"   He  said finding  out about  the doc  fee                                                               
happened during  his transaction with  the car dealer  before the                                                               
moment that  he wrote  the check.   He said  until the  moment he                                                               
wrote the check, he had the opportunity to leave the dealership.                                                                
CHAIR SEATON asked Representative Ramras:                                                                                       
     Your feeling is  that the current ... law  that we have                                                                    
     -  that  those   document  fees  have  to   be  in  the                                                                    
     advertised price  - should  not be  there as  well, ...                                                                    
     because  that   forces  us  to  include   that  in  the                                                                    
     advertised price as well.   I mean, is that where we're                                                                    
     really coming through here?                                                                                                
REPRESENTATIVE  RAMRAS   replied,  "I   didn't  follow   you  Mr.                                                               
Chairman, but I think so."                                                                                                      
8:42:57 AM                                                                                                                    
REPRESENTATIVE LYNN said he doesn't  care if [the doc fee] "comes                                                               
before or after," he just wants  it clear to the consumer that it                                                               
is  pure profit.    He stated  that  he is  not  opposed to  pure                                                               
profit;  he just  wants to  see fair  and honest  practices.   He                                                               
concluded,  "I think  many  of  us in  this  room, perhaps,  have                                                               
fallen victim to this  practice.  I know I have  in the past, and                                                               
I don't like it."                                                                                                               
8:43:56 AM                                                                                                                    
REPRESENTATIVE GRUENBERG  mentioned an  amendment to a  past bill                                                               
that required  car repair staff  to post a  sign if they  work on                                                               
commission.   He asked Mr.  Sniffen if that requirement  is being                                                               
8:45:02 AM                                                                                                                    
MR. SNIFFEN  said he  assumes dealers are  complying, but  he has                                                               
not  heard any  complaints and,  thus, has  not investigated  the                                                               
8:45:34 AM                                                                                                                    
MR. SNIFFEN shifted  focus to the issue of  the dealer's reserve,                                                               
and he  said he wanted to  address some comments made  during the                                                               
last  hearing of  HB 383,  relating to  requiring car  dealers to                                                               
disclose when  they mark up  financing, when "in  virtually every                                                               
other  kind of  transaction that  takes place  on the  planet you                                                               
don't have  to do this."   He said he doesn't  want the committee                                                               
to be misled  "by some of that information."   He stated that the                                                               
car buying experience is unique; it's  one of the only times that                                                               
a person can negotiate a price for a product.  He continued:                                                                    
     You've got a  situation where you go  into a dealership                                                                    
     and there are  a bunch of people who sort  of ascend on                                                                    
     you right  away, and  they do this  sort of  dance with                                                                    
     you about  how you  have to go  through these  hoops to                                                                    
     buy a  car.   It's ... a  very unique  transaction that                                                                    
     really  isn't comparable  to a  lot of  other kinds  of                                                                    
     transactions, which  is why I  think the  disclosure of                                                                    
     the marked up  interest rates in the  dealer reserve is                                                                    
     important   for   this   kind   of   transaction   that                                                                    
     distinguishes it from a lot of other transactions.                                                                         
MR.  SNIFFEN,  in  response to  a  question  from  Representative                                                               
Ramras, said he works for the State of Alaska.                                                                                  
8:47:32 AM                                                                                                                    
REPRESENTATIVE RAMRAS  stated that  transactions in a  variety of                                                               
services are  unique.  He  said he thinks Mr.  Sniffen's comments                                                               
show a  pretty clear  bias against the  automobile industry.   He                                                               
stated, "I appreciate the specific  nature of your opinion, but I                                                               
could do without the editorializing of the industry."                                                                           
8:48:41 AM                                                                                                                    
CHAIR  SEATON stated  that  he  understands where  Representative                                                               
Ramras is coming  from "as far as the State  of Alaska," but said                                                               
people can offer their opinions  through testimony.  He initiated                                                               
a question for Mr. Sniffen.                                                                                                     
8:49:21 AM                                                                                                                    
REPRESENTATIVE GRUENBERG  interjected to  call a point  of order.                                                               
He said he  has known Mr. Sniffen professionally for  a long time                                                               
and  he has  the  highest reputation.   He  stated,  "It is  most                                                               
important  that witnesses  before  this committee  be allowed  to                                                               
testify freely.   He is a professional, and he  should be treated                                                               
with the appropriate courtesy by the members of this committee."                                                                
8:49:56 AM                                                                                                                    
REPRESENTATIVE RAMRAS  apologized for possibly stepping  over the                                                               
line.  Nevertheless,  he said he would like people  to be careful                                                               
how  they characterize  industries in  Alaska that  contribute to                                                               
the state's economy.                                                                                                            
8:50:09 AM                                                                                                                    
CHAIR  SEATON  asked  Mr.  Sniffen   if  additional  interest  is                                                               
"allowable for real estate agents or other such sales."                                                                         
8:50:32 AM                                                                                                                    
MR. SNIFFEN  offered his understanding that  it is not.   He said                                                               
real  estate agents,  brokers,  and lenders  are  free to  charge                                                               
whatever interest  rate they choose,  but he said he  thinks that                                                               
when  a  person  consummates  a transaction,  the  interest  rate                                                               
he/she pays is up front.                                                                                                        
MR.  SNIFFEN   expressed  his  appreciation   for  Representative                                                               
Ramras' comments.  He apologized for  seeming to pick on the auto                                                               
industry.  He said he works  closely with that industry and has a                                                               
good relationship  with it  and respect  for it.   He  stated, "I                                                               
just wanted to make sure we  were comparing apples to apples, and                                                               
oranges to oranges, and some of  the comments in the last meeting                                                               
seem to indicate that that wasn't the case."                                                                                    
8:51:35 AM                                                                                                                    
CHAIR SEATON told Mr. Sniffen that  he may add anything else that                                                               
he deems  appropriate, and  he said the  committee is  not taking                                                               
[umbrage] at his testimony.                                                                                                     
8:52:09 AM                                                                                                                    
REPRESENTATIVE  LYNN remarked  that  anyone  who speaks  probably                                                               
expresses his/her bias,  because everyone is unique.   He said he                                                               
is a  licensed real  estate agent.   He said  there are  only two                                                               
things  that   are  really  negotiated  in   the  United  States:                                                               
automobiles and houses.  He asked  if the bill would require that                                                               
the doc fee  be indicated as pure profit whether  it comes before                                                               
or after the negotiated price and, if not, whether it should.                                                                   
8:53:20 AM                                                                                                                    
REPRESENTATIVE GARA  said he doesn't  think that should  be done,                                                               
because  he  doesn't think  it  could  be  done accurately.    He                                                               
offered further  details.  He said  he runs a restaurant,  and if                                                               
the price of a burger is  $3.99, that isn't $3.99 plus a document                                                               
fee.  He said, "We don't charge  a buck for the credit card slip,                                                               
even though that only costs us 10 cents."  He continued:                                                                        
     You  don't want  to do  some sort  of accounting  thing                                                                    
     where you're  trying to determine  how much of  the doc                                                                    
     fee  is profit  and how  much of  it is  out of  pocket                                                                    
     cost.   I  suspect  almost  all of  it  is profit,  and                                                                    
     that's, truthfully,  what the  car dealer said,  but we                                                                    
     don't know  if it's 100  percent, or 99 percent,  or 97                                                                    
8:54:36 AM                                                                                                                    
CHAIR  SEATON said  if that  was included  in the  bill he  would                                                               
probably vote against  it, because it is not  appropriate to make                                                               
a business say what is profit and what is not.                                                                                  
8:55:38 AM                                                                                                                    
REPRESENTATIVE  LYNN  reiterated that  he  believes  in full  and                                                               
honest disclosure.                                                                                                              
8:56:14 AM                                                                                                                    
REPRESENTATIVE GRUENBERG directed attention  to an amendment that                                                               
had not  been offered but  was in the committee  packet, [labeled                                                               
24-LS1287\X.1, Bannister,  3/15/06.]  He  noted that line  15 [as                                                               
numbered on Amendment  X.1], read "from a bank  or credit union".                                                               
He said that  excludes other types of financing,  such as through                                                               
[General Motors  Acceptance Corporation  (GMAC)], and he  said he                                                               
is not sure why.                                                                                                                
8:57:48 AM                                                                                                                    
REPRESENTATIVE GARA  explained that  when a  loan is  coming from                                                               
the  car company,  the argument  can  be made  that the  consumer                                                               
expects that somebody is making  some money and there is probably                                                               
some relationship between the car dealer and the loan company.                                                                  
9:00:17 AM                                                                                                                    
REPRESENTATIVE GRUENBERG  said he  doesn't think  that he  or his                                                               
constituents would know that.                                                                                                   
REPRESENTATIVE LYNN concurred.                                                                                                  
REPRESENTATIVE  GRUENBERG said  he would  like to  get away  from                                                               
saying who the  lending institution is, but  having the amendment                                                               
apply to any lender.  He  asked Representative Gara if he has any                                                               
objection to that.                                                                                                              
9:01:40 AM                                                                                                                    
REPRESENTATIVE  GARA  responded that  Representative  Gruenberg's                                                               
proposal is exactly what  the bill does now.  He  said he sees no                                                               
problem in  giving consumers information,  which is all  the bill                                                               
proposes.    In  response  to   a  question  from  Representative                                                               
Gruenberg, he  said he  doesn't have strong  feelings one  way or                                                               
the other  regarding whether the aforementioned  amendment should                                                               
be  offered.     He  added   that  he  thinks  Mr.   Sniffen  has                                                               
communicated that it is not necessary.                                                                                          
9:03:21 AM                                                                                                                    
JOHN COOK,  Legislative Director, Alaska  Automobile Association,                                                               
testified on behalf  of the association in opposition  to HB 383.                                                               
He stated  that there is no  difference between GMAC and  a bank.                                                               
He revealed  that the Alaska Automobile  Association is comprised                                                               
of 70  new and used car  dealerships, 2,400 employees in  the new                                                               
car dealerships  alone, and an  annual payroll in excess  of $120                                                               
million, plus benefits.  He noted  that much of the testimony has                                                               
been centered on  unfair practices.  He said, "I  can tell you we                                                               
wouldn't  be in  business for  60 years  if we  operated in  that                                                               
manner, nor if  any of our members consistently  operated in that                                                               
manner.  The legal community would have us out of business ...."                                                                
MR. COOK  stated that  the association has  a close  and positive                                                               
working  relationship  with  Mr.  Sniffen; however,  he  said  he                                                               
respectfully disagrees with  Mr. Sniffen on a couple  points.  He                                                               
said  he does  not  agree  that the  term  "negotiated price"  is                                                           
clear.  He said if statute  is passed without a clear definition,                                                               
the car dealer's will have to  live with the consequences and the                                                               
legal  community  will have  to  hash  it  out.   Mr.  Cook  said                                                               
deceptive  practices are  currently prohibited  in statute  under                                                               
the Unfair  Trade Practices  Act.  The  Act carries  severe fines                                                               
and  penalties,  including  possible  civil  penalties  from  the                                                               
state.   Regarding doc fees,  he stated that not  all dealerships                                                               
charge them.  He said in  his dealership the doc fee is disclosed                                                               
and  delineated  separately.    He  said  that  is  the  standard                                                               
practice  of  all   the  major  dealerships.     He  stated  that                                                               
everything  in regard  to a  vehicle transaction  other than  the                                                               
Division of  Motor Vehicle (DMV)  fees is negotiable and  "we can                                                               
do  away with  all this  language."   However, he  stated, "If  a                                                               
consumer comes  to us  and has  an objection with  a doc  fee, we                                                               
will reduce the ... selling price  of the vehicles before we will                                                               
reduce a  doc fee."   He explained the  reason for doing  that is                                                               
that charging a different doc fee  from person to person could be                                                               
considered   a   discriminatory   lending  practice,   which   is                                                               
prohibited under a federal regulation:  Regulation Z.                                                                           
9:08:52 AM                                                                                                                    
CHAIR SEATON  said the committee  had heard testimony  from other                                                               
car dealers  [at the last hearing]  stating that the doc  fee was                                                               
really just  profit, and  he offered  his understanding  that Mr.                                                               
Cook  is indicating  that  the doc  fee  is a  flat  fee that  is                                                               
something other than just another portion of profit.                                                                            
9:09:16 AM                                                                                                                    
MR. COOK prefaced his clarification  by revealing that he is also                                                               
a certified public accountant (CPA).   He said the doc fee is not                                                               
pure profit; it is revenue.  He continued:                                                                                      
     Our practice and most dealers'  practice is to charge a                                                                    
     consistent  doc  fee.    ...  All  dealerships  charge,                                                                    
     generally,   the  same   fee  to   everyone.     It  is                                                                    
     delineated.  It is revenue.                                                                                                
9:09:59 AM                                                                                                                    
CHAIR SEATON said  some dealers have told the  committee that the                                                               
doc  fee is  negotiable and  that seems  different from  what Mr.                                                               
Cook is saying.                                                                                                                 
9:10:24 AM                                                                                                                    
MR. COOK  explained that it  is not different, because  where the                                                               
negotiation would take  place would be within  the vehicle price.                                                               
In other words,  if the customer says he/she refuses  to pay, for                                                               
example, a  $189 doc fee, the  dealer would most likely  keep the                                                               
doc fee the same, but reduce  the selling price of the vehicle by                                                               
$189.   He  said  the majority  of  the association's  membership                                                               
treats the situation exactly the way that he just described.                                                                    
9:11:39 AM                                                                                                                    
MR. COOK,  regarding the dealer  reserve, said although  he would                                                               
term himself  a sophisticated borrower,  he has never  had anyone                                                               
disclose  to  him that  he  may  be able  to  get  a better  rate                                                               
somewhere  else.   Furthermore, he  said  he has  never seen  any                                                               
industry be required to tell a  person that he/she may be able to                                                               
get  a  better  rate  somewhere else;  therefore,  that  proposed                                                               
provision in  the bill  seems to be  specifically looking  at the                                                               
car industry.  He continued:                                                                                                    
     I  can  tell you  that  mortgage  brokers ...  are  not                                                                    
     originators  of paper;  they receive  fees for  selling                                                                    
     mortgages.    Of  course,  ...  that  industry  is  not                                                                    
     regulated by the  State of Alaska -  federal lending is                                                                    
     not.   So,  Mr. Sniffen  is  correct in  that in  House                                                                    
     transactions  you  have  the right  of  rescission  and                                                                    
     other   things,  but   federal  law   supersedes  state                                                                    
     statute.  That  doesn't make it right, but  that is the                                                                    
     reason that that's different.                                                                                              
MR.  COOK  pointed  out that  dealers  of  recreational  vehicles                                                               
(RVs),  boats, and  snowmobiles have  the same  dealer agreements                                                               
with banks  that car dealers  do.   He added, "But  we're sitting                                                               
here as  the only  people that  are being  discussed ...  in this                                                               
bill."  He  said the car dealers in Alaska  are competing against                                                               
dealerships all  across the country  and are  held to one  of the                                                               
highest standards of any industry in the country.                                                                               
9:14:48 AM                                                                                                                    
MR. COOK  said this bill  hearing makes  it sound like  foul play                                                               
related to doc  fees and dealer reserves is  common practice, but                                                               
he  has never  received  a complaint  from  a consumer  regarding                                                               
either  of those  issues, nor  has  he ever  received a  consumer                                                               
complaint  through  Mr.  Sniffen's  office  regarding  these  two                                                               
issues.   He noted that  there are  seven dealers in  Juneau with                                                               
him today,  and none of them  have received such complaints.   He                                                               
said  at the  last hearing  [Representative Lynn]  had asked  why                                                               
it's necessary to fix all  industries before the car industry can                                                               
be fixed.   Mr. Cook  said he is trying  to figure out  where the                                                               
problem is.   He said there is  one case of a dealer  who was new                                                               
to the  market from out of  state, and that story  was publicized                                                               
in the Anchorage Daily News.   He asked why the legislature feels                                                             
the need to fix what isn't broken.                                                                                              
9:16:28 AM                                                                                                                    
REPRESENTATIVE  GRUENBERG   suggested  that  since   all  parties                                                               
interested  in the  bill  are present,  perhaps  a definition  of                                                               
"negotiated price" could be formulated.                                                                                     
9:17:38 AM                                                                                                                    
MR.  COOK said  he  is not  an  attorney and  does  not have  the                                                               
ability  to come  up with  a legal  definition of  the term.   He                                                               
reported that his  legal council has told him that  he thinks the                                                               
term is too  vague.  He said he would  rather something come from                                                               
the other  parties and then  the he would  be willing to  look at                                                               
9:18:35 AM                                                                                                                    
REPRESENTATIVE GRUENBERG suggested that  if Mr. Cook thinks there                                                               
should be a  definition, he should take the issue  up in the next                                                               
committee of  referral, because the House  State Affairs Standing                                                               
Committee can't [address the issue] "on the fly."                                                                               
REPRESENTATIVE  GRUENBERG  said  he  would  like  to  know  if  a                                                               
violation of  the bill would be  a violation of the  Unfair Trade                                                               
Practices Act.                                                                                                                  
9:20:21 AM                                                                                                                    
MR. SNIFFEN  answered yes.   He said  AS 45.25.400  addresses the                                                               
regulation of  dealer practices.   He  stated, "Any  violation of                                                               
that 400  section of this  statute is also a  consumer protection                                                               
9:20:41 AM                                                                                                                    
REPRESENTATIVE  GRUENBERG said  his constituents  may not  be the                                                               
most sophisticated, and  he noted that many of them  are not high                                                               
wage  earners and  English is  their second  language.   He said,                                                               
"Maybe they do need  to be told up front that  the deal really is                                                               
negotiable."   He asked  Mr. Cook,  "Would your  industry support                                                               
such a disclosure?"                                                                                                             
9:21:57 AM                                                                                                                    
MR. COOK  said he thinks  "it's something that's  already there."                                                               
He said that  he would have no problem putting  up a sign telling                                                               
customers that  they can  negotiate, but said  he thinks  they do                                                               
that already.                                                                                                                   
9:22:47 AM                                                                                                                    
REPRESENTATIVE   GRUENBERG   said   he    would   like   to   ask                                                               
Representative Gara the same question.                                                                                          
9:23:11 AM                                                                                                                    
REPRESENTATIVE LYNN,  in response to a  statement previously made                                                               
by  Mr.  Cook,  said  the  legislature  is  not  picking  on  one                                                               
industry; it is simply focusing on one  issue at a time.  He said                                                               
he  understands   that  negotiating  is  done   when  people  buy                                                               
vehicles, but  he wants to know  "what is truly negotiable."   He                                                               
said he  didn't previously  know that a  doc fee  was negotiable,                                                               
whether  by  being  lowered,  or buy  having  the  vehicle  price                                                               
lowered instead.   He asked, "What  is the problem with  full and                                                               
public disclosure  on what is and  is not the actual  thing we're                                                               
trying to buy, which in your case is an automobile?"                                                                            
9:24:57 AM                                                                                                                    
MR.  COOK reiterated  that  he believes  in  full disclosure  and                                                               
provides it.   He reemphasized the lack of problems  that the car                                                               
dealerships have experienced in this  regard, which is the reason                                                               
that the association does not support the bill.                                                                                 
9:25:58 AM                                                                                                                    
CHAIR SEATON  asked Mr. Sniffen  how often he gets  complaints on                                                               
the issues raised in the bill.                                                                                                  
9:26:21 AM                                                                                                                    
MR.  SNIFFEN  responded  that  although  he  cannot  discuss  the                                                               
complaints in any detail because  of confidentiality statutes, in                                                               
a broad  sense, Mr.  Cook is right  that there are  not a  lot of                                                               
written  complaints about  the  doc  fee issue.    He stated  his                                                               
belief  that the  reason there  are not  a lot  of complaints  is                                                               
specifically  because   consumers  don't  understand   that  it's                                                               
something  that  they  could  complain  about.   He  said  he  is                                                               
currently involved  in a  case where  the department  has audited                                                               
some  files  of  dealerships  and, in  nearly  every  transaction                                                               
looked  at  so  far,  has  found  a  doc  fee  that  was  charged                                                               
inappropriately.   He added,  "We had  no complaints  about those                                                               
transactions  either."   In  response to  a  question from  Chair                                                               
Seaton, he confirmed  that [regarding these cases],  the doc fees                                                               
charged were added on above the advertised price.                                                                               
9:27:45 AM                                                                                                                    
REPRESENTATIVE GARDNER  seconded Mr.  Sniffen's comment  that the                                                               
reason  people  don't  make  the  complaints  is  that  they  are                                                               
9:28:33 AM                                                                                                                    
MR.  COOK noted  that  the  case to  which  Mr. Sniffen  referred                                                               
relates  to advertised  price.   He reminded  the committee  that                                                               
advertised   prices  are   policed   by   Mr.  Sniffen's   office                                                               
vigorously.   He  reiterated that  the  definition of  negotiated                                                               
price is  unknown.  He asked,  "If you do  not have a doc  fee in                                                               
one place  and you  try to put  it in another  or disclose  it as                                                               
being a mandatory fee, ...  wouldn't that already be considered a                                                               
deceptive  practice,  and  isn't   that  covered  under  statutes                                                               
currently on the books?"                                                                                                        
9:29:39 AM                                                                                                                    
CHAIR SEATON stated:                                                                                                            
     I  want to  make sure  we  don't get  anybody into  hot                                                                    
     water  anywhere   here;  ...  everybody   realize  what                                                                    
     they're putting on  the record.  I mean,  if we're into                                                                    
     a situation where  we're saying that we're  going to be                                                                    
     putting  these uniformly  across  all  cars because  we                                                                    
     might run  into federal  law prohibitions,  it's almost                                                                    
     as if we're saying those  charges are a separate charge                                                                    
     that  must be  maintained.   And if  what we're  saying                                                                    
     under state law - ...  there is no true separate charge                                                                    
     - we want to  make sure we don't get --  I just want to                                                                    
     put  everybody under  awareness that  we don't  want to                                                                    
     have people  commit themselves to statements  that they                                                                    
     don't want in the future.                                                                                                  
9:30:26 AM                                                                                                                    
MR.  SNIFFEN  said  Mr.  Cook  raises a  good  point;  a  lot  of                                                               
practices that are  being discussed in the bill  could already be                                                               
illegal under  Alaska's Consumer Protection  Act.  He said  it is                                                               
not illegal for  car dealers to have a "holdback";  it is illegal                                                               
for  them to  engage in  any kind  of deception  that would  have                                                               
mislead the consumer into believing  he/she was getting financing                                                               
from the bank,  when in fact that wasn't the  true financing from                                                               
the bank.  He illustrated that point as follows:                                                                                
     Let's say  you go to  a dealer  and you say,  "What can                                                                    
     you  do for  me on  this car?"   And  the dealer  says,                                                                    
     "Well, the  best I can do  for you is 5  percent."  The                                                                    
     dealer doesn't say, "The best  the bank can give you is                                                                    
     5 percent"; the  dealer says, "The best I  can give you                                                                    
     is 5 percent."   [It's a ] very  subtle difference, but                                                                    
     very important.   If  the dealer  said, "Well  the best                                                                    
     the bank  will do for  us is  5 percent," when  in fact                                                                    
     the  bank is  giving the  dealer a  4 percent  rate and                                                                    
     [the  dealer  is] holding  back  that  1 percent,  well                                                                    
     that's  just fraud  - that  is  deception -  and it  is                                                                    
     illegal under our Consumer Protection Act.                                                                                 
MR.  SNIFFEN said  a lot  of  consumers may  not understand  that                                                               
distinction when they  are negotiating for the purchase  of a new                                                               
vehicle, which Mr.  Sniffen said is a significant  event for most                                                               
people.  He said,  "So, it really is a matter  of trying to prove                                                               
what the dealer  said, what the consumer thought, and  you get in                                                               
front of  a court  and it's  a he said/she  said kind  of thing."                                                               
Mr. Sniffen expressed  his wish that all dealers  were as upfront                                                               
and honest as Mr. Cook so  that these problems would not exist at                                                               
all, but he said that is not the case.  He concluded:                                                                           
     So, yes  they could  be unlawful under  our Act.   It's                                                                    
     difficult to prove that they  are.  And it would remove                                                                    
     that uncertainty  if we had  our statute that  said ...                                                                    
     you can  do it, but if  you do it you  have to disclose                                                                    
     it ... clearly.                                                                                                            
9:33:45 AM                                                                                                                    
REPRESENTATIVE GRUENBERG  referred to a handwritten  amendment in                                                               
the committee packet, which would change the bill as follows:                                                                   
     On page 1, line 8:                                                                                                         
     Between "price" and ","                                                                                                
     Insert  ",  including the  price  stated  at any  point                                                                
     during the negotiation or transaction"                                                                                 
REPRESENTATIVE GRUENBERG asked Mr. Cook  and Mr. Sniffen if "that                                                               
would at least put some kind of a definition on the record."                                                                    
9:35:05 AM                                                                                                                    
MR. COOK  said he cannot  speak on  behalf of the  association on                                                               
this  matter, but  he personally  does not  like the  wording and                                                               
would still be opposed to the bill.                                                                                             
9:35:41 AM                                                                                                                    
CHAIR SEATON closed public testimony.                                                                                           
9:36:06 AM                                                                                                                    
REPRESENTATIVE GARDNER suggested  the previously stated amendment                                                               
should say, "including  the price stated at any  point and agreed                                                               
or accepted", because  she indicated that the  transaction is not                                                               
complete  until the  dealer  accepts the  amount  offered by  the                                                               
9:36:15 AM                                                                                                                    
REPRESENTATIVE GRUENBERG said he shares that concern.                                                                           
9:36:24 AM                                                                                                                    
REPRESENTATIVE GARA  stated that "negotiated price"  never became                                                               
an issue until the legislature passed  a bill in 2002 banning doc                                                               
fees. He said as a response  to that bill, the car industry said,                                                               
"Oh, you used the advertised price,  so we're going to charge the                                                               
doc fee  in the  negotiated price."   He  said the  industry well                                                               
knew  what the  negotiated price  was; "they  were the  ones that                                                               
created the issue."   He stated, "What we're trying  to do is say                                                               
at no  point during  the process may  you insert a  doc fee  - in                                                               
your  advertisement,  when  you  negotiate with  the  consumer  -                                                               
never."   Representative Gara  said there are  only two  kinds of                                                               
prices:  the advertised price and the negotiated price.                                                                         
9:37:56 AM                                                                                                                    
CHAIR SEATON agreed  that the wording in the  bill is sufficient.                                                               
He said:                                                                                                                        
     The only question  is, "Can you add in  additional fees that                                                               
     aren't   in   the  advertised   price   after   you  go   to                                                               
     negotiations?"  And  that's what this bill says  is that you                                                               
     are working from an advertised price, and anything that's                                                                  
     included in the advertised price is included in                                                                            
9:38:59 AM                                                                                                                    
REPRESENTATIVE GRUENBERG  said he would not  offer the amendment.                                                               
Regarding additional charges, he  asked Representative Gara where                                                               
language addressing them would go in the bill.                                                                                  
9:39:27 AM                                                                                                                    
REPRESENTATIVE  GARA   suggested  inserting   "charges,"  between                                                               
"surcharges," and  "and other" on page  1, line 12.   In response                                                               
to a  follow-up question from  Representative Gruenberg,  he said                                                               
he would support such an amendment.                                                                                             
9:39:51 AM                                                                                                                    
REPRESENTATIVE  GRUENBERG   moved  Conceptual  Amendment   1,  as                                                               
     On page 1, line 8:                                                                                                         
     Between "surcharges," and "and other"                                                                                      
     Insert "charges,"                                                                                                          
CHAIR  SEATON asked  if  there was  any  objection to  Conceptual                                                               
Amendment 1.  There being none, it was so ordered.                                                                              
9:40:49 AM                                                                                                                    
REPRESENTATIVE GRUENBERG explained that he  is trying to cut down                                                               
on "wiggle room"  in the bill.  He directed  attention to page 2,                                                               
line 24, and expressed concern  about the word "arranges".  [Page                                                               
2, lines 23-25 read as follows:                                                                                                 
               (f) In addition to the other requirements of                                                                     
     this  section,  if  a  motor  vehicle  dealer  arranges                                                                    
     financing  for  a  proposed  buyer,  the  dealer  shall                                                                    
     disclose in writing and before the sale is finalized                                                                       
9:41:50 AM                                                                                                                    
REPRESENTATIVE  GARA, in  response  to Representative  Gruenberg,                                                               
suggested inserting "or offers financing  to a proposed buyer" in                                                               
that language.   In response to a follow-up question,  he said he                                                               
would support such  an amendment and would run it  by Mr. Sniffen                                                               
before the bill reaches the House floor.                                                                                        
9:43:06 AM                                                                                                                    
REPRESENTATIVE  GRUENBERG   moved  Conceptual  Amendment   2,  as                                                               
     On page 2, line 24:                                                                                                        
     Following "proposed buyer,"                                                                                                
     Insert "or offers financing to a proposed buyer,"                                                                          
CHAIR  SEATON asked  if  there was  any  objection to  Conceptual                                                               
Amendment 2.  There being none, it was so ordered.                                                                              
9:44:08 AM                                                                                                                    
REPRESENTATIVE LYNN  said he  thinks the fact  that the  bill has                                                               
been heard in two lengthy meetings  by the committee and is still                                                               
unclear shows that the plight of  the new car buyer is remarkable                                                               
and speaks to the necessity of the bill.                                                                                        
9:46:14 AM                                                                                                                    
MR. SNIFFEN,  in response to  a question from Chair  Seaton, said                                                               
he has no objection to the adopted Conceptual Amendment 2.                                                                      
9:46:24 AM                                                                                                                    
REPRESENTATIVE  GARDNER   opined  that  although  there   may  be                                                               
elements that  can be improved  upon, the committee has  done its                                                               
best on  what is a  good bill.   She said  she views the  bill as                                                               
addressing  consumer protection  and  in no  way would  interfere                                                               
with a dealer's right to be in  business and earn a profit; it is                                                               
about obligations  for disclosure  that would allow  consumers to                                                               
make informed decisions.                                                                                                        
9:46:54 AM                                                                                                                    
REPRESENTATIVE  GARDNER   moved  to  report  CSHB   383(TRA),  as                                                               
amended, out of committee with individual recommendations.                                                                      
9:47:22 AM                                                                                                                    
REPRESENTATIVE RAMRAS objected.   He opined that HB 383  is a bad                                                               
bill that hampers commerce.                                                                                                     
9:47:45 AM                                                                                                                    
A roll call vote was  taken.  Representatives Gardner, Gruenberg,                                                               
Lynn,  and Seaton  voted in  favor  of moving  CSHB 383(TRA),  as                                                               
amended,  out  of   committee  with  individual  recommendations.                                                               
Representative  Ramras   voted  against  it.     Therefore,  CSHB
383(STA) was  reported out  of the  House State  Affairs Standing                                                               
Committee by a vote of 4-1.                                                                                                     

Document Name Date/Time Subjects