SENATOR KELLY introduced SB 86 (FUND TRANSFERS UNDER THE UNIFORM COMMERCIAL CODE) and asked who was going to explain the bill. BILL KELDER, Aide to SENATOR KERTTULA, said a copy of the explanation had been delivered to the committee member offices, but he deferred to ARTHUR PETERSON, who is a Uniform Law Commissioner for Alaska. GERALD KURTZ, who is also a Uniform Law Commissioner for Alaska, was Off-Net from Anchorage on the teleconference network. MR. PETERSON explained that although he was now an attorney in private practice with Dillon & Findley, he was appearing in his role as a Uniform Law Commissioner for Alaska. He testified in support of SB 86 and urged the committee to favorably report it from committee. Number 164 MR. PETERSON said the bill was supported by the American Bar Association, the American Law Institute, the American Bankers Association, and was developed by the National Conference of Commissioners and Uniform State Laws. MR. PETERSON said the purpose of the bill was to recognize modern electronic technology and modern business practices. He said it would provide legislative answers to the great number of questions that arise in the new way of doing business, is vastly preferable to the current system, and has been enacted by 44 states. Enactment by all states would retain this subject for handling by the states and would preclude federal intervention. MR. PETERSON said the bill covered two areas, wholesale wire transfers, and non-consumer automated payments, which are similar. He explained it parallels, and is consistent with, a related federal act and with the rules that govern the two principle national wire systems, the FedWire and the CHIPS (Clearing House Interbank Payment Systems). MR. PETERSON said he preferred to answer questions at this point, and he noted another Uniform Law Commissioner for Alaska, GERALD KURTZ, who has a great deal of experience in commercial law, was on the teleconference from Anchorage. Number 201 SENATOR RIEGER questioned the national act, and MR. PETERSON explained the federal act was the Electronics Transfer Act, which covers only consumer transactions, such as an automated teller machine or credit card transactions. He also explained this act is uniform among all the other states and with the two national wire systems. The only changes he noted were to comply with Alaska's requirements of style and numbering adjustments; otherwise, it is the national version. SENATOR KELLY invited MR. KURTZ in Anchorage, to testify on SB 86. MR. KURTZ reviewed some of the provisions specific to Alaska, and he thought it was important that 44 other states had adopted the act. He explained it was quite critical to those business people, who were trying to hold down the cost of business and consumer transactions and keep up with the rest of the world on the subject of both SB 86 and SB 112. PETE CRANDALL, representing the National Bank of Alaska and the Alaska Bankers Association, urged the committee's support of SB 86. He explained it would provide clear lines of responsibility for all parties utilizing electronic funds transfers and would reduce, or eliminate, legal disputes between all parties that conduct business in this manner. He said it could also eliminate disputes that could arise between the State of Alaska and other states, since it provides clear, fair, and sound rules for all parties - not just bankers. Number 269 SENATOR KELLY asked WILLIS KIRKPATRICK if the Division of Banking supported the bill, and MR. KIRKPATRICK responded they supported the bill - and it had no fiscal note. SENATOR RIEGER asked MR. CRANDALL what happened when funds were erroneously sent, and who was responsible for the loss of interest in the transaction. MR. CRANDALL explained both the senders and the receivers have some responsibilities, but the act would clearly define the rules, and he gave an example. SENATOR RIEGER said he was looking from the standpoint of the owner of the funds, who directs the bank to transfer some funds, if the deal goes wrong. He asked if he would still get his interest, and at what rate of interest, while the problem is being sorted out. MR. PETERSON assured SENATOR RIEGER he would not suffer because the bank, or whoever made the error, would bear the burden of his loss, but the rate of interest would be under law of the state. He quoted the supporting Alaska statute, AS 45.45.10, which is essentially market rate. SENATOR KELLY asked for further questions. SENATOR LINCOLN quoted SENATOR KERTTULA as expecting the bill to bring the state laws into compliance with federal law, otherwise, the federal government will perform the regulatory and enforcement duties related to the fund transfers. She asked for a meaning of his quote. Number 299 MR. PETERSON referred to his previous testimony that the federal government wishes to be assured that all states deal with fund transfers in the same way for a nation-wide system. He explained if the states don't conform, then either Congress or the appropriate federal regulatory agencies would intervene. He also explained it was important for Alaska to have a model version of the act, and he said the two federal wire services had adopted the language produced by the Uniform Law Commissioners. He said the state statute is consistent with federal law on the books, but he expressed the fear that if the states don't act, the federal government would expand its area of regulation. SENATOR LINCOLN, in reference to those states without similar legislation, asked if their regulations would be replaced by the federal government. MR. PETERSON explained if the states fail to act, they would place their commercial climate at a great disadvantage. He explained that if all states cannot implement the Uniform Act, that encourages the federal government to intervene, if they feel it is required. SENATOR KELLY noted a list of those 45 states who have acted on the Uniform Commercial Code, and he asked why this has happened so quickly. MR. PETERSON explained the UCC had swept the country because of the great push to make uniform all of the laws to keep pace with the strides in the business world, and he reviewed the bill from last session on this subject. Number 347 SENATOR RIEGER asked about the rate of interest on page 37 of the bill, as to whether it referred to the various financial institutions. MR. PETERSON explained, as a depositor, a rate would be set in the contract with the bank. After a few more questions on the subject, SENATOR RIEGER moved to pass SENATE BILL NO. 86 from committee with individual recommendations. Without objections, so ordered.