SENATE LABOR AND COMMERCE COMMITTEE February 1, 1996 1:45 p.m. MEMBERS PRESENT Senator Tim Kelly, Chairman Senator John Torgerson, Vice-Chairman Senator Mike Miller Senator Jim Duncan Senator Judy Salo MEMBERS ABSENT None COMMITTEE CALENDAR SENATE BILL NO. 157 "An Act relating to the regulation of small loan and retail installment transactions." SENATE BILL NO. 186 "An Act relating to partnerships; amending Alaska Rules of Civil Procedure 20 and 24; and providing for an effective date." PREVIOUS SENATE COMMITTEE ACTION SB 157 - See Labor & Commerce minutes dated 5/4/95. SB 186 - No previous Senate action. WITNESS REGISTER John Higgins Northland Credit 3031 Brookview Anchorage, AK 99504 POSITION STATEMENT: Supports SB 157. Willis Kirkpatrick Division of Banking, Securities, and Corporations Dept. of Commerce & Economic Development P.O. Box 110807 Juneau, AK 99811-0907 POSITION STATEMENT: Supports SB 157. ACTION NARRATIVE TAPE 96-8, SIDE A Number 001 SB 157 SMALL LOANS & RETAIL INSTALLMENT SALES  CHAIRMAN TIM KELLY called the Labor and Commerce Committee meeting to order at 1:45 p.m. The first order of business was SB 157. SENATOR KELLY asked witnesses to confine testimony to the proposed committee substitute before committee members. JOHN HIGGINS, general manager for Northland Credit Corporation, gave the following overview of the measure. The purpose is to modernize and update the Alaska Small Loans Act. It will expand the availability of credit to the Alaska consumer, and will allow Alaska-based lenders to compete with out-of-state lenders who import interest rate structures from their home states into Alaska. This legislation will create and retain jobs in Alaska's financial industry, will provide more local financing to rural communities and provide credit to a broader base of Alaskan consumers who might otherwise not have access to the credit they deserve. MR. HIGGINS explained the changes made to the proposed committee substitute. Additional fee enhancements were worked out with the Administration and added in the first two pages. In particular, the bonding requirement was increased to $25,000. An adjustment was also made to the amount of the annual licensing fee. In Section 8 on page 4, language changes were made to the joint loan provision. Under the current statutory loan provision, a business cannot have two open loans simultaneously. Language was added to Section 9 related to non-filing insurance in lieu of filing a UCC1 (insurance in lieu of perfecting a security interest as long as the premiums do not exceed the fees that would otherwise be charged if one did file a UCC or security interest). In Section 10 the late payment fee was changed to $25 or ten percent of the payment due, rather than what was commercially reasonable. The Administration did not want to have to keep revisiting the issue of what is commercially reasonable. Section 14 is an attempt to deregulate a particular part of the market to equalize the competitive field with out-of-state lenders who import rate structures into the state. He informed committee members that the industry component behind this legislation is: Northland Credit, Norwest Financial, AVCO Financial, JC Penney and other retailers under portions of the statute, Affordable Loan, and Superior Financial Services. Number 126 WILLIS KIRKPATRICK, Division of Banking, Securities and Corporations, Department of Commerce, limited his comments to the Savings and Loan portion of the bill. He noted his appreciation for the cooperation of the industry in straightening out some of the problems caused by obsolescence. The changes made in the proposed committee substitute are well within the reasons of consumer protection, and the Division does not object to them. The major change under the installment retail portion, which eliminates credit limitations, has a broad scope. The Division does not regulate, or have enforcement powers over the regulation of, interest rates with the exception of those found in the Alaska Banking Code. The Division often receives comments and complaints from consumers concerning consumer lending. SENATOR KELLY asked if the Division supports the bill. MR. KIRKPATRICK responded affirmatively. Number 154 SENATOR DUNCAN asked Mr. Kirkpatrick if the Division supports the change to the competitive market rate. MR. KIRKPATRICK stated it does. He explained the Division conducts a lot of interstate banking with the states of Washington, Oregon, and Idaho. In those states the marketplace determines the interest rate and they do not understand why Alaska doesn't go with the market rate. Number 179 SENATOR TORGERSON moved adoption of the committee substitute for SB 157. There being no objection, the motion carried. SENATOR TORGERSON moved CSSB 157 (L&C) out of committee with individual recommendations. There being no objection, the motion carried. SENATOR KELLY announced SB 186 would be postponed until next Thursday. He adjourned the meeting at 1:55 p.m.