Legislature(2003 - 2004)

04/21/2004 08:43 AM House FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                  HOUSE FINANCE COMMITTEE                                                                                       
                       April 21, 2004                                                                                           
                         8:43 A.M.                                                                                              
TAPE HFC 04 - 91, Side A                                                                                                        
TAPE HFC 04 - 91, Side B                                                                                                        
CALL TO ORDER                                                                                                                 
Co-Chair Williams called the House  Finance Committee meeting                                                                   
to order at 8:43 A.M.                                                                                                           
MEMBERS PRESENT                                                                                                               
Representative John Harris, Co-Chair                                                                                            
Representative Bill Williams, Co-Chair                                                                                          
Representative Kevin Meyer, Vice-Chair                                                                                          
Representative Mike Chenault                                                                                                    
Representative Eric Croft                                                                                                       
Representative Hugh Fate                                                                                                        
Representative Richard Foster                                                                                                   
Representative Mike Hawker                                                                                                      
Representative Reggie Joule                                                                                                     
Representative Carl Moses                                                                                                       
Representative Bill Stoltze                                                                                                     
MEMBERS ABSENT                                                                                                                
ALSO PRESENT                                                                                                                  
Representative Bruce Weyhrauch;  Representative Tom Anderson;                                                                   
Greg O'Claray, Commissioner, Department  of Labor & Workforce                                                                   
Development;  Patrick  Luby,   Legislative  Director,  Alaska                                                                   
Association   of  Retired   Persons   (AARP),  Juneau;   Josh                                                                   
Applebee,  Staff,  Representative  Tom Anderson;  Mario  Lim,                                                                   
Juneau;  Sal  Lumba,  Immigration Group,  Juneau;  Guy  Bell,                                                                   
Director, Division of Administrative  Services, Department of                                                                   
Labor  & Workforce  Development; Deborah  Fink, Cash  Alaska,                                                                   
PRESENT VIA TELECONFERENCE                                                                                                    
Ed Sniffen,  Assistant Attorney  General, Department  of Law,                                                                   
Anchorage;  Mark   Davis,  Director,  Division   of  Banking,                                                                   
Securities  and  Corporations,   Department  of  Community  &                                                                   
Economic  Development,   Anchorage;  Angela   Liston,  Alaska                                                                   
Catholic  Conference,  Eagle River;  Steve  Clary,  Executive                                                                   
Director,  Alaska Public  Interest  Research Group  (AkPIRG),                                                                   
Anchorage;  Jim  Davis,  Alaska   Legal  Services,  Attorney,                                                                   
Anchorage; Bud Wilson, Cash Alaska, Anchorage                                                                                   
HB 379    An  Act  establishing   an  office  of  citizenship                                                                   
          assistance in the Department of Labor and                                                                             
          Workforce Development.                                                                                                
          HB 379 was reported out of Committee with a "do                                                                       
          pass" recommendation and with a new fiscal note by                                                                    
          the Department of Labor & Workforce Development.                                                                      
HB 389    An  Act relating  to certain  monetary advances  in                                                                   
          which the deposit or other negotiation of certain                                                                     
          instruments to pay the advances is delayed until a                                                                    
          later date; and providing for an effective date.                                                                      
          HB 389 was HEARD and HELD in Committee for further                                                                    
HCR 28    Relating  to the  socioeconomic  impacts of  salmon                                                                   
          harvesting cooperatives.                                                                                              
          HCR 28 was SCHEDULED but not heard.                                                                                   
HOUSE BILL NO. 379                                                                                                            
     An Act establishing an office of citizenship assistance                                                                    
     in the Department of Labor and Workforce Development.                                                                      
REPRESENTATIVE BRUCE  WEYHRAUCH, SPONSOR, stated  that HB 379                                                                   
would create  an office  to assist  naturalized citizens  and                                                                   
citizen candidates  in Alaska.   HB  379 would establish  the                                                                   
Office of Citizenship  Assistance in the Department  of Labor                                                                   
and Workforce  Development.  Naturalized citizens  and people                                                                   
who  are actively  pursuing United  States citizenship  could                                                                   
receive help navigating through  State employment and federal                                                                   
immigration agencies.                                                                                                           
The  Office of  Citizenship Assistance  would also  act as  a                                                                   
liaison between  individuals, the Office of  the Commissioner                                                                   
and  State  and  federal  agencies as  well  as  the  private                                                                   
sector.   Under the legislation,  the Office would  assist in                                                                   
immigration services,  employment services,  affordable legal                                                                   
service,  medical  services, and  educational  opportunities.                                                                   
Information would be available  regarding job discrimination,                                                                   
sexual harassment and unsafe working conditions.                                                                                
Representative  Weyhrauch  noted   that  Alaska  has  a  rich                                                                   
history of immigration.  Through  the legislation, the Office                                                                   
would be  sensitive to  the diverse  cultural backgrounds  of                                                                   
those  it  would  serve  and  the  Office  would  bridge  the                                                                   
transition  of  adjustment  for   incoming  new  citizens  to                                                                   
Representative  Fate asked  at  this time  how many  citizens                                                                   
could use  the service.  He  noted the fiscal impact  and was                                                                   
concerned that the  State would be assuming the  "job" of the                                                                   
federal government.  Representative  Weyhrauch responded that                                                                   
the work  of the bill  would not be in  doing the job  of the                                                                   
U.S. government.   He emphasized that the  federal government                                                                   
has  not  been helpful  with  these  types  of issues.    The                                                                   
federal  government is  the  problem by  continually  placing                                                                   
impediments  before these  people who  are attempting  to get                                                                   
immigration  status.   He  pointed  out  that they  are  very                                                                   
unresponsive,   mentioning  that   his  office  has   written                                                                   
numerous  letters  for  six-month  periods  and  received  no                                                                   
response.  They do not address the work in a timely manner.                                                                     
The proposed State  agency would not be providing  free legal                                                                   
services,  immigration or  naturalization.   The  legislation                                                                   
proposes   an    Office   to   facilitate    discussion   and                                                                   
communications  between individuals  who  want to  work in  a                                                                   
free  society  and  the  situations that  impede  them.    He                                                                   
stressed  that   the  Office   is  intended  to   assist  and                                                                   
facilitate communication  in employment opportunities.   That                                                                   
is not the work of the federal government.                                                                                      
Representative Fate  inquired if the intent  was primarily to                                                                   
help with citizenship and/or jobs.   He was concerned that it                                                                   
might create  competition for  local residents attempting  to                                                                   
get jobs.   Representative Weyhrauch acknowledged  that was a                                                                   
possibility, however,  the intent is citizenship  assistance.                                                                   
A State  employee would not  be allowed to discriminate  over                                                                   
race  or  color,  noting  that  some  of  these  people  have                                                                   
difficulty even speaking English.                                                                                               
Vice  Chair  Meyer  inquired  if  such  an  office  has  ever                                                                   
existed.   Representative  Weyhrauch  explained that  Senator                                                                   
Kelly  from Fairbanks  previously  introduced  a bill,  which                                                                   
went nowhere.   Vice  Chair Meyer  understood that  there had                                                                   
been   a  similar   position   within  Legislative   Affairs.                                                                   
Representative  Weyhrauch  clarified  that in  2000,  Senator                                                                   
Halford,  then the Senate  President,  created a job  service                                                                   
through  legislative  funding  to  help  with  that  type  of                                                                   
concern  and  at  that  time,   the  Legislature  saw  it  as                                                                   
Vice  Chair  Meyer  asked  if   it  should  be  relocated  in                                                                   
Legislative  Affairs  Agency  and  then it  could  be  helped                                                                   
through  Legislative  influence.    Representative  Weyhrauch                                                                   
commented that placing it there  would not necessarily remove                                                                   
the struggles of  bureaucracy.  The intent of the  bill is to                                                                   
guarantee that the position is created.                                                                                         
In  response  to Vice  Chair  Meyer's  query,  Representative                                                                   
Weyhrauch commented  that it is important to  have the Office                                                                   
as a matter of  policy within State government.   There is an                                                                   
understanding in  the Executive  Branch that it  is important                                                                   
for  such an  agency to  act in  a  cohesive, consistent  and                                                                   
ongoing manner.   Vice Chair  Meyer agreed that  the position                                                                   
should exist,  however, thought  that it should  remain under                                                                   
legislative jurisdiction.                                                                                                       
Representative  Hawker pointed out  that presently,  there is                                                                   
the State  Ombudsmen's Office.   He thought that  the service                                                                   
proposed  in HB  379 could  be performed  within that  Office                                                                   
with   the  existing   budget.     Representative   Weyhrauch                                                                   
responded that  was possible,  however, that Office  does not                                                                   
approach the same  issues addressed by the legislation.   The                                                                   
State Ombudsmen's Office is generally  staffed by an American                                                                   
U.S.  citizen  and  most  often  deals  with  issues  of  the                                                                   
Executive Branch.  The proposed  Office would help those that                                                                   
need  assistance  with  either   employment  or  interpretive                                                                   
services to assist  in dealing with employment  problems.  He                                                                   
acknowledged that  it does have  an "ombudsmen's  flavor" and                                                                   
noted that had  been considered as a potential  option but it                                                                   
became  obvious that  it was different  and  did not fit  for                                                                   
those specific specialized services.                                                                                            
Representative  Hawker  referenced  the  fiscal  note,  which                                                                   
would fund  one range 17 employee  and office supplies.   The                                                                   
largest  line  item  is  interpreter   fees.    He  asked  if                                                                   
directing the  Ombudsmen's Office  to undertake the  mission,                                                                   
then instead of a $112 thousand  dollar fiscal note, allocate                                                                   
them $24  thousand dollars for  the interpreter fees  and the                                                                   
use  of  their office  supplies.    Representative  Weyhrauch                                                                   
noted  that he  did question  the assumptions  of the  fiscal                                                                   
note.   He recommended that the  fiscal costs be  directed to                                                                   
the Department of Labor & Workforce Development.                                                                                
Co-Chair Harris  asked if the  position had ever  been seated                                                                   
within  the  Department  of  Labor  &  Workforce  Development                                                                   
before.  Representative Weyhrauch  stated that the Department                                                                   
has  worked hard  to accommodate  these types  of issues  and                                                                   
requested   that   Commissioner    O'Claray   address   that.                                                                   
Representative Weyhrauch interjected  that it is not just one                                                                   
particular nationality  or group  of people involved,  noting                                                                   
that  he  was  astonished  at how  many  foreigners  come  to                                                                   
Alaska.    Most  often  these  people  work  extremely  hard,                                                                   
sometimes having three jobs.                                                                                                    
GREG O'CLARAY,  COMMISSIONER, DEPARTMENT OF  LABOR, commented                                                                   
on the  bill and requested that  Mr. Bell address  the fiscal                                                                   
concerns identified by the Committee members.                                                                                   
GUY  BELL,  DIRECTOR, DIVISION  OF  ADMINISTRATIVE  SERVICES,                                                                   
DEPARTMENT OF  LABOR & WORKFORCE DEVELOPMENT,  commented that                                                                   
the fiscal note had been modeled  after the bill sponsored by                                                                   
Senator  Kelly  from   three  years  ago.     That  note  was                                                                   
substantially larger  than the proposed note.  It  had two or                                                                   
three   positions    associated   with   it    and   included                                                                   
substantially  higher travel and  operating costs  because it                                                                   
would have established offices  in both Juneau and Anchorage.                                                                   
That note was used as the starting  point.  Mr. Bell reminded                                                                   
members that  there is  very restrictive  use of monies  that                                                                   
the Department  receives  from the federal  government.   The                                                                   
request  had to  become  a  general fund  cost,  as  it is  a                                                                   
special  service beyond  what  is authorized  in the  federal                                                                   
program.    It was  determined  that  one position  would  be                                                                   
needed and  located in  Juneau with  a limited travel  budget                                                                   
for a few trips to Anchorage and  other parts of the State, a                                                                   
contractual   budget  for   basic  office   costs,  and   the                                                                   
interpreter service  costs.  He called that  service a "soft"                                                                   
item as it is  not known what services will be  required.  He                                                                   
noted the possibility  that the Office might be  able to find                                                                   
volunteers  for that  service.   Mr. Bell  thought that  they                                                                   
could lower the interpreter service  portion of the note from                                                                   
$24 thousand dollars to $4 thousand dollars.                                                                                    
Mr. Bell concluded that the position  would be located in the                                                                   
Commissioners  Office  on the  basis  that it  should  report                                                                   
directly  to   the  Commissioner   rather  than   a  division                                                                   
director, given the broad range of responsibilities.                                                                            
Co-Chair Williams  asked if the  note would be reduced.   Mr.                                                                   
Bell responded  that the  Department would  reduce it  by $20                                                                   
thousand dollars.                                                                                                               
Co-Chair Harris  inquired if an  interpreter would  be making                                                                   
$120  dollars an  hour.   Mr.  Bell replied  that the  dollar                                                                   
number of the proposed note had  been taken from the previous                                                                   
bill and  the assumption was  not questioned.   He reiterated                                                                   
that it was a soft cost.                                                                                                        
Co-Chair  Harris thought  the bill  was a  good idea,  noting                                                                   
that he  would support  the bill  with the  reduction to  the                                                                   
fiscal  note.    Representative  Weyhrauch  inquired  if  the                                                                   
supply  and  furnishing  dollar  amount  had  come  from  the                                                                   
Legislative  Affairs note.   Mr. Bell  replied that  had been                                                                   
the Department's  own internal  determination for  a personal                                                                   
computer, a  printer and basic  phones.  The  Department felt                                                                   
it  would  be appropriate  to  have  some  basic  information                                                                   
material printed  and produced and a description  of services                                                                   
the office  would offer.   He added  that those are  the cost                                                                   
components  that  are  standard  when creating  any  type  of                                                                   
Office.   Representative  Weyhrauch  pointed  out that  there                                                                   
currently  are  desks  and  cubical   spaces  in  the  office                                                                   
buildings.   He thought  that since  they already exist,  why                                                                   
could they not be moved.                                                                                                        
Representative  Chenault  proposed   that  HB  379  might  be                                                                   
special  legislation.    He referenced  the  total  operating                                                                   
costs for  FY06, which are  different from what  is requested                                                                   
in the  funding source.   Mr. Bell embarrassingly  noted that                                                                   
the  Department had  made an  addition mistake  and that  the                                                                   
cost   should    have   been    $106.1   thousand    dollars.                                                                   
Representative  Chenault indicated  his support  of the  bill                                                                   
acknowledging the difficulty that these people experience.                                                                      
Representative  Hawker  referenced language  indicating  what                                                                   
the Office intends to accomplish.   He asked if there already                                                                   
were operations in the State system  that could address these                                                                   
concerns.  Commissioner  O'Claray acknowledged  that each job                                                                   
center  does offer  a wide array  of resources  on a  limited                                                                   
basis.   The  Office  proposed in  the  legislation would  be                                                                   
focused on particular problems.                                                                                                 
Representative  Hawker pointed out  that this is  a statewide                                                                   
issue.  He inquired  if spreading the mission  to the outline                                                                   
job centers  throughout  the State could  further reduce  the                                                                   
fiscal note.  He warned that since  the problem is statewide,                                                                   
how   would  the   remote  sites   access  the   information.                                                                   
Commissioner  O'Claray responded  that with the  installation                                                                   
of  a fax  machine and  email  systems, the  Office could  be                                                                   
specifically focused.                                                                                                           
Representative  Hawker asked  if  there were  federal or  any                                                                   
other   source    funds   available   for    this   activity.                                                                   
Commissioner  O'Claray replied  that there  are not  and that                                                                   
the services  mostly are  intended to  deal with  Immigration                                                                   
and Naturalization Service (INS).                                                                                               
Representative  Fate asked  if  there were  ways to  identify                                                                   
people seeking  citizenship in other  areas of the  State and                                                                   
outside of Juneau.   Commissioner O'Claray replied  that they                                                                   
could  absolutely  handle those  cases.   The  bill  provides                                                                   
additional services beyond what  is normally addressed in the                                                                   
job centers  and is intended  to provide more  intensive core                                                                   
services rather than routine employment services.                                                                               
MARIO  LIM, JUNEAU,  commented  that he  had  been the  first                                                                   
person  who manned  the Office  through Legislative  Affairs.                                                                   
He stressed that the need is enormous.   There is a comradery                                                                   
within  the  minorities with  a  deep  dislike of  the  white                                                                   
people  because of  how  difficult things  have  been in  the                                                                   
past.  Mr. Lim pointed out that  there is no one in the State                                                                   
supporting  the people  with  these types  of  concerns.   He                                                                   
pointed out  that these  people are  also helping to  support                                                                   
the State.  He emphasized that  there is an enormous need for                                                                   
the  people that  cannot  speak English  and  as a  minority,                                                                   
there is  a tremendous  amount of  discrimination.   He urged                                                                   
that the bill be adopted, as it is a statewide issue.                                                                           
Vice  Chair Meyer  asked where  his work  is done.   Mr.  Lim                                                                   
replied that  his work is done  statewide.  Vice  Chair Meyer                                                                   
questioned  if  the  position  would  be  better  located  in                                                                   
Anchorage  where  the  larger  population  lives.    Mr.  Lim                                                                   
responded that  in the age  of technological assistance,  the                                                                   
position could be located anyplace statewide.                                                                                   
SAL LUMBA, IMMIGRATION  GROUP, JUNEAU, urged  support for the                                                                   
Representative  Foster   MOVED  to  report  HB   379  out  of                                                                   
Committee  with  individual  recommendations   and  with  the                                                                   
adjusted new fiscal  note.  There being NO  OBJECTION, it was                                                                   
so ordered.                                                                                                                     
HB  379  was reported  out  of  Committee  with a  "do  pass"                                                                   
recommendation  and with  a  new fiscal  impact  note by  the                                                                   
Department of Labor & Workforce Development.                                                                                    
HOUSE BILL NO. 389                                                                                                            
     An Act  relating to certain  monetary advances  in which                                                                   
     the deposit or other negotiation  of certain instruments                                                                   
     to pay the  advances is delayed until a  later date; and                                                                   
     providing for an effective date.                                                                                           
Co-Chair Harris  MOVED to ADOPT the work  draft #23-LS1341\U,                                                                   
Bannister, 4/20/04, as the version  of the legislation before                                                                   
the Committee.  There being NO OBJECTION, it was adopted.                                                                       
REPRESENTATIVE  TOM ANDERSON,  SPONSOR, noted  that the  bill                                                                   
would  create  a framework  for  regulatory oversight  of  an                                                                   
industry  that  is  currently   doing  business  and  serving                                                                   
consumers  across  the State.    HB 389  does  not create  an                                                                   
industry;  it  is  simply  providing   oversight  to  current                                                                   
practices to  ensure some level  of consumer protection.   He                                                                   
commented  that if the  practice was  banned from the  State,                                                                   
consumers would then  take advantage of the  offers online or                                                                   
from banks with out-of-state branches  that offer the product                                                                   
and often at higher fees.                                                                                                       
Representative  Anderson stated that  these are not  standard                                                                   
loans,  they do not  fall into  the same  category either  in                                                                   
amount or in length.  They would  best be described as short-                                                                   
term conveniences.                                                                                                              
Representative Anderson commented  that his office has worked                                                                   
with the  Department of Law and  the Division of  Banking and                                                                   
Securities  to come  up with  HB  389, which  adheres to  two                                                                   
important principals:                                                                                                           
     ·         Consumer protection - shielding citizens from                                                                    
               unconscionable fees and predatory lending                                                                        
               tactics; and                                                                                                     
     ·         Business protection - allowing businesses                                                                        
               that are filling a legitimate need for the                                                                       
               Alaskan    consumer    to   operate    without                                                                   
               unreasonable regulatory burdens that would                                                                       
               force them out of business.                                                                                      
Representative Anderson added that HB 389 provides:                                                                             
   · Minimum standards for licensure;                                                                                           
   · Maximum loan amount;                                                                                                       
   · Maximum number of "roll overs";                                                                                            
   · Bonding requirements;                                                                                                      
   · Penalties; and                                                                                                             
   · Framework for oversight and examination.                                                                                   
ED  SNIFFEN,   (TESTIFIED   VIA  TELECONFERENCE),   ASSISTANT                                                                   
ATTORNEY GENERAL,  DEPARTMENT OF  LAW, ANCHORAGE,  offered to                                                                   
answer questions of the Committee.                                                                                              
ANGELA   LISTON,  (TESTIFIED   VIA  TELECONFERENCE),   ALASKA                                                                   
CATHOLIC   CONFERENCE,  EAGLE   RIVER,   spoke  against   the                                                                   
legislation.  She  commented that the bill would  legalize an                                                                   
industry that makes  a profit on the working poor.   It would                                                                   
charge huge  interests rates  on that group  of people.   She                                                                   
noted  that  it had  been  compared  to  a credit  card  cash                                                                   
advance;  however,  she  pointed  out  that  no  credit  card                                                                   
charges 490% on its cash advances.   She stressed that HB 389                                                                   
was  poor  public   policy.    She  requested   that  if  the                                                                   
legislation is passed, that it  be amended to allow a minimum                                                                   
term of 30-days on any loan with a maximum of $50-$100 fee.                                                                     
TAPE HFC 04 - 91, Side B                                                                                                      
Ms.  Liston continued  discussing  the repercussions  of  the                                                                   
interest, which could be addressed  by amending the bill to a                                                                   
30-day term rather than the 14-day term.                                                                                        
STEVE  CLARY,   (TESTIFIED  VIA  TELECONFERENCE),   EXECUTIVE                                                                   
DIRECTOR,  ALASKA PUBLIC  INTEREST  RESEARCH GROUP  (AKPIRG),                                                                   
ANCHORAGE,  testified that  AkPIRG  opposes the  bill in  its                                                                   
current form.   To  charge vulnerable  consumers in  need for                                                                   
short-term loans over 400% interest  is unconceivable.  Other                                                                   
states  have been  addressing similar  legislation placing  a                                                                   
limit  on  the  interest  rates  that can  be  charged.    He                                                                   
proposed  a compromise  in attempting  to figure  out how  to                                                                   
keep the industry around for those  that do need a short-term                                                                   
loan and a way to protect the consumers.                                                                                        
Mr. Clary  discussed that  there are two  ways to  reduce the                                                                   
annual  percentage rates  by either  reducing  the amount  of                                                                   
money  charged or  increase the  time.   AkPIRG supports  the                                                                   
idea of  extending the amount of  the loan time from  14 days                                                                   
to 30 days,  which would divide the interest  rate charged to                                                                   
consumers  in half.   Another change  that would protect  the                                                                   
consumer would be to limit the amount of rollovers.                                                                             
Mr. Clary  was pleased to see  the industry will now  have to                                                                   
report to the Division of Banking,  however, if that Division                                                                   
does  not  have   more  staff  to  adequately   review  these                                                                   
documents, will  result in another  cause of concern  for the                                                                   
Representative  Croft   asked  the  status  of   the  current                                                                   
lawsuit.    Mr.  Clary advised  that  Alaska  Legal  Services                                                                   
Corporation has a  case before the bar which  challenges that                                                                   
payday loans not be granted an  exemption from the Small Loan                                                                   
Act.  That General Usury Act usually  caps interests rates at                                                                   
10.25%; the Small Loan Act caps  it at 36%.  The Alaska Legal                                                                   
Services  Corporation   is  representing  the   consumer  who                                                                   
believes that payday lenders should fall under those caps.                                                                      
BUD  WILSON,  (TESTIFIED VIA  TELECONFERENCE),  CASH  ALASKA,                                                                   
ANCHORAGE, offered to answer questions of the Committee.                                                                        
JIM  DAVIS,  (TESTIFIED  VIA  TELECONFERENCE),  ALAKSA  LEGAL                                                                   
SERVICES,  ATTORNEY, ANCHORAGE,  addressed issues of  concern                                                                   
in  the bill.   He  noted  that there  is  a pending  lawsuit                                                                   
before  the court  against  a payday  lender  chain known  as                                                                   
Alaska First Cash.  He pointed  out that those businesses are                                                                   
already  regulated through  the  Alaska Small  Loans Act  and                                                                   
that they have  been violating that act for some  years.  The                                                                   
case will be decided by the Superior Court in June.                                                                             
Mr.  Davis claimed  that  the  legislation has  been  brought                                                                   
forward because  the lawsuit points  out that  these business                                                                   
are  violating  that  Act.   HB  389  is  a means  to  create                                                                   
legality  for  some  business  that are  already  illegal  in                                                                   
Alaska.   He  pointed out  that the  legislation would  allow                                                                   
people that have needs to get  loans at a 400% interest.  The                                                                   
question is  not whether  people have  needs but rather  that                                                                   
there  should be  some sort  of regulation  on the  interest.                                                                   
Loan sharking  is illegal and  the bill would make  it legal.                                                                   
Mr.  Davis maintained  that  the legislation  is  not in  the                                                                   
consumer's interest  and that it would not  meet the rollover                                                                   
and cap intent.                                                                                                                 
Mr. Davis  pointed out that there  is concern whether  or not                                                                   
the Division  of Banking could  monitor the data.   If honest                                                                   
data is reported to the Division,  the only way that it would                                                                   
be meaningful is if there was  enough staff in that Division.                                                                   
The number of lenders  would not be reported.   There will be                                                                   
societal  problems resulting  from  the small  suits with  no                                                                   
legal  representation.    Mr. Davis  emphasized  that  payday                                                                   
lenders are asking for authorization  for a lending rate used                                                                   
by crime families.  The legislation  has been brought forward                                                                   
only to end a lawsuit currently before the courts.                                                                              
Representative Croft  questioned if other lawsuits  have held                                                                   
that they were exempted from the  usury exception.  Mr. Davis                                                                   
replied not  to his knowledge.   Alaska is unique  because of                                                                   
the Small Loan Act.                                                                                                             
Representative  Croft  asked what  would  be the  appropriate                                                                   
regulation  of  the  industry.    Mr.  Davis  responded  that                                                                   
consumer  groups  should  be   considered  when  making  that                                                                   
determination.    He  understood that  the  legislation  only                                                                   
addresses  what  would work  for  the  payday lenders.    The                                                                   
consumer groups have had no opportunity for input.                                                                              
DEBORAH FINK,  CASH ALASKA,  ANCHORAGE, testified  in support                                                                   
of the  legislation.   She noted  that there  currently  is a                                                                   
lawsuit  and that  presently, 44  states are  regulated in  a                                                                   
more liberal  manner than proposed  in the legislation.   She                                                                   
stressed  that  HB  389  is  one  of  the  stronger  consumer                                                                   
protection  bills dealing  with  the industry  in the  United                                                                   
States.   The  lawsuit was  based  on the  premise that  past                                                                   
legislative groups  in 1955 before  statehood, and in  1981 &                                                                   
1993 were  "too dumb to figure  out" when they  increased the                                                                   
small  loan  exemption that  meant  there  would not  be  any                                                                   
interest  requirements  or  limits  on  those  people.    She                                                                   
maintained that the legislatures  involved clearly understood                                                                   
that small  loans would  not be available  if the  market was                                                                   
not allowed  to regulate  the amounts,  because no  one would                                                                   
provide the service.   Under the consumer rate  proposed, the                                                                   
lenders would be  able to charge less than 50  cents per $100                                                                   
loan  without  the  proposed  provisions.    The  legislative                                                                   
bodies meant to exempt the loans  from any regulated interest                                                                   
rate.   The exemption was raised  to keep up  with inflation.                                                                   
She maintained that  consumers love these loans.   Those that                                                                   
argue  against the  loans don't  use them.   The industry  is                                                                   
happy  to do the  loans at  $15 per  $100 for  a couple  week                                                                   
period of time.                                                                                                                 
Ms. Fink  maintained that  some of  the numbers mentioned  in                                                                   
previous  testimony  were incorrect.    She  referred to  the                                                                   
recommendation  that there  be  a compromise  and extend  the                                                                   
terms  to 30  days.    Ms. Fink  pointed  out that  would  be                                                                   
cutting their income in half.   Money does not grow on trees.                                                                   
At  the present  configuration, there  is only  a 10%  profit                                                                   
margin.   It would  be impossible  to continue lending  under                                                                   
that type of term except for the  Internet dealers.  Internet                                                                   
is operating  in all  states, legally,  with no  regulations.                                                                   
That industry will grow if there  is no legislation in Alaska                                                                   
that permits the  industry to provide service  for the public                                                                   
to utilize.                                                                                                                     
Ms. Fink advised  that the bill puts forth a  lot of consumer                                                                   
protections.     She  stated   that  only  six   people  have                                                                   
complained.   It  is  a service  that  only  the people  that                                                                   
utilize  it  understand.    It  is  not  a  traditional  bank                                                                   
situation.   Annual  percentage  rates  are based  on  making                                                                   
payments over twelve months and  what happens in the industry                                                                   
are  two-week  loans.    She   claimed  that  these  are  not                                                                   
desperate people  getting the loans.  Payday  loans cost less                                                                   
than a bouncing  a check which can amount to  $43-$48 per one                                                                   
bad check.   She reiterated that  these are not  dumb people.                                                                   
They  are usually  young people  in the  collection phase  of                                                                   
their lives.   Statistics  show that  56% of these  borrowers                                                                   
have some  sort of  college education.   Ms. Fink  emphasized                                                                   
that  the  service  is  important   and  that  it  must  stay                                                                   
PATRICK  LUBY, LEGISLATIVE  DIRECTOR,  ALASKA ASSOCIATION  OF                                                                   
RETIRED PERSONS  (AARP), JUNEAU,  testified on behalf  of the                                                                   
76,000 AARP  members in  Alaska, in  strong opposition  to HB
389  regarding  deferred  deposit  advances,  also  known  as                                                                   
payday  loans,  sponsored by  the  House Labor  and  Commerce                                                                   
Committee.   Under  the plain  language  of Alaska's  general                                                                   
usury statute and small loans  act, the maximum interest rate                                                                   
of  36%  under  the usury  statute  should  apply  to  payday                                                                   
lending.   HB 389 would eliminate  the cap on  interest rates                                                                   
for those loans and allow usurious lending.                                                                                     
There are  reasons why the  federal government,  the Consumer                                                                   
Federation  of   America,  Consumer's  Union,   the  National                                                                   
Consumer Law Center  and AARP consider payday  loan operators                                                                   
as predatory lenders.   Payday loans usually  affect the most                                                                   
vulnerable  segment of  the population  -  those that  cannot                                                                   
secure  credit or  a small  loan  from traditional  financial                                                                   
institutions, often because the  loan amount is small or they                                                                   
do not  have the necessary collateral.   Those who  live from                                                                   
paycheck  to   paycheck  must  resort  to   "fringe"  banking                                                                   
services such as payday loans if an emergency arises.                                                                           
Mr. Luby continued,  cash-strapped consumers rarely  have the                                                                   
ability to  repay the entire  loan when their  payday arrives                                                                   
because that would leave them  with little to nothing to live                                                                   
on  until  the   next  paycheck.    Lenders   then  encourage                                                                   
consumers  to  rollover or  refinance  one payday  loan  with                                                                   
another.  The result is that the  consumer pays another round                                                                   
of charges and obtains no additional  cash in return.  If the                                                                   
consumer cannot  repay the  loan in  two weeks, however,  the                                                                   
loan is  rolled over into a  new payday loan, and  the annual                                                                   
percentage rate jumps to a staggering 917%.                                                                                     
Mr.  Luby pointed  out that  the  legislation would  legalize                                                                   
payday  loans,  thereby,  authorizing   interest  rates  that                                                                   
exceed State usury  limits more than ten times.   At minimum,                                                                   
HB 389  would allow  loans of  up to  $500 be  made at  a 15%                                                                   
interest rate, which translates  to an annual percentage rate                                                                   
(APR) of 391%.  It would also  allow payday lenders to charge                                                                   
an  origination  fee,  with  no  limit  set.    Although  the                                                                   
origination fee  is not considered  interest in the  bill, in                                                                   
fact, it  would have  the identical  effect, as the  consumer                                                                   
must repay the fee to renew the loan.                                                                                           
In addition, the legislation allows  what are known as "touch                                                                   
and  go" loans,  where  borrowers  can take  out  a new  loan                                                                   
immediately  after  paying  off  an old  loan,  resulting  in                                                                   
borrowers entering a never-ending  cycle of using two lenders                                                                   
to  continually  pay  off  each  other,  while  plunging  the                                                                   
borrower into ever-deeper debt.                                                                                                 
Mr.  Luby  stated  that  as indicated,  to  renew  the  loan,                                                                   
consumers would have to repay  the origination fee as well as                                                                   
the $15 per  $100 loan charges.  Research in  several states,                                                                   
such  as   Illinois,  Indiana,   and  Wisconsin,   show  that                                                                   
consumers typically take out 10-12  payday loans a year.  The                                                                   
consumer repays  the interest over  and over again  to extend                                                                   
the loan  term, as they  do not have  the money to  repay the                                                                   
principal.  The  limit on renewals in the bill  would not end                                                                   
the practice in any way.  There  is no limit on the number of                                                                   
loans that could  be taken out by the consumer,  just a limit                                                                   
on  the dollar  amount  from one  lender  or its  affiliates.                                                                   
Consumers   often  have  multiple   loans  outstanding   from                                                                   
multiple lenders, using one loan to pay off another.                                                                            
AARP,  in  collaboration  with  the  Consumer  Federation  of                                                                   
America,  Consumer's Union,  and  the National  Consumer  Law                                                                   
Center,  has been  working on  predatory  lending issues  for                                                                   
several years.   As part of the effort on  predatory lending,                                                                   
the  organizations have  developed a  model bill  recognizing                                                                   
that consumers,  particularly those  who are "unbanked,"  may                                                                   
have a need for small loans but  they should not pay usurious                                                                   
rates to receive  them.  Further, the repayment  terms of the                                                                   
loan  must be  reasonable  so consumers  are  not trapped  in                                                                   
debt.   The model bill  calls for a  repayment period  of two                                                                   
weeks for  every amount borrowed,  which allows  consumers to                                                                   
pay back their  loans without having to go  deeper into debt.                                                                   
AARP also advocates a 36% annual  interest rate cap, which is                                                                   
consistent with Alaska's existing  Small Loan Act.  The model                                                                   
also prohibits lenders from extending  loans to consumers who                                                                   
already have  $300 outstanding  in payday loans,  either from                                                                   
the  same lender  or  any other  lender.    Payday loans  are                                                                   
heavily marketed in low-income  areas and near military bases                                                                   
as "fast,  easy, credit"  with no  credit checks, a  practice                                                                   
considered  predatory.   AARP  has found  payday lenders  who                                                                   
market to older  persons who have high medical  costs or high                                                                   
prescription  costs by  encouraging retirees  to treat  their                                                                   
Social Security check like a paycheck.                                                                                          
Mr.  Luby pointed  out  that many  of  the  AARP members  are                                                                   
veterans.   It is  particularly onerous  that payday  lenders                                                                   
target  young military  families who,  because of  deployment                                                                   
overseas, may  find themselves cash-strapped.   Consumers who                                                                   
are  considered high-risk  borrowers often  have a  difficult                                                                   
time getting  credit on  reasonable terms,  but they  deserve                                                                   
protection from deceptive and  unfair lending practices.  Mr.                                                                   
Luby  strongly  urged  that  the   bill  not  be  moved  from                                                                   
HB 389 was HELD in Committee for further consideration.                                                                         
The meeting was adjourned at 10:05 A.M.                                                                                         

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