The Committee on Commerce and Labor was called to order at 3:45 p.m., on Wednesday, March 24, 1999. Chairman Barbara Buckley presided in Room 3142 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List. All Exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

COMMITTEE MEMBERS PRESENT:

Ms. Barbara Buckley, Chairman

Mr. Richard Perkins, Vice Chairman

Mr. Bob Beers

Ms. Merle Berman

Mr. Joe Dini, Jr.

Mrs. Jan Evans

Ms. Chris Giunchigliani

Mr. David Goldwater

Mr. Lynn Hettrick

Mr. David Humke

Mr. Dennis Nolan

Mr. David Parks

Mrs. Gene Segerblom

COMMITTEE MEMBERS ABSENT:

Mr. Morse Arberry, Jr.

GUEST LEGISLATORS PRESENT:

Assemblyman John Carpenter, Assembly District 33

Senator Mark Amodei, Capital Senatorial District

STAFF MEMBERS PRESENT:

OTHERS PRESENT:

Chairman Buckley opened the meeting and advised the committee the order in which the bills would be heard. She also said a work session would follow the hearing. Chairman Buckley advised those persons testifying before the committee on proper procedures for testimony.

Chairman Buckley handed the gavel over to Vice Chairman Perkins so she could introduce the bill. Vice Chairman Perkins said it was his intention to move the bills along quickly.

Assemblywoman Barbara Buckley, representing district 8, said that was an "omnibus consumer protection" bill. She expressed her frustration with Nevada’s current consumer protection laws and said they were some of the worst in the country. Ms. Buckley reviewed section 2 of the bill, which expanded the definition of deceptive trade practices. Current statute, outlined in NRS chapter 598, had not been updated in some time. Ms. Buckley pointed out fraudulent persons changed their ways often to avoid capture and prosecution. An update of consumer protection statutes would ensure fraudulent persons would not take advantage of consumers. Ms. Buckley again referred to section 2, which specified down payments must be returned to individuals who unsuccessfully applied for loans or other forms of credit, even if the down payment was a condition of financing. She explained sections 1, 2, and 3 were attempts by the bill drafter to clarify the language to prohibit fraudulent lenders from keeping those down payments.

Section 3 stipulated persons involved in contract negotiations, undertaken in a language other than English, must be provided an unexecuted copy of the contract in that language. Ms. Buckley said in southern Nevada, businesses were marketing to Hispanic customers in the Spanish language and conducting transactions in Spanish. Then, when the contract was drawn up, the business refused to provide that contract in Spanish.

Sections 4, 5, and 6, described the unfair and deceptive practice law, which currently did not make anything illegal unless a sale of goods took place. A major loophole was left open because leasing was not included. Section 6, page 3, paragraph 14, added another deceptive trade practice: "knowingly making a false representation." Section 7 added lease language for previously stated reasons. That section also updated the "bait and switch law" in regard to leases. Section 9 expanded the deceptive trade practice law by providing a person who engaged in a deceptive trade practice, or used coercion, duress, or intimidation, would be punished accordingly.

Ms. Buckley wanted to discuss her intent in drafting section 12, which referred to "payday lending." She presented a handout entitled "Financing the Unbanked" (Exhibit C) and a document by the Consumer Federation of America, which discussed the growth of payday loan lending (Exhibit D). Additionally, Ms. Buckley handed out a statement from the attorney general’s Bureau of Consumer Protection in support of certain portions of the bill (Exhibit E). She said banks no longer issued small loans to consumers due to mergers, deregulation, and other trends in the industry. As a result, businesses that loaned money to people wanting to borrow small amounts over a short period of time were cropping up everywhere. Ms. Buckley said those new payday lenders could be seen on any corner throughout Nevada. Last session, Assemblyman Wendell Williams had introduced a bill on check cashing, to limit the amount a check casher could charge customers. Ms. Buckley said testimony was presented during a hearing on that bill from businesses in the deferred deposit industry. Prior to that hearing, many legislators had not known such an industry existed. Ms. Buckley explained the process in which lenders gave money to customers. In the deferred deposit industry, a customer wrote a check to the check casher, which then held the check until the customer’s next payday, hence the name payday lending. The check casher provided the funds to the customer, knowing funds were not presently available, but on the promise that the funds would be available on the customer’s next payday.

Ms. Buckley was concerned because those payday lenders charged exorbitantly high interest rates. Some were loaning at as much as 1000 percent interest. The rollover aspect of the lending process also concerned her. She said in many cases, the customers could not raise enough money to pay for the loan they took out in the first place. More money was borrowed, and the person was eventually indebted far beyond their ability to pay. Ms. Buckley was concerned because the finance charges paid by deferred deposit customers were extremely high. She said most users of payday lending did not have much money in the first place, and the payday lending process never let them out of debt.

The other sections of the bill were derived from language included in the Consumer Federation of America’s Model National Legislation. She said approximately 20 states prohibited payday lending. Ms. Buckley explained she had not chosen to eliminate the industry all together with the bill. She felt a regulatory approach was more appropriate.

Daphne Hunkin, a private citizen, was a 6 year resident of Nevada. She wanted to share her costly experiences with the deferred deposit industry. The short-term and high-rate loans came with different names: some were called payday loans, also cash advance loans, check advance loans, post-dated check loans, and deferred deposit check loans. Ms. Hunkin reviewed the lending process with the committee. She emphasized there was no restriction on the amount she was allowed to borrow, and the amount was not based on her income. For the $200 to $500 loans Ms. Hunkin had taken, fees ranged from $5 per $100 loaned per week to $15 per $100 loaned per week, depending on the lender. Ms. Hunkin reiterated she had been easily given the loan by signing a post-dated check to the lender. Loans could be renewed at the end of the term with a rollover fee. Those types of loans were very high priced credit. The annual percentage rates she had been charged varied from 240 percent to 720 percent annually.

Ms. Hunkin had read the report authored by the Consumer Federation of America and easily related to the situations in the report. The use of a personal check made collection easier for lenders, because the deferred deposit lenders could sue delinquent customers under the state’s bad check law. She had been threatened into paying additional fees by some lenders to avoid being sued under that law. Under current state law, deferred deposit lenders had both civil and criminal resources available to collect debts. Ms. Hunkin pointed out no other lending industry enjoyed that privilege. Additionally, contracts had never been utilized during her dealings with deferred deposit lenders. She said the nature of those loans put borrowers on a "debt treadmill." Ms. Hunkin was outraged when she learned minorities and lower income families were targeted by the deferred deposit industry.

Ms. Buckley continued by turning to section 12, page 5, of the bill. She said the protections guaranteed by other states could be broken into categories. The first were disclosures requiring an explanation of the services to be provided. Conspicuous statements were required, advising customers they would not be prosecuted under criminal law for a deferred deposit collection. She reiterated the deferred deposit industry had an advantage over other lending mechanisms because bad checks carried criminal implications. Section 13 also dealt with the same disclosure. Section 14 addressed interest rates, capping the interest at 36 percent per year, plus an administration fee. Section 15 made public policy statements by providing it was unlawful to threaten criminal prosecution to deferred deposit debtors. Additionally, the section provided protection to consumers against confessions of judgement or waivers of the right to a jury trial. She said some members of the deferred deposit industry had expressed an interest in helping her with the language of the bill, while others had threatened her for bringing the issue forward.

Ms. Segerblom thought a limit on deferred deposit finance charges had been put in statute during the previous legislative session. Ms. Buckley said that language had been deleted when the bill reached the Senate. Passage of that statute had required deferred deposit lenders to register with the state. She continued by expressing her concern about the increase in debt incurred by consumers using payday lending. She observed the banking industry did not have those problems, because they did not lend to those persons they thought to be risky. At the same time, the deferred deposit industry was targeting those consumers who were unable to pay.

Mr. Nolan said the bill included a requirement forcing a lender to provide a contract in both English and Spanish when the customer was Hispanic. He stated there were other provisions in the bill requiring contracts to be drafted in the primary language of the person who was entering into the contract. He wondered if it would be difficult to find people to draft the intricate language of a contract in those other languages. Ms. Buckley said her intent was to target transactions conducted by a business in another language. She stated everyone was legally bound to read a contract before signing, and persons who were unable to read the language of a contract were bound to find someone who could. She felt businesses who deliberately marketed to non-English speaking people and had salespeople who conducted transactions in that language were not allowing the customer to see a copy of the contract in that language. Ms. Buckley stated the bill could be shaped to clarify that desire. She felt the bill did not apply to other groups unless the business was specifically owned, staffed by, and marketed to a specific ethnic group.

Ms. Guinchigliani asked who was the commissioner in the bill. Ms. Buckley answered that was the Commissioner of Financial Institutions.

Ms. Guinchigliani asked if there would be a toll free number where complaints could be voiced. Ms. Buckley answered a number would be available.

Mr. Goldwater asked about the amount a lender could charge if the deferred check was returned for insufficient funds. That question was in reference to section 14, number 2. The language in the bill stated a lender could not charge the customer more than a $15 service fee for a returned check. Ms. Buckley agreed the language was somewhat restrictive and said she would look into making changes to enable the lender to charge more, if he was charged a higher fee by his banking institution.

Gail Burks, Executive Director of the Nevada Fair Housing Center, said her corporation dealt with housing and banking issues in Nevada and across the nation. She supported the bill, and felt it closed a loophole regulation of the deferred deposit industry. Credit was defined by the Federal Truth in Lending law as "a right granted by a creditor to defer payment of a debt… A loan, in Black’s Law Dictionary, was the delivery of one party of one thing for another in exchange for a later payment." According to those definitions, a deferred deposit did not constitute a loan. The loopholes in current state law allowed deferred deposit companies to be set up as international or national corporations to avoid being subject to state law. The economic effect was demonstrated by the amortization schedule provided by Ms. Burks (Exhibit F).

Ms. Burks gave an example using a 2-week loan of $200. If the customer paid back the loan within the 2-week period, the cost of the loan would be approximately $40. However, if she carried the loan out over 1-year, it would cost $1,042. Ms. Burks also discussed the practice of rolling over loans. If a customer rolled over a loan of $200, over 1-year’s time, the cost of the loan would be over $35,000. She called the deferred deposit industry "fringe banking" which was trying to service a market left open by the traditional banking industry.

Ms. Burks stated several other states had aggressive laws aimed against the deferred deposit industry. She referred to Virginia’s law, which capped the loan amount that could be borrowed from a deferred deposit lender. She said that law was similar to the bill being discussed by the committee. Georgia and Kentucky were also dealing with the legality of deferred deposit businesses.

Michele Johnson, President of Consumer Credit Counseling Service, said her organization provided several services, most of which were focused on education. According to Ms. Johnson, deferred deposit businesses did not perform the credit checks made by traditional lending venues. Many low to moderate income consumers were targeted by deferred deposit lenders because they did not have the credit choices offered to more credit-worthy consumers. Ms. Johnson also pointed out the debt incurred by customers of deferred deposit did not stop at the interest. Fees were also charged for sending letters, completing collections calls, and many other services. She said Nevada had the second highest bankruptcy growth in the nation for 1998. Ms. Johnson also submitted a written copy of her testimony (Exhibit G). It included several examples of the forms and disclosure statements utilized by various check cashers.

Several persons who came to her organization for help owed more to deferred deposit lenders than their monthly income. Another factor in the problem was a customer could go to many different lenders and take out several loans easily. Ms. Johnson stated regulation would offer protection to those indebted consumers.

Mr. Nolan asked if the deferred deposit lenders were so deceptive that they did not disclose the interest rate and long-term obligations. He wondered if the customers were so desperate they were willing to accept the terms, no matter how bad. Ms. Johnson replied annual percentage rates were disclosed, but were minimized to the customer as inapplicable. Most customers lived paycheck to paycheck and took out the loans to pay their living expenses. They did not have the money to pay back the lender. Annual percentage rates often became a reality for those customers. Ms. Johnson felt desperation was not a factor. Ms. Burks also responded by stating no disclosures were made on the compound interest of the loan. Unlike a mortgage or other traditional loan, the ending balance and payment information on a deferred deposit loan was never made available.

Mr. Goldwater stated the bill could be reworked to eliminate the deceptive practices of the deferred deposit industry, but the bill as written did not accomplish that goal. He said there was a difference between annual percentage rate and the stated percentage rate. In the example presented by Ms. Burks, he thought the daily compounding rate was the real problem.

Michael Pawlak, a member of the Clark County Community Resources organization, submitted written testimony in favor of the bill (Exhibit H). He felt the legislation was important to Nevada consumers. According to his statement, many new families in southern Nevada relied on nontraditional lending sources. He pointed out many of those problems were exacerbated by language differences. The work he had done in Clark County allowed him to become familiar with the ways check cashing affected consumers and the community. It was Mr. Pawlak’s opinion the bill would help protect honest businesses in the deferred deposit industry.

Chairman Perkins asked for further testimony in favor of the legislation. Seeing no one, he called up the first witness in opposition to the bill. Ms. Buckley interjected the bill as drafted applied only to check cashers under the referenced chapter. She was considering amending the bill so it applied to all small loans issued by cash lenders. Chairman Perkins urged the people testifying in opposition to the bill to keep their testimony brief.

Robert Frimet, President of the Nevada Independent Check Cashing Association and President of Casa de Cambia Check Cashing, was concerned about sections 11 through 17 of the bill. He submitted a written copy of his testimony
(Exhibit I). The members of the association were regulated by legislation passed in the 1997 legislative session. Mr. Frimet outlined his employment history in Nevada, including his involvement at various levels of the check cashing industry. He owned a check cashing business with three locations in Las Vegas. Mr. Frimet said the bill would take away everything he had worked so hard to build.

He said the members of the association had complied with chapter 604 of NRS to the letter. According to Mr. Frimet, the businesses in the deferred deposit industry had participated in workshops and public hearings with regulators. The interaction allowed formulation of regulations benefiting consumers, while maintaining the integrity of the deferred deposit industry. Mr. Frimet said NRS 604 required check cashers to post a $50,000 bond to show viability and fiscal responsibility, and required the owners of businesses to pass a financial and criminal background check. The law also required the businesses to post the fees in the building, showing the customer what they were being charged. Consumers were protected by a disclosure of fees, which they were required to sign under the law. However, current statute did not limit the profitability of lenders. Additionally, current law could not regulate businesses without a license under NRS 604, who were most likely misleading consumers.

Mr. Frimet said he had several conversations with the financial commissioner concerning those "renegade" lenders. The commissioner assured Mr. Frimet cease and desist orders were sent to such lenders as soon as the agency learned of their existence. Mr. Frimet argued businesses not operating under NRS 604 and not members of the Nevada Independent Check Cashing Association should not be allowed to do business. Deferred deposit lenders who were complying with the law should be allowed to operate with no further restriction. Mr. Frimet read into the record a letter from one of his customers (Exhibit I). The letter expressed satisfaction with the check cashing process and stated the customer had been aware of the fees paid to the lender. The author urged the lawmakers to allow those lenders to operate without restriction. Mr. Frimet asserted the letter exemplified the necessity for check cashers in the community and the positive experience customers had with businesses in the industry. He stated there were over 33,000 active customers and 175 employees in the deferred deposit industry in Nevada. Approximately $660 million was outstanding to deferred deposit customers. A 1997 study by the Department of Treasury revealed there were over 5,000 check cashing businesses in the United States, who cashed over 180 million checks amounting $55 billion. Mr. Frimet stated consumers dictated the market for deferred deposits and check cashing. He felt that government should support "fringe banking".

Mr. Frimet continued by arguing the business of check cashing was high risk, and felt he should be able to use whatever legal means necessary to recoup losses. He stated insufficient funds checks did not have to be prosecuted criminally; however, customers who closed accounts or stopped payment of checks should be held liable under criminal law. He acknowledged those risks were the price of doing business. He concluded by stating he should be allowed to make profit at will and usury was eliminated in Nevada to foster new enterprise. He said the bill was too limited because it told him how to run his business, from the amount he could loan, to the amount collected in interest. The bill would force him "out of business and into bankruptcy" and eliminate a service needed by many consumers. He also stated employees in the industry would be forced to collect unemployment. Mr. Frimet urged the committee to allow NRS 604 to regulate the industry. He stated only four complaints had been made to the commissioner’s office since July of 1998 against the deferred deposit industry.

Mr. Frimet also wanted to address the issue of annual percentage rates. He said those rates had been created by the Federal Reserve Bank to allow customers to compare prices. He stated annual percentage rates were not applicable to loans given by check cashers, which only lasted 2 to 4 weeks. Mr. Frimet stated none of his customers were interested in annual percentage rates, although as of May 1, 1999, lenders were required to disclose those rates.

Mr. Nolan asked what percentage of loans defaulted at Mr. Frimet’s business. Mr. Frimet answered approximately 25 percent. He had been in business for just over 1 year and was holding $35,000 in returned checks. He stated collection was very difficult. He estimated 3 out of 10 borrowers defaulted on their loans.

Mr. Nolan asked what the highest annual percentage rate was for lending. Mr. Frimet said he was not familiar with those rates. He reviewed the amounts he charged to customers, which ranged from $15 to $25 per week, depending on the amount loaned. Mr. Frimet asserted those charges were much less than what a customer could incur at a traditional bank. He reiterated he did not have any information on the annual percentage rates of the loans.

Ms. Buckley asked if Mr. Frimet’s business granted rollovers for those loans. He answered affirmatively. She wondered what percentage of his customers utilized rollovers. Mr. Frimet estimated 30 percent rolled over once or twice, while 10 percent rolled over beyond 6 weeks.

Ms. Buckley asked how much a customer would pay if they borrowed $300, as a general rule. Mr. Frimet said customers could come in and make payments on the loan to reduce the principle or extend the loan by requesting a rollover. He stated only a few customers utilized rollovers.

Ms. Buckley did not feel he had answered the question, so she put the question to him again. Mr. Frimet replied $100 per month was the charge if the customer borrowed $300. The average term of advance was 2 weeks. He said the fees were so high because the loan was unsecured and the business was very risky.

Ms. Buckley asked how long the term was for borrowing. She wanted to know the cost of credit over several months. Mr. Frimet answered out of the 10 percent who rolled over loans, half went 2 months and the other half went 3 months. He said it may cost the customer $300 over a 90 day period to borrow $300.

Neil Ordiers owned two Cash Plus lending stores in Carson City, and was a member of the Nevada Independent Check Cashing Association. He presented a written copy of his testimony to the committee (Exhibit J). Mr. Ordiers’ intent was to inform the committee about his customers and give more information on the benefits of the deferred deposit industry.

Chairman Perkins advised Mr. Ordiers several other people wished to testify on the bill, and time was limited.

Mr. Ordiers replied he intended to be as brief as possible, and cover points no one else would be able to review. He proceeded by recapping the written testimony. He asked why so many customers frequented businesses in the deferred deposit industry, if they were so fraudulent. He stated the businesses were so successful because they took a chance on the customer when no one else was willing, and provided short-term assistance. He stated customers of the deferred deposit industry came from all walks of life. They used deferred deposit as a method of lending because it provided a short-term solution to a short-term problem. Mr. Ordiers argued traditional lending channels were too restrictive and did not allow customers to borrow when they needed extra cash.

Mr. Ordiers proceeded to review the qualifications required for a customer to receive a loan from his company. He required two bank statements, a continuous work history of 3 months or more, and a telephone and other utilities under their name. He said many check cashing businesses, including his own, used an outside source to perform credit checks. Mr. Ordiers said the average customer would take 2 weeks to pay back the loan, with 25 percent paying within 1 week, and 15 percent within 4 to 6 weeks. The average income of his customer was $900 per paycheck. In addition, the average amount loaned to each customer was $200. According to his testimony, the "average customer received between 15 percent to 25 percent of their net income as an industry standard." He said the bill would detrimentally affect customers. It could cause customers to lose wages, have their power turned off, and hurt their credit rating. The financial chain of events that occurred as a result of bad checks would affect many types of businesses. Mr. Ordiers asserted collection agencies would be the prime beneficiaries of the bill. He suggested customers would be punished if the bill was passed, because they would not have funding alternatives. He argued the bill would put an industry out of business and create financial disaster for consumers. In addition to his written testimony, Mr. Ordiers submitted several letters of reference for the committee’s review (Exhibit J) and copies of the contracts given to customers of deferred deposit businesses.

Sandy Perry, President of Cash Express and member of the Nevada Independent Check Cashing Association, said she understood why Ms. Buckley introduced the bill and sympathized with Ms. Hunkin. Ms. Perry said her business had $24,000 outstanding when she purchased it in 1997. She had lowered her fees since 1997, and was currently charging $12.00 per hundred per week. Ms. Perry stated she gave bonus incentives to customers who paid back their loans early or on time. Her business did not encourage people to roll over their loans. She stated all business came via telephone calls, in which customers were asked a series of questions. Ms. Perry offered to furnish a form outlining those questions. She said callers were asked if they had outstanding advances with other companies. If customers did have other outstanding cash advances, they were usually not extended credit by Cash Express. Income ranges for Cash Express customers were $1200 to $7000 net per month. Ms. Perry stated extensions were common, and they cost $500. Her customers viewed the service as a convenience. Ms. Perry distributed several letters for the committee’s review (Exhibit K).

Ms. Perry prepared a financial statement of her expenses if the bill passed. As of March 20, 1999, Cash Express had $52,000 outstanding, at an average of $24 per hundred. The annual percentage rate calculated was 625 percent. She estimated her net monthly profit would be $13,000. Ms. Perry said she did not take a salary in the last year. Her company would have a net monthly loss of $6,000 if the bill was passed. It would effectively put her out of business. She reiterated her customers were pleased with the service provided, and her company was extremely careful in lending. She said the policy of her company was to stop finance charges if and when a customer came into serious financial hardship. Ms. Perry invited members of the committee to visit her store to observe those practices.

Steven Gresh, owner of Cash Central, submitted a written document for the record in opposition to the bill (Exhibit L). He stated the bill would be detrimental to the citizens of Nevada. Mr. Gresh was especially concerned about section 11. He pointed out chapter 604 had just taken effect, and urged the committee members to let the law do its job before restricting the deferred deposit industry any further. He also included several letters from his customers on his behalf.

Chairman Perkins acknowledged John Odin and Carl Hull of the Nevada Independent Check Cashing Association and noted their objection to the bill for the record. Chairman Perkins closed the hearing on A.B. 431, and returned the gavel to Ms. Buckley.

Chairman Buckley opened the hearing on A.B. 492.

Assemblyman David Humke, representing district 26, introduced the bill and stated a constituent who owned a driver training school requested it. According to Mr. Humke, there was a need for private-sector driver training schools. Mr. Humke indicated his constituent had difficulties in dealing with the Department of Motor Vehicles and Public Safety in the past.

Ken Kruger, President of All American Driving School and President of the Nevada Professional Driving School Association, testified in favor of the bill. He started teaching driving in 1970. His goal was to have the most professional driving school in the United States. It was Mr. Kruger’s desire to make the entire industry more professional in Nevada. He acknowledged the disparity in quality between Nevada’s driving schools. According to his testimony, most driving schools only taught driving skills necessary for the driving test—not skills to improve the skills of all drivers. Mr. Kruger said the Department of Motor Vehicles and Public Safety regulated his business. To his knowledge, no one in that department had any experience teaching driving. The regulatory process utilized by the department was supposed to take that fact into account.

Mr. Kruger passed out the first draft of the regulations posted by the department and a copy of the adopted regulations (Exhibit M). Mr. Kruger said the first draft was compiled without input from the driving school industry. A workshop was held, and several driving schools were represented. The completed regulation was then printed, with minimal changes. He tried to convince the department they needed input from the regulated industry before drafting the new language. Mr. Kruger asserted the final regulations were made at the convenience of the department, and were not made to benefit the public or the driving school industry. He said the regulation required a school operating in more than one county to have an administrative office in each of those counties. Additionally, the records for the school had to be kept in those separate administrative offices. Mr. Kruger argued the process was not cost effective and it took control away from the school operator. He said there were also "nitpicking" items in the regulations. One example was the internal student records. The department required the school to put the name of the school, address, and license number on those records (although the records did not belong to the department.)

Mr. Kruger stated there were three options for regulating the driving school industry. Those were the Department of Education, the Department of Motor Vehicles and Public Safety (DMV), or an independent licensing board. He opined the DMV had proven their ignorance on the issue. He explained the goal of a driving school was to create good driving habits, not teach driving academically. Mr. Kruger pointed out the regulations prohibited driving schools from allowing teen students to drive. He reiterated the purpose of driving school was to teach good driving habits. He said drivers were not always thinking about driving when they were in the car. Mr. Kruger continued by stating the Department of Education had not made regulations compliant to statute. NRS 389.090 required the department to teach driving "knowledge, attitudes, habits, and skills." He argued habits and skills could not be taught in a classroom environment. Additionally, Mr. Kruger opined driver education had been a failure under the school system. He referred to the DeKalb County, Georgia, study (Exhibit N) which showed no statistical difference between students with classroom-based driver education and students without driver education. He said California stopped funding driver education after the publication of that study. Mr. Kruger further stated all professions in Nevada had private licensing boards. He cited professions from doctors to cosmetologists. He said licensing boards better understood the business. Mr. Kruger felt the department currently regulating driving schools, the DMV, was not related to driving schools and did not have a clue as to what driving schools did. He acknowledged Nevada would be the first state to have a board for licensing driving schools.

Mr. Kruger referred to page 6, line 1, where the bill required school operators to have experience as an instructor. He said under current law, anyone could obtain a license to operate a driving school. On line 24 of the same page, the school was allowed to teach a person under 15 years of age how to drive. Mr. Kruger explained the provision prohibiting drivers under that age passed during the 1995 legislative session to keep high school students from driving before they were legally allowed. Line 37 of page 6 made licenses for driving schools good for 5 years. Under current law, fingerprint and background checks were required every 2 years. License fees would still be required every year. Page 7, line 6, increased the insurance required on cars used by the school. He said some schools depended on assigned risk insurance, and those underwriters utilized the state minimum. The stipulation raised Nevada’s insurance requirement to a level comparable to other states. Page 8, line 7 increased the fees for driving instructors and driving schools to make those fees comparable with traffic and D.U.I. school rates.

Robert Sullivan, Principal of Bishop Manogue High School, stated the school had a 10-year association with Mr. Kruger and All American Driving School. He said students at Manogue were given 6 hours of driver training in the car. Three of those hours were spent behind the wheel, and the remaining time was spent observing another student. Mr. Sullivan had observed the process on more than one occasion. He felt Mr. Kruger’s school allowed students to deal with varying conditions, which prepared them for the inclement weather driving in northern Nevada. Two years prior, Mr. Sullivan was faced with dropping the program due to lack of funding. However, the parents at the school demanded the program stay. In the last 3 years, 50 percent of the sophomores at the school had contacted All American Driving School to take an additional 6 hours of training.

Mr. Hettrick asked if there would be an impact on the driving school operating on private property. Mr. Kruger replied those schools would not be regulated under the proposed board.

Chairman Buckley said the committee was hesitant to create new boards. She stated some committee members wanted to eliminate boards, not create new ones. She acknowledged the DMV’s lack of responsiveness might be the real issue. Chairman Buckley stated the committee would be happy to work with Mr. Humke to resolve the issue.

Mr. Hettrick asked what the fiscal note was for the bill. Mr. Humke responded the fiscal note was not available. He hesitated to calculate the fiscal note for the bill as currently written and indicated his flexibility on the bill’s language.

Mr. Kruger said he would no longer be in business if the regulation for driving schools was not changed.

Dana Mathiesen, Management Analyst for the Department of Motor Vehicles and Public Safety, opposed the bill and submitted a written copy of her testimony (Exhibit O). It removed the regulatory responsibility from the department and gave responsibility to a governor-appointed board. The department opposed the legislation because the governor’s authority in relation to the board, beyond appointment, was undefined. Additionally, she felt the quorum requirement of only three members eliminated the objectivity of the board. In the department’s opinion, the board allowed for self-regulation. The department also opposed the inclusion of one member who operated a D.U.I. training school. The representation would be skewed toward driving school operators and would not include input by the Department of Motor Vehicles and Public Safety. According to Ms. Mathiesen, the department currently spent 80 days per year working on driving school-related activities. The department was concerned the meeting frequency stipulated in the bill was not enough to regulate the industry thoroughly. Ms. Mathiesen stated the department would face an annual fiscal loss of approximately $21,000 as a result of the new law. The department further opposed the bill because it did not require background checks for driving school operators. The bill also stipulated acceptance of licensure certificates from other states, which the department opposed because it could not evaluate compliance with other states’ driving schools.

Chairman Buckley asked if Ms. Mathiesen had a written statement. Ms. Mathiesen answered affirmatively. Chairman Buckley acknowledged the department’s opposition to the bill and suggested Ms. Mathiesen submit her written comments for the committee’s review (Exhibit O).

Joann Keller, Highway Safety Coordinator for the Office of Traffic Safety within the Department of Motor Vehicles and Public Safety, echoed the sentiment of Ms. Mathiesen in her opposition to the bill.

Mr. Hettrick asked if comments could be made in reference to Mr. Kruger’s earlier testimony, and wondered why the regulations had to be so onerous.

Ms. Mathiesen stated the DMV monitored each facility based on its location. Customer complaints and inquiries were sent to the applicable counties, who then reviewed the records of the school.

Chairman Buckley suggested the DMV request records from the school, saving time for both parties. Ms. Mathiesen replied the idea was a good one, and could be considered by the department. Chairman Buckley pointed out legislation could be avoided by having more "user-friendly" regulations.

Mr. Hettrick referred to earlier testimony, which indicated the department had not taken into consideration recommendations made by people within the industry. He continued the purpose of regulation was to regulate as little as possible and make the process simple for everyone involved.

Ms. Mathiesen agreed with Mr. Hettrick’s comments. She said regulations were only altered when the majority of those providing input could agree on a change.

Richard Shrader, representing Nevada Automobile Association of America (AAA), stated his agency was not taking sides on the bill. He understood the concern for more appropriate regulation; however, the association did not support a disconnection of training and driver licensure. Mr. Shrader suggested the bill be amended to allow some DMV supervision of the schools. He also suggested the composition of the board be changed to represent a more diverse group of interests.

Chairman Buckley closed the hearing on A.B. 492.

Assemblyman John Carpenter, representing district 33, introduced the bill. The intent was to correct inequities created by legislation passed during the 1997 session. That law required certain property managers to become licensed real estate agents. Mr. Carpenter wanted to repeal some of those provisions. Section 1 was intended to clear up ambiguities in the definition of "owner." The other section created an exemption for persons who used property for subsidized residential housing.

Shirley Petro, Auditor for the Real Estate Division of the Department of Business and Industry, testified in support of the bill. Ms. Petro pointed out public property managers were already regulated by the Federal Government. The department supported the bill under S.B. 248 of the 69^th Session.

Chairman Buckley asked Ms. Petro to recap the provisions of S.B. 248 of the 69^th Session. Ms. Petro said that bill required a real estate license to manage property, and required additional education for property managers.

Chairman Buckley asked Ms. Petro to clarify her earlier statement regarding the qualifications of public property managers. Ms. Petro responded the reports required by the Federal Government for property managers were much more stringent than the reports required by the state.

James Gregory, Broker for Westgates Property Management Company, said S.B. 248 of the 69^th Session was devastating to his company. His company dealt with Farmers Home Administration funds and low-income housing tax credits, as well as Nevada housing trust funds or home funds. Those types of programs were administered throughout northern Nevada. Each of those programs also had various compliance requirements for property managers. Mr. Gregory referred to a property managed in Eureka by a part-time staff. He did not feel that person should be licensed, and the Real Estate Division agreed. However, S.B. 248 of the 69^th Session stipulated that manager must be licensed.

Mr. Carpenter told the committee members to stop by any of the properties managed by Mr. Gregory and observe their excellent condition. Chairman Buckley felt Mr. Carpenter should express those sentiments to Senator O’Donnell.

Joseph Johnson of the Nevada Housing Coalition submitted written testimony in favor of the bill (Exhibit P).

Chairman Buckley closed the hearing on A.B. 447.

Sean Smith, lobbyist for the National Association of Independent Insurers, stated his clients were responsible for writing property and casualty insurance policies in the state. The bill made it possible for the association to perform internal audits, under section 3. In the past, problems had arisen between the insurance industry and the Commissioner of Insurance. He respectfully asked for the bill to be moved to work session, to enable the proponents of the bill to work out those differences.

Chairman Buckley asked Mr. Smith to outline the provisions of the bill. Mr. Smith declined to review the bill.

Chairman Buckley asked what were the concerns of the commissioner. Mr. Smith replied provisions keeping the commissioner from having access to internal audits were opposed. He indicated the association’s desire to have that conflict resolved before going forward with the bill.

Chairman Buckley said she would wait for further testimony, but hesitated to put it on a work session. Mr. Smith suggested Jim Wadhams could answer questions on the legal aspects of the bill.

Chairman Buckley wondered about the confidentiality of the internal audits. She wanted to know what the affect of the bill would be on those documents.

Jim Wadhams, lobbyist for the National Association of Independent Insurers, said he was not prepared to review the bill in detail. Chairman Buckley asked if Mr. Wadhams could submit written testimony for the committee’s review. He replied that would be appropriate. Mr. Wadhams further commented insurance companies should be encouraged to have their programs audited for internal improvement. The issue was really focused around litigation.

Nancy Wong, Counsel for the Division of Industrial Relations, asked if the bill would apply to worker’s compensation insurance. It was not mentioned in the bill. The division was concerned about the self-policing mechanism and the applicability to worker’s compensation in Nevada. Chairman Buckley directed Mr. Wadhams to address those issues in his written statement to the committee.

Chairman Buckley closed the hearing on A.B. 476. She referred the committee to the work session document provided by Mr. Hughey (Exhibit Q).

Vance Hughey, Committee Policy Analyst, reviewed the bill. He told the committee the bill might have conflicted with federal law. Chairman Buckley said Assemblywoman Von Tobel, the sponsor of the bill, did not want to pursue the legislation in light of the conflict.

Mr. Hughey said the previous hearing on the bill had revealed concern about the rental assistance fund. Ms. Ohrenshall provided some amendments for the bill (Exhibit Q). Renee Diamond, the administrator of the Manufactured Housing Division, had concurred with the amendments. The first amendment was designed to keep that fund solvent, and the second amendment left the current income thresholds intact. Ms. Diamond said the federal income thresholds were higher than the amounts indicated in current statute. The third amendment allowed for consideration of medical and other emergencies. Ms. Diamond stated current law required rental assistance be based on annual income and assets. It did not allow for the consideration of those extenuating circumstances. The final amendment provided for food stamps or medicare to be included, but not for both.

Chairman Buckley asked if Ms. Diamond had approved all four of the amendments. Mr. Hughey replied they had. Ms. Diamond was concerned with another element in the bill, the $12,000 limit on page 2, line 18. However, after reviewing the provision Ms. Diamond approved the cap. Chairman Buckley said she had asked Mr. Guild and Ms. Diamond to work with Ms. Ohrenschall on the bill. She indicated no new revenue was available to replenish the fund, so revenue had to be provided within existing mechanisms. Chairman Buckley said she liked the provision regarding medical and financial emergencies. One of her constituents, who testified in the previous hearing on the bill, had developed cancer and was not eligible for the assistance because she had made too much money the previous year. She praised the bill’s proponents for working out a positive solution.

Mr. Hettrick wondered if the language referring to food stamps should be changed in light of the fourth amendment to the bill, because the loss of food stamps could trigger eligibility for assistance. He suggested changing the verbiage from "has received" to "is received."

Chairman Buckley asked Mr. Hughey if the food stamps were classified as resources or income. He indicated they were considered to be assets. Chairman Buckley felt the food stamps should be under income, because a drastic reduction in income would take the food stamps into account.

Mr. Beers concurred the food stamps should be classified as income. However, he asked if the paid benefits were skewed and without revenue.

Chairman Buckley wondered if the loss of food stamps changed eligibility because resources were not counted toward the income threshold. If the stamps were classified as income, more people would be cut from assistance.

Mr. Beers wondered if the Manufactured Housing Division provided testimony for determining the income threshold, including food stamps.

Mr. Hettrick said food stamps received in the past were neither income nor assets. He thought that was a problem with the bill. The stamps would be counted if the individual had received them any time in the past, which may not be relevant to current eligibility.

Chairman Buckley suggested having Ms. Diamond clarify the provision and schedule the bill for another work session on March 26. She reminded the committee food stamps increased when income decreased, so the existing language should be changed.

Chairman Buckley closed the work session on A.B. 195.

Mr. Hughey said four amendments had been proposed for the bill (Exhibit Q). The first amendment provided an insurer who provided a copy of coverage in a language other than English would retain the English copy, which would be controlling. Ms. Giunchigliani had suggested both the non-English and an English copy be provided simultaneously. Danny Lee, with Nevada General Insurance Company, suggested an insurer be allowed to provide an explanation of benefits, as opposed to providing the actual policy, in a language other than English. With that change, the policy written in English would still be controlling. Finally, Joseph Guild proposed amending the bill to provide the English language copy of the policy as the controlling document as well as a copy of the policy in a language other than English. A copy of Mr. Guild’s suggested language could be found in the work session document (Exhibit Q).

Chairman Buckley noted during the original hearing, discussion centered on the controlling version of the policy. In lines 6 and 7 of the original language, the bill indicated the policy written in English was the only source of the "rights and obligations of the parties to that policy." Chairman Buckley felt Mr. Hettrick focused on that issue in his arguments. She said the existing language conveyed adequately the importance of the legality of the English document. She acknowledged the amendments suggesting a summary be provided in a language other than English, as opposed to the actual policy.

Ms. Giunchigliani was uncomfortable with the original language of the bill. She was concerned with the marketing aspect of the process, when companies were marketing and doing business in a language other than English, then giving the policy to the customer in English.

Chairman Buckley said several scenarios could be occurring in that pattern. The bill before the committee addressed insurance policies only.

Mr. Nolan favored providing consumers with information in other languages. However, there were many foreign languages in the state, some of which were extremely difficult to translate, especially technical terms. He felt setting policy in that direction would put the legislature on a "slippery slope" for requiring translations of all kinds of languages and businesses. He was concerned discrimination could occur if the owner of a company could not provide the appropriate translation. He was comfortable with Mr. Lee’s suggestion of providing the benefits in another language.

Chairman Buckley pointed out the bill was discretionary, and not mandatory. She acknowledged there might be a significant legal difference between an explanation versus a contract. If a contract in another language was misleading, it would not matter under the proposed legislation. Only the English document was valid in a court of law. Ms. Buckley said that was not good public policy.

Mr. Beers foresaw court problems as a result of the non-English language version being the controlling document. He preferred Ms. Giunchiglianai’s suggested language, the second amendment. That proposal required both versions be provided together. However, Mr. Beers wanted the English version to be binding.

Ms. Giunchigliani wondered if anything currently prohibited companies from marketing and creating contracts in languages other than English. She thought the legislation might not be necessary. If the courts already ruled the English version of a contract was controlling, why was the bill needed?

Mr. Hettrick thought the issue was the insurance companies wanted to be relieved from liability. The bill allowed the insurers to create contracts in a language other than English without liability. He approved of Ms. Giunchigliani’s and Mr. Beers’ suggestions. He also felt a disclaimer should be created notifying the customer the English contract was binding.

Chairman Buckley wanted to get a clarification from the insurance companies on whether they could already issue those contracts. She also wanted to confer with the bill’s sponsor.

Chairman Buckley closed the work session on A.B. 248.

Mr. Hughey gave a short synopsis of the bill. Mr. Nolan had provided a mock-up of the proposed amendments (Exhibit Q). The amendment would eliminate changes in paternal benefit societies. After consulting the interested parties and examining legislation passed during the 1997 session, it was decided the problem was not in paternal benefits societies, and they did not need to be addressed. Other changes to the bill included section 1, paragraph b, which deleted the provision a claimant must be immediately informed when a claim was denied. The change was made because the word "immediately" was not clearly defined. The amendment changed that provision to read 5 working days instead. The written notification had to include reasons for denial, the criteria used to determine the claim status, as well as the right of the claimant to file a written complaint and the procedures by which a complaint could be filed. Many of the provisions of this bill were already included in the insurance code. The revised bill only had to reference those requirements. Additionally, section 1, paragraph (c), new provisions referring to hospital reimbursement would be unchanged.

Mr. Nolan said the issues that prompted him to introduce the bill had been addressed by other consumer protection legislation. The only significant provision remaining after the amendment process was the notification of claim denial. He suggested another change allowing the insurance company 10 days to notify claimants.

Chairman Buckley clarified the only significant part of the bill would be the 10 day notification requirement. It was important to make sure the other provisions were indeed included in statute and appropriately referenced in the bill. She wanted to ensure no existing laws were being changed.

Mr. Hughey directed the committee to page 2, where a new subsection 3 had been added to existing statute, which was clarifying language.

Mr. Hettrick said page 3 revised NRS 689.755 and other sections. He asked if the appropriate language already existed in that law. Mr. Hughey said page 3 discussed a different chapter, 689B. The proposed new language would be removed by the amendment. The various notice requirements throughout the bill were being removed to avoid duplicating language.

Chairman Buckley summarized the changes, which would be made consistent throughout the bill.

Mr. Nolan said the denial of claims could be made in one section, and referenced through the rest of the bill. Chairman Buckley said the committee would review the amendment very carefully after drafting.

The Committee on Commerce and Labor adjourned at 6:30 p.m.

RESPECTFULLY SUBMITTED:

Kelly Gregory,

Committee Secretary

APPROVED BY:

Assemblywoman Barbara Buckley, Chairman

DATE: