Legislature(2005 - 2006)CAPITOL 17

04/26/2006 03:15 PM LABOR & COMMERCE


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03:23:15 PM Start
03:23:36 PM Confirmation Hearing(s) || Regulatory Commission of Alaska
03:29:55 PM SB300
03:50:21 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ SB 300 MOTOR VEHICLE NEGATIVE EQUITY/CONTRACTS TELECONFERENCED
Moved Out of Committee
+ Confirmation Hearing - RCA Board TELECONFERENCED
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
          HOUSE LABOR AND COMMERCE STANDING COMMITTEE                                                                         
                         April 26, 2006                                                                                         
                           3:23 p.m.                                                                                            
                                                                                                                              
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Tom Anderson, Chair                                                                                              
Representative Pete Kott                                                                                                        
Representative Gabrielle LeDoux                                                                                                 
Representative Bob Lynn                                                                                                         
Representative Norman Rokeberg                                                                                                  
Representative Harry Crawford                                                                                                   
Representative David Guttenberg                                                                                                 
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
CONFIRMATION HEARING(S)                                                                                                         
                                                                                                                                
Regulatory Commission of Alaska                                                                                               
                                                                                                                                
     Janis Wilson - Anchorage                                                                                                   
                                                                                                                                
     - CONFIRMATION(S) ADVANCED                                                                                                 
                                                                                                                                
CS FOR SENATE BILL NO. 300(L&C)                                                                                                 
"An Act relating to the handling of negative equity in motor                                                                    
vehicle transactions; and relating to the contents of retail                                                                    
installment contracts."                                                                                                         
                                                                                                                                
     - MOVED CSSB 300(L&C) OUT OF COMMITTEE                                                                                     
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: SB 300                                                                                                                  
SHORT TITLE: MOTOR VEHICLE NEGATIVE EQUITY/CONTRACTS                                                                            
SPONSOR(s): SENATOR(s) SEEKINS                                                                                                  
                                                                                                                                
02/14/06       (S)       READ THE FIRST TIME - REFERRALS                                                                        
02/14/06       (S)       TRA, L&C                                                                                               
02/23/06       (H)       TRA AT 1:30 PM CAPITOL 17                                                                              
02/23/06       (H)       -- Meeting Canceled --                                                                                 
03/09/06       (S)       TRA AT 1:30 PM BUTROVICH 205                                                                           
03/09/06       (S)       Moved  SB 300 Out of Committee                                                                         
03/09/06       (S)       MINUTE(TRA)                                                                                            
03/10/06       (S)       TRA RPT  2DP 1NR                                                                                       
03/10/06       (S)       DP: HUGGINS, KOOKESH                                                                                   
03/10/06       (S)       NR: FRENCH                                                                                             
03/16/06       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
03/16/06       (S)       Heard & Held                                                                                           
03/16/06       (S)       MINUTE(L&C)                                                                                            
03/28/06       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
03/28/06       (S)       Moved CSSB 300(L&C) Out of Committee                                                                   
03/28/06       (S)       MINUTE(L&C)                                                                                            
03/29/06       (S)       L&C RPT CS  4DP                   NEW                                                                  
                         TITLE                                                                                                  
03/29/06       (S)       DP: BUNDE, DAVIS, ELLIS, SEEKINS                                                                       
04/05/06       (S)       TRANSMITTED TO (H)                                                                                     
04/05/06       (S)       VERSION: CSSB 300(L&C)                                                                                 
04/06/06       (H)       READ THE FIRST TIME - REFERRALS                                                                        
04/06/06       (H)       TRA, L&C                                                                                               
04/25/06       (H)       TRA AT 1:30 PM CAPITOL 17                                                                              
04/25/06       (H)       Moved Out of Committee                                                                                 
04/25/06       (H)       MINUTE(TRA)                                                                                            
04/26/06       (H)       L&C AT 3:15 PM CAPITOL 17                                                                              
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
JANIS WILSON, Appointee                                                                                                         
to the Regulatory Commission of Alaska (RCA)                                                                                    
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified as appointee to the Regulatory                                                                   
Commission of Alaska.                                                                                                           
                                                                                                                                
SENATOR RALPH SEEKINS                                                                                                           
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Spoke as the sponsor of SB 300.                                                                            
                                                                                                                                
CLYDE (ED) SNIFFEN, JR., Assistant Attorney General                                                                             
Commercial/Fair Business Section                                                                                                
Civil Division                                                                                                                  
Department of Law (DOL)                                                                                                         
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Expressed support and answered questions                                                                   
during hearing on SB 300.                                                                                                       
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
CHAIR TOM ANDERSON  called the House Labor  and Commerce Standing                                                             
Committee  meeting  to  order at  3:23:15  PM.    Representatives                                                             
Rokeberg, LeDoux, Kott, and Anderson  were present at the call to                                                               
order.   Representatives Lynn,  Guttenberg, and  Crawford arrived                                                               
as the meeting was in progress.                                                                                                 
                                                                                                                                
3:23:36 PM                                                                                                                    
                                                                                                                                
^CONFIRMATION HEARING(S)                                                                                                      
^Regulatory Commission of Alaska                                                                                              
                                                                                                                                
3:23:52 PM                                                                                                                    
                                                                                                                                
CHAIR ANDERSON announced  that the first order  of business would                                                               
be the confirmation of Janis  Wilson to the Regulatory Commission                                                               
of Alaska (RCA).                                                                                                                
                                                                                                                                
3:24:19 PM                                                                                                                    
                                                                                                                                
JANIS WILSON,  Appointee to the  Regulatory Commission  of Alaska                                                               
(RCA), began  by saying that  she has been an  Administrative Law                                                               
Judge  (ALJ) for  first the  Alaska  Public Utilities  Commission                                                               
[and later] the RCA.  She noted  that her position as ALJ was the                                                               
first  position [of  this type]  in the  state; however,  at this                                                               
time  there are  many ALJ  positions.   She  explained that  this                                                               
position  was   created  in  1981,   when  the   Alaska  Pipeline                                                               
Commission merged  into the  Alaska Public  Utilities Commission.                                                               
She noted  that she  has held this  position since  its creation.                                                               
She said "I've  had the same job  for 25 years.  What  I want you                                                               
to conclude  from that ...  is ... that the  job is a  very, very                                                               
interesting and  varied job."   She stated that she  has presided                                                               
over  all  of  the  concurrent hearings  of  the  Federal  Energy                                                               
Regulatory  Commission (FERC),  the  Alaska Pipeline  Commission,                                                               
the Alaska  Public Utilities  Commission, and  the RCA  since she                                                               
first held  the position, in  addition to presiding  over utility                                                               
matters.                                                                                                                        
                                                                                                                                
The committee took an at-ease from 3:26 p.m. to 3:28 p.m.                                                                       
                                                                                                                                
3:28:04 PM                                                                                                                    
                                                                                                                                
CHAIR  ANDERSON commented  that the  RCA deals  with a  number of                                                               
different issues,  and opined  that Ms.  Wilson has  expertise in                                                               
the various areas, and would be able to address these issues.                                                                   
                                                                                                                                
3:28:52 PM                                                                                                                    
                                                                                                                                
MS. WILSON replied  that while she does not  have much experience                                                               
in  telephones,  she does  have  some  expertise  in all  of  the                                                               
required areas.                                                                                                                 
                                                                                                                                
REPRESENTATIVE KOTT made a motion  to advance the confirmation of                                                               
Janis Wilson  to the  Regulatory Commission  of Alaska  (RCA), to                                                               
the joint session  for consideration.  There  being no objection,                                                               
the confirmation  of Janis  Wilson was advanced.   He  noted that                                                               
each  members'  signature  does not  reflect  the  member's  vote                                                               
during the joint floor session.                                                                                                 
                                                                                                                                
3:29:46 PM                                                                                                                    
                                                                                                                                
SB 300-MOTOR VEHICLE NEGATIVE EQUITY/CONTRACTS                                                                                
                                                                                                                                
3:29:55 PM                                                                                                                    
                                                                                                                                
CHAIR ANDERSON announced  that the final order  of business would                                                               
be  CS FOR  SENATE BILL  NO. 300(L&C),  "An Act  relating to  the                                                               
handling of  negative equity in  motor vehicle  transactions; and                                                               
relating to the contents of retail installment contracts."                                                                      
                                                                                                                                
3:30:00 PM                                                                                                                    
                                                                                                                                
SENATOR RALPH SEEKINS, Alaska State  Legislature, speaking as the                                                               
sponsor of SB  300, noted that SB 300 was  introduced by request.                                                               
He explained that national banks  and credit unions are regulated                                                               
under federal  law.   He said that  acceptance companies  such as                                                               
Ford Motor  Credit and GMAC  are required to follow  both federal                                                               
and state laws.   He noted that  he has been in  the industry for                                                               
36 years, and is familiar with  the issue of negative equity.  He                                                               
said it is necessary to  ensure that the federal requirements and                                                               
restrictions  regarding  contracts  and "negative  equity"  under                                                               
state law  line up with  the requirements and  restrictions under                                                               
federal law.   He stated that, in the industry,  this is referred                                                               
to as "upside down."   He explained that there are advertisements                                                               
claiming  that  for "zero  down"  a  person  can finance  a  car,                                                               
provided  that he/she  is  creditworthy.   He  said that  finance                                                               
contracts can  run up  to 84  months, with  the average  being 72                                                               
months.  As  a result of not making a  down payment, many people,                                                               
he said, will  find themselves in a position in  which the trade-                                                               
in value  is less than  the amount of money  owed.  He  said "the                                                               
lines crossing  between equity  and what  you owe  extend farther                                                               
out today than they ever did before."                                                                                           
                                                                                                                                
3:32:58 PM                                                                                                                    
                                                                                                                                
SENATOR SEEKINS  went on  to say that  the Federal  Reserve Board                                                               
provided guidance  on this  issue in Regulations  M and  Z, which                                                               
control the  manner in  which lease  and credit  transactions are                                                               
disclosed.   He  explained  that state  law  has never  addressed                                                               
where to  disclose negative  equity on a  financing document.   A                                                               
dealer, he  said, would be  able to work  with a federal  bank or                                                               
credit  union on  its  contract  and meet  all  of the  necessary                                                               
regulations; however, this may not  meet all regulations and laws                                                               
of the State of Alaska.  This  issue, he said, is addressed by SB
300.   Referring to a  handout in members' packets,  he explained                                                               
an "upside  down" situation.   He pointed out different  areas in                                                               
which  federal law  requires the  negative equity  be shown.   He                                                               
said SB 300  would bring state laws into  compliance with federal                                                               
laws  regarding negative  equity.   He stated  that the  Attorney                                                               
General's office was involved in the [drafting process].                                                                        
                                                                                                                                
3:36:28 PM                                                                                                                    
                                                                                                                                
SENATOR  SEEKINS, in  conclusion,  stated that  once federal  and                                                               
state law  are in compliance, there  will be no "gray  area," and                                                               
everyone in the industry will be on "equal footing."                                                                            
                                                                                                                                
3:37:15 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  CRAWFORD asked  if there  is  a cap  on how  much                                                               
negative equity can be borrowed.                                                                                                
                                                                                                                                
SENATOR  SEEKINS  replied  that  there  is  no  cap,  although  a                                                               
person's ability to  repay is taken into consideration.   He said                                                               
that he  does not  recommend doing  this, adding  that it  is not                                                               
favored in the industry as it  takes the person out of the market                                                               
for  a  longer period  of  time;  however,  this is  an  economic                                                               
reality.                                                                                                                        
                                                                                                                                
REPRESENTATIVE  CRAWFORD  asked  if   there  are  any  guidelines                                                               
regarding the maximum percentage.                                                                                               
                                                                                                                                
SENATOR SEEKINS replied  that he is not aware  of any guidelines.                                                               
He stated  that in  his experience, the  most negative  equity he                                                               
has seen is $19,000.  He  noted that this individual was not able                                                               
to  finance on  the next  contract.   Years  ago, he  said, if  a                                                               
person did not  have enough money for a down  payment, they would                                                               
borrow the money  from a second lender.  This  was referred to as                                                               
a "Mickey mouse loan," and resulted in two loan payments.                                                                       
                                                                                                                                
3:40:00 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GUTTENBERG said "Much of  it goes back to what the                                                               
banks will ... finance."                                                                                                        
                                                                                                                                
SENATOR SEEKINS  said that this  is correct.   He said  that Ford                                                               
Credit uses a  computer program that assigns a risk  to the loan,                                                               
and if this  does not fit into the "risk  profile," the loan will                                                               
not get financed.                                                                                                               
                                                                                                                                
3:41:12 PM                                                                                                                    
                                                                                                                                
CLYDE   (ED)   SNIFFEN,    JR.,   Assistant   Attorney   General,                                                               
Commercial/Fair Business  Section, Civil Division,  Department of                                                               
Law (DOL),  informed the committee  that his  obligations include                                                               
enforcement of  the consumer protection  statutes.  He  said that                                                               
he has looked over the bill and  the division is in support.  The                                                               
division  looked   at  the  bill   from  a   consumer  disclosure                                                               
perspective to  ensure that  consumers involved  in this  type of                                                               
transaction  are  fully  informed  of the  cost  of  refinancing.                                                               
Under   the  current   federal   regulations,   he  said,   these                                                               
disclosures  are made  very clear;  [on  a state  level], SB  300                                                               
adequately makes these disclosures.                                                                                             
                                                                                                                                
REPRESENTATIVE  GUTTENBERG   asked  if   the  passage   of  state                                                               
guidelines would supersede "tighter" federal restrictions.                                                                      
                                                                                                                                
MR. SNIFFEN replied  no.  He said that the  state cannot regulate                                                               
any   institutions   that   fall  under   federal   jurisdiction;                                                               
therefore, there  is no  conflict.   This legislation  would only                                                               
affect  entities  that  fall   under  state  jurisdiction,  which                                                               
includes the  acceptance corporations  that do  not fit  into the                                                               
federal definition of a bank or credit union.                                                                                   
                                                                                                                                
REPRESENTATIVE  GUTTENBERG  asked  if,  because  the  banks  have                                                               
federal restrictions  that differ from the  lending institutions,                                                               
the  state  should  have  more  restrictions  on  the  amount  of                                                               
negative  equity allowed  or  the amount  of  times the  negative                                                               
equity can be "rolled over."                                                                                                    
                                                                                                                                
MR.  SNIFFEN  replied  that  he  is  not  certain  that  this  is                                                               
necessary.  He  said that the [Division of  Banking, Securities &                                                               
Corporations]  regulates  the  majority of  the  state's  banking                                                               
institutions,  which   are  not  federally  chartered,   and  has                                                               
comprehensive   regulatory   control  over   the   aforementioned                                                               
institutions.  In regard to  limiting the amount of "roll overs,"                                                               
he  said  that he  has  not  considered  this, although  this  is                                                               
interesting idea and may be something to consider in the future.                                                                
                                                                                                                                
SENATOR SEEKINS,  in regard  to limiting  the amount  of negative                                                               
equity and  "roll over,"  noted that  it is  allowed in  49 other                                                               
states  and  opined  that  individuals   would  go  elsewhere  to                                                               
purchase a vehicle if this was limited.                                                                                         
                                                                                                                                
3:45:01 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  ROKEBERG  noted  that  this  is  self-regulating,                                                               
adding  that the  banks  will  deny the  loan  if  the amount  of                                                               
negative  equity  is too  high.    He  remarked that  a  person's                                                               
"creditworthiness" would drive the transaction.                                                                                 
                                                                                                                                
SENATOR SEEKINS agreed that this  is correct.  He reiterated that                                                               
the industry is in support of the legislation.                                                                                  
                                                                                                                                
The committee took an at-ease from 3:45 p.m. to 3:49 p.m.                                                                       
                                                                                                                                
3:49:41 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LYNN  moved  to   report  CSSB  300(L&C)  out  of                                                               
committee  with individual  recommendations and  the accompanying                                                               
fiscal  notes.   There  being  no  objection, CSSB  300(L&C)  was                                                               
reported from the House Labor and Commerce Standing Committee.                                                                  
                                                                                                                                
3:50:12 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Labor and  Commerce Standing Committee  meeting was  adjourned at                                                               
3:50:21 PM.                                                                                                                   

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