Legislature(2003 - 2004)

04/28/2004 09:06 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                                                                                                                                
     CS FOR SENATE BILL NO. 272(L&C)                                                                                            
     "An Act relating to certain monetary advances in which the                                                                 
     deposit or other negotiation of checks to pay the advances is                                                              
     delayed until a later date; and providing for an effective                                                                 
     date."                                                                                                                     
                                                                                                                                
                                                                                                                                
This was  the second  hearing for  this bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair  Wilken stated  this bill,  sponsored by  the Senate  Rules                                                            
Committee,  "requires   the  Division  of  Banking  Securities   and                                                            
Corporations  to  license  and  supervise  Alaska's  payday  lending                                                            
establishments."                                                                                                                
                                                                                                                                
RICHARD SCHMITZ, Staff  to Senator Cowdery, indicated he had nothing                                                            
to add to his testimony given at the previous hearing.                                                                          
                                                                                                                                
ED SNIFFEN,  Assistant  Attorney General,  Commercial/Fair  Business                                                            
Section,   Civil  Division,   Department  of   Law,  testified   via                                                            
teleconference  from Anchorage to respond to testimony  presented at                                                            
the prior  hearing. A representative  of  Alaska Legal Services  had                                                            
testified that  Permanent Fund Dividend loan advances  were found to                                                            
be illegal by  the Alaska Supreme Court. Mr. Sniffen  clarified that                                                            
the case referenced  was the Berger  case. Mr. Berger was  advancing                                                            
money  to  Alaskan   residents  against  future  receipt   of  their                                                            
Permanent   Fund  Dividend   payment.  The   State  challenged   the                                                            
transactions,   and   the   Supreme  Court   determined   that   the                                                            
transactions were legal  under Alaska's usury statute. Following the                                                            
Berger decision, legislation  was passed that made advances based on                                                            
the Permanent Fund Dividend  illegal. The Department of Law does not                                                            
fully  agree with  the  outcome of  the  Berger case;  however,  the                                                            
ruling established  precedent for financial transactions.  This case                                                            
evidences that  financial advances would be legal  in the State even                                                            
if they were not regulated.                                                                                                     
                                                                                                                                
Mr. Sniffen then referenced  testimony from the American Association                                                            
of Retired People  (AARP) that recommended a partial  payment option                                                            
be included  in the bill.  This suggestion  was considered,  but was                                                            
determined  to be  too  problematic  for multiple  reasons.  Partial                                                            
payments  would  create   some  procedural  difficulties.   Advances                                                            
currently operate  under a system where the consumer  leaves a post-                                                            
dated check with  the lending institution to be cashed  after a two-                                                            
week period.  If partial payments  were allowed, the consumer  would                                                            
need to provide  the lender with a new check, and  the interest rate                                                            
information  would  have  to  be changed.  In  addition,  a  partial                                                            
payment  would be  allowable  under the  proposed  legislation if  a                                                            
consumer's  advance  goes into  default. Under  the  payment plan  a                                                            
consumer would  be able to make partial payments,  and no additional                                                            
fees would be required.                                                                                                         
                                                                                                                                
Mr.  Sniffen  continued   that  the  Department   of  Law  has  been                                                            
communicating  with  various  groups, not  exclusively  lenders,  to                                                            
consider  issues  surrounding   this  legislation.  The   Department                                                            
considered the  concerns expressed in the earlier  Committee hearing                                                            
of this  bill and  concluded that  this version  of the legislation                                                             
addresses those concerns in a "reasonable manner".                                                                              
                                                                                                                                
Amendment #1:  This amendment deletes "$2,000" and  inserts "$3,000"                                                            
in subsection  (b) of Sec. 06.50.030. Application.,  in Section 3 of                                                            
the  committee  substitute,  which  amends AS  06  by adding  a  new                                                            
Chapter  50. Deferred  Deposit  Advances.  The amended  language  in                                                            
Article 1. Licensing., on page 4 line 4 reads as follows.                                                                       
                                                                                                                                
     (b) The  applicant shall submit  with the application  the bond                                                            
     required  by AS 06.50.040 and  a nonrefundable application  fee                                                            
     in  an  amount  that  is  established   by  the  department  by                                                            
     regulation  and that  does not exceed  $3,000. The application                                                             
     fee for the initial license may not be prorated.                                                                           
                                                                                                                                
Senator  Bunde announced  this amendment  would be  NOT OFFERED  and                                                            
deferred to Amendment #3.                                                                                                       
                                                                                                                                
Amendment #2:  This amendment deletes "14" and inserts  "30" on page                                                            
10,  line  10,  in  Article  4. Licensee   Practices  and  Recipient                                                            
Rescission and Payment.,  of Chapter 50. Deferred Deposit Advances.,                                                            
created  by Section  3  of the  committee  substitute.  The  amended                                                            
language reads as follows.                                                                                                      
                                                                                                                                
          Sec. 06.50.440. Duration of advances. The minimum                                                                     
     duration of an advance is 30 days.                                                                                         
                                                                                                                                
This amendment  also deletes "14" and inserts "30"  and deletes "two                                                            
consecutive times"  and inserts "once" on page 10,  lines 27 and 28,                                                            
in  Chapter  50,  Article  4, created  by  Section  3.  The  amended                                                            
language reads as follows.                                                                                                      
                                                                                                                                
          Sec. 06.50.470. Renewal of advance. (a) The minimum term                                                              
     of a renewal of an advance is 30 days.                                                                                     
          (b) A licensee may not renew an advance more than once,                                                               
     after  which the licensee shall  require the advance  recipient                                                            
     to repay the advance in full.                                                                                              
                                                                                                                                
This amendment  also deletes  "as an annual  percentage rate  for 14                                                            
days for  each $100, and"  on page 11, lines  11 and 12, in  Chapter                                                            
50, Article 4,  created by Section 3. The amended  language reads as                                                            
follows.                                                                                                                        
                                                                                                                                
     Sec.  06.50.500. Posted  fee notice.  A licensee  shall post  a                                                            
     notice in  each business location that discloses  the fees that                                                            
     the licensee charges  for advances. The fees in the notice must                                                            
     be expressed  as a dollar amount,  and as an annual  percentage                                                            
     rate for  30 days for each $100.  The notice must also  contain                                                            
     any  other reasonably  necessary  information  required by  the                                                            
     department  by regulation. The  notice shall be posted  so that                                                            
     it  is conspicuous  to  an  advance  recipient or  a  potential                                                            
     advance recipient.  The lettering in the notice must be legible                                                            
     and at least one inch in height.                                                                                           
                                                                                                                                
Senator Hoffman moved for adoption.                                                                                             
                                                                                                                                
Co-Chair Wilken objected for an explanation.                                                                                    
                                                                                                                                
Senator  Hoffman  explained  this amendment  addresses  the  concern                                                            
expressed  at the earlier  Committee hearing  of this bill  that the                                                            
14-day  minimum  advance  should  be changed  to  a  30-day  minimum                                                            
advance.                                                                                                                        
                                                                                                                                
Senator Hoffman  explained that this bill would allow  a $15 fee per                                                            
$100 advance to  be required for each 14-day renewal  with a maximum                                                            
of two renewals. The 14-day  renewal would target military personnel                                                            
who might  only be  paid every 30  days. The  14-day renewal  period                                                            
would allow a lender to  charge a consumer two $15 fees, in addition                                                            
to the five-dollar  origination fee for a combined  fee of $35 for a                                                            
$100 advance.  He considered this  amount too high for such  a short                                                            
borrowing  period. This amendment  would allow  two 30-day  renewals                                                            
requiring a $15 fee per $100 advance.                                                                                           
                                                                                                                                
Senator Hoffman detailed  that if a consumer accepted a $100 advance                                                            
for the required minimum  advance period of 14 days, and extended it                                                            
twice for  a total of 45  days, the individual  would pay three  $15                                                            
renewal fees  and one $5  origination fee for  a total of $50.  This                                                            
amendment would allow only one 30-day renewal.                                                                                  
                                                                                                                                
Co-Chair  Wilken asked  if the maximum  length of  an advance  under                                                            
Amendment #2 would be 60 days.                                                                                                  
                                                                                                                                
Senator Hoffman affirmed.                                                                                                       
                                                                                                                                
Mr. Schmitz  stated that the sponsor  would oppose Amendment  #2. He                                                            
deferred to Mr.  Sniffen and the representative from  Cash Alaska to                                                            
address the sponsor's opposition to this amendment.                                                                             
                                                                                                                                
Mr. Sniffen surmised that  the extension of loans from 14 to 30 days                                                            
could effectively  "drive business away". Some states  that regulate                                                            
this industry  allow more  than two extensions,  while others  allow                                                            
only  one. He  also  deferred  to the  industry  to testify  to  the                                                            
effects of this amendment.                                                                                                      
                                                                                                                                
DEBORAH FINK,  Cash Alaska, testified that if the  minimum loan term                                                            
were extended  to 30  days, the  industry would  not "survive".  She                                                            
qualified that  because this industry is not currently  regulated in                                                            
Alaska, financial  data does not exist. Using data  from states with                                                            
regulated   industries  she   informed  that   lenders  are   making                                                            
approximately ten percent  on fees. The overhead of the advance does                                                            
not change  due to fixed costs; however  income would be  reduced by                                                            
half if the 30-day  extension were implemented. The  payday industry                                                            
could no longer support  the payroll advance loan program in Alaska.                                                            
She further predicted that  Internet-based businesses located out of                                                            
state  and  the "loan  by  phone industry"  would  thrive  with  the                                                            
absence of Alaska companies offering these loans.                                                                               
                                                                                                                                
Senator  Olson  anticipated  that  this  amendment   could  decrease                                                            
businesses' viability,  but disputed that the companies would go out                                                            
of business.                                                                                                                    
                                                                                                                                
Ms. Fink  argued  that some  businesses  would fail  if required  to                                                            
extend the  loans for a minimum  of 30 days.  She informed  that her                                                            
businesses start "in the  hole" each year because the amount of fees                                                            
collected  by  her businesses  is  equal  to  the amount  of  checks                                                            
written  from accounts with  non-sufficient  funds. The payday  loan                                                            
business  is really a collection  agency.  The 30-day minimum  would                                                            
reduce these  businesses' income by  half. No other state  imposes a                                                            
30-day  minimum,  and only  four  states  have instituted  a  14-day                                                            
minimum. The majority of  states do not have a minimum advance term,                                                            
and many are issuing five, six and seven-day advances.                                                                          
                                                                                                                                
Senator  B.  Stevens  asked  whether  Internet  companies   offering                                                            
payroll   advance   loans   and   "loan-by-phone"    companies   are                                                            
unregulated.                                                                                                                    
                                                                                                                                
Ms.  Fink affirmed  and  explained  these  businesses  operate  from                                                            
states with no  usury regulations. Approximately 60  payroll advance                                                            
companies operate on the  Internet, and their fees range from $19.88                                                            
to $60 per  $100 advance, with a one-day  minimum. These  businesses                                                            
especially  flourish in  the six states  that do  not allow  payroll                                                            
advances.                                                                                                                       
                                                                                                                                
Senator Hoffman  asked Ms. Fink to  comment on the rollover  changes                                                            
proposed in Amendment #1.                                                                                                       
                                                                                                                                
Ms. Fink  replied that  the payroll advance  companies could  comply                                                            
with a single rollover,  although customers often utilize rollovers.                                                            
This provision would eliminate an option for customers.                                                                         
                                                                                                                                
Co-Chair Wilken  commented that currently there are  no restrictions                                                            
on rollovers.                                                                                                                   
                                                                                                                                
Ms. Fink affirmed.                                                                                                              
                                                                                                                                
Senator Bunde  pointed out  that consumers  could simply have  a new                                                            
loan  issued after  utilizing  the maximum  number  of rollovers  on                                                            
their previous  loan. He asked if  having a new loan issued  is more                                                            
expensive than a loan renewal.                                                                                                  
                                                                                                                                
Ms. Fink replied that a  rollover is less expensive for the customer                                                            
due to the five-dollar origination fee for each new loan.                                                                       
                                                                                                                                
Senator   Bunde  understood   that   Ms.  Fink's   businesses   make                                                            
approximately $1.50 per $100 loan.                                                                                              
                                                                                                                                
Ms.  Fink  responded  that  a  $1.50 profit  per  $100  loan  is  an                                                            
industry-wide  average based  on the data  collected in states  that                                                            
regulate  the  payroll  loan  industry.  Ms.  Fink  added  that  her                                                            
businesses average a profit between $1.50 and $2 per $100 loan.                                                                 
                                                                                                                                
Senator  Bunde inquired  if the  passage of  this legislation  would                                                            
provide  the State  with more  information  about  the payroll  loan                                                            
industry in future years.                                                                                                       
                                                                                                                                
Ms. Fink replied  that the State would  know "everything"  about the                                                            
payroll  loan  industry's  volume  and  profits if  this  bill  were                                                            
implemented.                                                                                                                    
                                                                                                                                
Senator Bunde  understood the presence of significant  opposition to                                                            
this service and suggested  that instead of offering this amendment,                                                            
Senator  Hoffman could sponsor  other legislation  to eliminate  the                                                            
industry.  Senator  Bunde emphasized  that  while the  payroll  loan                                                            
industry  is operating  in Alaska  it should  be  regulated so  that                                                            
industry information can be compiled.                                                                                           
                                                                                                                                
Senator  Hoffman clarified  his concerns  relating  to the  rollover                                                            
provision given  that the cost of a $500 loan is $80.  When the term                                                            
of the loan  is due, customers  are forced  to rollover the  loan if                                                            
they do not have the finances  to pay for the original amount of the                                                            
loan and  the fees  incurred. Forced  renewals could  be avoided  if                                                            
this legislation offered  a partial payment provision. The extension                                                            
of  the  minimum  loan term  to  30  days  would  accommodate  those                                                            
customers  who are  paid on a  monthly basis.  Currently,  customers                                                            
borrowing $500 for a 30-day  period consisting of two renewals would                                                            
pay $150  in renewal fees  and a $5 origination  fee for a  total of                                                            
$155. Amendment  #2 would reduce the fees by the amount  of a second                                                            
rollover, or $75, and would  allow the customer up to 60-days to pay                                                            
for the loan and fees.                                                                                                          
                                                                                                                                
Senator Bunde  commented that if the consumer cannot  repay the loan                                                            
and fees  after one  renewal, it  is unlikely  they could repay  the                                                            
loan after a second renewal.                                                                                                    
                                                                                                                                
Senator  Hoffman defended  Amendment  #2 by stating  that under  the                                                            
current  version   of  this  bill  the  consumer  would   have  more                                                            
difficulty paying the loan  because after the first 14-day period an                                                            
additional $75 renewal fee would be incurred.                                                                                   
                                                                                                                                
Senator Bunde  agreed that  the consumer would  likely be unable  to                                                            
pay the  loan and fees  after an additional  $75 fee were  incurred,                                                            
resulting in "bad debt".                                                                                                        
                                                                                                                                
Senator  Hoffman  moved  to  divide  the  amendment.  Amendment  #2a                                                            
pertains  to the extension  of the minimum  loan term from 14  to 30                                                            
days.  Amendment #2b  pertains to  reducing the  number of  renewals                                                            
from two to one.                                                                                                                
                                                                                                                                
Senator B.  Stevens referred  to the chart  provided by Cash  Alaska                                                            
titled  "State  Law  Governing   Deferred  Deposit  Services/Payday                                                             
Advance" [copy  on file] and commented that the states  with liberal                                                            
laws and political  representatives,  such as Wisconsin and  Oregon,                                                            
have  $25,000  and  $50,000  payday loan  limits  with  no  interest                                                            
guidelines  and  minimal  loan  terms.  In contrast,  traditionally                                                             
conservative  states  have  more  regulations.   He  emphasized  the                                                            
"unique"  nature  of  the  statewide  regulatory  patterns  on  this                                                            
industry.                                                                                                                       
                                                                                                                                
Senator Dyson referenced  Senator B. Stevens's comments and surmised                                                            
that the political leaders  in the states with strict regulations on                                                            
this industry  have realized, "how stupid their constituencies  are,                                                            
and how  much they  need  to be protected."  He  continued that  his                                                            
constituents do  not need protections on this industry  because they                                                            
have the ability to make rational decisions.                                                                                    
                                                                                                                                
Senator  Dyson  asked  Ms.  Fink to  clarify  if  the  payroll  loan                                                            
industry's  profits would  actually  be reduced by  one-half if  the                                                            
minimum advance terms were  increased to 30 days. He understood that                                                            
the profits  would  not be  reduced by  one-half unless  all of  the                                                            
consumers  waited to  repay their  advances  until the  last day  of                                                            
their 30-day term. In earlier  testimony Ms. Fink had mentioned that                                                            
many consumers  pay their  loans back  in seven  to nine days,  well                                                            
before the 14-day loan expires.                                                                                                 
                                                                                                                                
Ms. Fink explained  that the gross  income would be reduced  by one-                                                            
half  and  that  profits  would be  negative  were  the  loan  terms                                                            
extended  to 30  days.  She referred  the  Committee  to a  document                                                            
titled  "Where do  fees for Deferred  Deposit  Advance Services  go"                                                            
[copy on file]  to view the expenses of a payroll  advance business.                                                            
She predicted that consumers  would not repay their loans as rapidly                                                            
if the minimum advance  term were increased to 30 days. She asserted                                                            
that  members  of the  military  do not  need  a 30-day  minimum  as                                                            
Senator  Hoffman suggested  because  most consumers  take out  loans                                                            
between paydays and repay the loan on their payday.                                                                             
                                                                                                                                
Ms. Fink  continued  that lenders  try  to ensure  the repayment  of                                                            
loans they  issue. Consumers  who renew loans  are likely to  become                                                            
consumers  who do not repay  their loans.  The industry's  preferred                                                            
consumers  are those who  pay their  loan as soon  as possible.  The                                                            
industry  attempts to  avoid consumers  who regard  the advances  as                                                            
"loans", and  attempts to attract  consumers who regard the  advance                                                            
as "a little something"  to assist them until payday.  If the 30-day                                                            
term is implemented, consumers  will no longer view the advance as a                                                            
"stopgap measure",  but as a loan. She predicted that  if the 30-day                                                            
term were instituted fewer consumers would repay their loans.                                                                   
                                                                                                                                
Ms.  Fink  relayed   that  while  reviewing  the  transactions   her                                                            
businesses conducted in  2003, she discovered that many transactions                                                            
were on behalf of repeat  customers. She estimated that 30-day terms                                                            
would reduce the number  of loans issued by 30-percent, consequently                                                            
reducing her  businesses' income by  30 percent. She added  that her                                                            
profits are  approximately five-percent,  meaning that a  30 percent                                                            
reduction in income would produce a negative balance.                                                                           
                                                                                                                                
Co-Chair  Green stated  her  assumption  that this  legislation  has                                                            
"come together  as a package"  including  rates, fees, percentages,                                                             
terms and other factors  regulating the payroll advance industry. If                                                            
certain  changes were  made to  this bill,  other  changes would  be                                                            
required to balance the  package. She expressed concern that if this                                                            
legislation is not properly  balanced it could be detrimental to the                                                            
payroll  advance   industry  and  result  in  the  industry   "going                                                            
underground".                                                                                                                   
                                                                                                                                
Senator  Hoffman countered  that Cash  Alaska,  not the legislative                                                             
finance committees  or the Murkowski  Administration submitted  this                                                            
legislation  and the supporting  documentation.  The industry  could                                                            
not expect to determine all of the regulations pertaining to it.                                                                
                                                                                                                                
Senator Hoffman  requested that the Committee consider  that none of                                                            
those  who testified  at this bill's  previous  hearing, except  the                                                            
industry,  were  in support  of  this  legislation.  The  testifiers                                                            
requested changes to this  bill in response to certain concerns, and                                                            
Amendment #2 would implement those changes.                                                                                     
                                                                                                                                
Co-Chair  Wilken  asked  for  an  explanation   of  the  portion  of                                                            
Amendment #2b  that would delete the  following language  on page 11                                                            
lines 11-12:  " as an annual  percentage rate  for 14 days  for each                                                            
$100, and".                                                                                                                     
                                                                                                                                
Senator Hoffman  replied that  this deletion  would be a  conforming                                                            
change to reflect  the establishment of a 30-day minimum  loan term.                                                            
                                                                                                                                
A roll call was taken on the motion to adopt Amendment #2a.                                                                     
                                                                                                                                
IN FAVOR: Senator Hoffman and Senator Olson                                                                                     
                                                                                                                                
OPPOSED: Senator Bunde,  Senator Dyson, Senator B. Stevens, Co-Chair                                                            
Green and Co-Chair Wilken                                                                                                       
                                                                                                                                
The motion FAILED (2-5)                                                                                                         
                                                                                                                                
Amendment #2a FAILED to be adopted.                                                                                             
                                                                                                                                
A roll call was taken on the motion to adopt Amendment #2b.                                                                     
                                                                                                                                
IN FAVOR: Senator Hoffman and Senator Olson                                                                                     
                                                                                                                                
OPPOSED: Senator Dyson,  Senator B. Stevens, Senator Bunde, Co-Chair                                                            
Green and Co-Chair Wilken                                                                                                       
                                                                                                                                
The motion FAILED (2-5)                                                                                                         
                                                                                                                                
Amendment #2b FAILED to be adopted.                                                                                             
                                                                                                                                
AT EASE 9:44 AM / 9:49 AM                                                                                                       
                                                                                                                                
Amendment #3:  This amendment deletes "$2,000" and  inserts "$3,000"                                                            
in  subsection  (b)  of  Sec.  06.50.030.  Application.,   and  Sec.                                                            
06.50.080.  Renewal  of license.,  in  Section  3 of  the  committee                                                            
substitute, which amends  AS 06 by adding a new Chapter 50. Deferred                                                            
Deposit Advances. The amended  language in Article 1. Licensing., on                                                            
page 4 lines 2 - 5 reads as follows.                                                                                            
                                                                                                                                
     (b) The  applicant shall submit  with the application  the bond                                                            
     required  by AS 06.50.040 and  a nonrefundable application  fee                                                            
     in  an  amount  that  is  established   by  the  department  by                                                            
     regulation  and that  does not exceed  $3,000. The application                                                             
     fee for the initial license may not be prorated.                                                                           
                                                                                                                                
The amended language on page 5, lines 12 - 16 reads as follows.                                                                 
                                                                                                                                
          Sec. 06.50.080. Renewal of license. A license issued                                                                  
     under this  chapter shall be renewed on or before  the date set                                                            
     by the department  by submitting to the department  a completed                                                            
     renewal  application on  a form established  by the  department                                                            
     and  paying  a nonrefundable  renewal  fee established  by  the                                                            
     department, which may not exceed $3,000.                                                                                   
                                                                                                                                
Senator Bunde stated that  a discrepancy existed in this legislation                                                            
regarding  the license  fee. He  noted a  new draft  fiscal note  to                                                            
reflect the impact of this amendment.                                                                                           
                                                                                                                                
MARK  DAVIS,   Director,   Division  of   Banking,  Securities   and                                                            
Corporations,  Department  of Community  and  Economic Development,                                                             
testified  via  teleconference  from  an offnet  location  that  the                                                            
increased license  fee would produce  significant revenue.  However,                                                            
he  understood  from correspondence   with Senator  Bunde  that  the                                                            
intent  is that  the program  be revenue  neutral in  the first  few                                                            
years of operation,  which the Division  determined would  require a                                                            
$5,000 fee annually.  Mr. Davis expressed concern  that the proposed                                                            
fee would  be too high  because it might  cause industry members  to                                                            
decide  to conduct business  illegally  in order  to avoid the  fee.                                                            
This amendment would require  a biannual fee of $3,000. The Division                                                            
would  prefer  that the  licensing  fee  be as  revenue  neutral  as                                                            
possible,  and will  adopt the  highest  fee the  industry would  be                                                            
willing to accept.                                                                                                              
                                                                                                                                
Senator Bunde remarked  that the cost to administer the program, and                                                            
not  the  preferences  of the  industry,  should  be  considered  to                                                            
determine  the licensing fee.  If the Division  calculates  that the                                                            
cost to  administer the program  is higher  than the industry  would                                                            
voluntarily  support with  fees, efforts should  be taken to  reduce                                                            
expenses.                                                                                                                       
                                                                                                                                
Mr.  Davis  outlined   that  the  Division  is  attempting   to  cut                                                            
administrative expenses  related to the regulations proposed in this                                                            
legislation   by  reducing  contractual   services  such   as  legal                                                            
services.  He explained  that  if  this bill  were adopted,  a  bank                                                            
examiner  position  would be  statutorily  required  to oversee  and                                                            
address potential  litigation. The  administrative costs  would also                                                            
include  a clerk to handle  increased correspondence;  however,  the                                                            
clerk  position  could  possibly be  eliminated  to  further  reduce                                                            
costs.                                                                                                                          
                                                                                                                                
Senator Bunde  acknowledged  the high workload  of the Division  and                                                            
the increased  demands this  legislation would  create. He  asserted                                                            
that despite  this workload, the full-time  bank examiner  would not                                                            
need to be exclusively  devoted to the payroll loan  businesses; the                                                            
examiner  could  also  serve  other  businesses.  The  payroll  loan                                                            
industry should not pay  for all of the expenses related to the bank                                                            
examiner,  but rather the  costs should be  distributed amongst  all                                                            
the businesses the examiner would serve.                                                                                        
                                                                                                                                
Co-Chair  Wilken explained  that the  options  before the  Committee                                                            
regarding the  application fee are threefold: leave  the language as                                                            
is, which would require  a fee not to exceed $2,000; adopt Amendment                                                            
#3, which  would require a  fee not to exceed  $3,000; or raise  the                                                            
fee to  $5,000 to  reflect the fee  recommended  by the Division  of                                                            
Banking.                                                                                                                        
                                                                                                                                
Senator Bunde moved for adoption of Amendment #3.                                                                               
                                                                                                                                
Senator Bunde offered an  amendment to the amendment to increase the                                                            
licensure fees to $5,000.  Because the sponsor of the amendment made                                                            
the motion,  no further action was  necessary and the amendment  was                                                            
AMENDED.                                                                                                                        
                                                                                                                                
Co-Chair  Green asked  whether every  industry  was responsible  for                                                            
administrative costs incurred  by the State during the first year of                                                            
governmental  oversight. She  stated that  a $5,000 application  fee                                                            
would be too high.                                                                                                              
                                                                                                                                
Mr. Davis informed  that the Division  is solvent because  it has an                                                            
annual budget  of approximately  $2.1 million,  and should  generate                                                            
revenues  of approximately  $14  million.  Fees collected  from  the                                                            
banking industry  are used to pay most of the Division's  costs. The                                                            
Division initially supported  the establishment of the licensing fee                                                            
amounts for payroll  advance loan businesses through  the regulatory                                                            
process. This  amendment would allow the Division  to impose fees up                                                            
to $5,000.                                                                                                                      
                                                                                                                                
Senator Bunde pointed out  that license fees have been increased for                                                            
existing  industries  to provide  adequate  funding  to support  the                                                            
administrative costs to  the State in order that State subsidies can                                                            
be eliminated.                                                                                                                  
                                                                                                                                
                                                                                                                                
SFC 04 # 98, Side B 09:59 AM                                                                                                    
                                                                                                                                
                                                                                                                                
Senator Olson  asked the bill's sponsor  to comment on the  proposed                                                            
amended amendment.                                                                                                              
                                                                                                                                
Mr. Schmitz  responded that  the sponsor  supports the amendment  in                                                            
its original form. He added  that the sponsor does not want to raise                                                            
fees  to  the  extent  that  the industry   is eliminated,   forcing                                                            
Alaskans to use out-of-state payday loan businesses.                                                                            
                                                                                                                                
Senator Olson  referenced Mr. Davis' suggestion that  if the license                                                            
fees were too  high, some operators would "go underground".  Senator                                                            
Olson  asked  how  many  underground  payday   loan  operations  are                                                            
currently active.                                                                                                               
                                                                                                                                
Mr.  Davis   replied  that   because  the   industry  is   currently                                                            
unregulated  in   Alaska  the  Division  is  aware   of  only  those                                                            
businesses that advertise.  He confirmed that underground operations                                                            
exist.                                                                                                                          
                                                                                                                                
A  roll call  was taken  on  the motion  to  adopt Amendment  #3  as                                                            
amended.                                                                                                                        
                                                                                                                                
IN FAVOR: Senator Olson, Senator Bunde and Co-Chair Wilken                                                                      
                                                                                                                                
OPPOSED: Senator B. Stevens,  Senator Dyson, Senator Hoffman and Co-                                                            
Chair Green                                                                                                                     
                                                                                                                                
The motion FAILED (3-4)                                                                                                         
                                                                                                                                
The amendment as amended FAILED to be adopted.                                                                                  
                                                                                                                                
Amendment #4:  This amendment is identical  to the original  version                                                            
of  Amendment #3.  It  increases the  license  fees  from $2,000  to                                                            
$3,000.                                                                                                                         
                                                                                                                                
Senator Bunde moved for adoption.                                                                                               
                                                                                                                                
Without objection the amendment was ADOPTED.                                                                                    
                                                                                                                                
Co-Chair  Green offered a  motion to report  SB 272 as amended  from                                                            
Committee with  individual recommendations and a forthcoming  fiscal                                                            
note.                                                                                                                           
                                                                                                                                
Senator Hoffman  noted that this legislation  should not  be brought                                                            
forth  by the legislature  because  it would  negatively affect  the                                                            
court's determination.                                                                                                          
                                                                                                                                
There was  no objection  and CS  SB 272 (FIN)  MOVED from  Committee                                                            
with a forthcoming  fiscal note dated 4/28/04 for  $130,500 from the                                                            
Department of Community and Economic Development.                                                                               
                                                                                                                                

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