02/16/1994 09:16 AM Senate STA

 CHAIRMAN LEMAN brings up the next item on the agenda, SB 227 (MOTOR           
 VEHICLE RENTAL TERMS) and calls the first witness.                            
                                                                               
 Number 435                                                                    
                                                                               
 CAROL CARROL, Aide to Senator Kerttula, says SB 227 will address              
 Terminal Rental Adjustment Clauses (TRAC's) and clarify in statute            
 that just because these clauses are a true lease, does not change             
 the nature of that lease.  This is important for two reasons: one,            
 it will hold down the rental cost to lessees; and two, it will                
 protect the lessor in bankruptcy cases where judges may determine             
 that the lessee had a security interest in the vehicle, and                   
 therefore, hold them up in some manner, wouldn't return them to the           
 lessor, or would use them to satisfy some of the debts of the                 
 lessee.                                                                       
                                                                               
                                                                               
 Number 414                                                                    
                                                                               
 CHAIRMAN LEMAN asks if this provision doesn't appear in the Uniform           
 Commercial Code (UCC).  Ms. Carroll replies it does not.                      
                                                                               
 Number 413                                                                    
                                                                               
 SENATOR TAYLOR says the reason he believes it is not in the UCC is            
 there would be a debate as to whether or not the lessee has                   
 acquired an equity interest within the property.  He asks why the             
 legislature should, as a matter of policy, deny the creditors of              
 the bankrupt the opportunity to go after that asset?                          
                                                                               
 Number 375                                                                    
                                                                               
 MS. CARROLL says SB 227 states that a TRAC, in and of itself, does            
 not change the nature of a lease.  That lease may be a security               
 interest lease, but the bill is only saying, just because this                
 clause is in a lease, does not necessarily mean the lessee has any            
 equity in the property.  Also, TRAC's usually appear in commercial            
 leases; they very rarely are consumer leases.                                 
                                                                               
 Number 360                                                                    
                                                                               
 CHAIRMAN LEMAN asks if anyone has any further comments or questions           
 about SB 227.  Hearing none, he asks what the pleasure of the                 
 committee is.                                                                 
                                                                               
 Number 359                                                                    
                                                                               
 SENATOR TAYLOR makes a motion to move SB 227 from the Senate State            
 Affairs Committee with individual recommendations.                            
                                                                               
 Number 358                                                                    
                                                                               
 SENATOR LEMAN, hearing no objections, releases SB 227 from the                
 committee with individual recommendations.