MINUTES OF THE
SENATE Committee on Commerce and Labor
Seventy-second Session
April 8, 2003
The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 7:18 a.m., on Tuesday, April 8, 2003, in Room 2135 of the Legislative Building, Carson City, Nevada. The meeting was videoconferenced to the Grant Sawyer State Office Building, Room 4401, 555 East Washington Avenue, Las Vegas, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
COMMITTEE MEMBERS PRESENT:
Senator Randolph J. Townsend, Chairman
Senator Warren B. Hardy II, Vice Chairman
Senator Ann O'Connell
Senator Raymond C. Shaffer
Senator Joseph Neal
Senator Michael Schneider
Senator Maggie Carlton
Senator Raymond C. Shaffer
STAFF MEMBERS PRESENT:
Scott Young, Committee Policy Analyst
Kevin Powers, Committee Counsel
Maryann Elorreaga, Committee Secretary
Makita Schichtel, Committee Secretary
OTHERS PRESENT:
Karen D. Dennison, Lobbyist, Lake at Las Vegas Joint Venture
Tammy Devries, Acting Deputy Administrator, Real Estate Division, Department of Business and Industry
Pamela Scott, Lobbyist, The Howard Hughes Corporation
David Smith, Lobbyist, Las Vegas Chamber of Commerce
William A.S. Magrath II, Lobbyist, Caughlin Ranch Homeowners Association
Michael S. Trudell, Lobbyist, Caughlin Ranch Homeowners Association
Karen Brigg
Kevin Ruth
John Briggs
Paul J. Enos, Lobbyist, The McMullen Strategic Group
Mark Kaplinsky
James L. Jackson, Lobbyist, Association of Health Insurers of America and Consumer Data Industry Association
David Stone
John McGlamery, Deputy Attorney General, Bureau of Consumer Protection, Office of the Attorney General
Chris MacKenzie, Lobbyist, American Express
Chairman Townsend:
We will begin the meeting with Senate Bill (S.B.) 100. Dan Jaggers sent a handout, “The Village News,” to be part of the minutes (Exhibit C). Staff has provided a working document for this bill titled “Work Session Information Senate Committee on Commerce and Labor” (Exhibit D. Original is on file in the Research Library). Small changes such as defining the difference between a commission and a division will be addressed in further amendments. On page 16 of the work session document, a violation will now result in a $5000 fine, which was previously a $1000 fine. On page 22, line 11, Mr. Ashleman requested paragraph (b) be removed. Is that correct, Ms. Dennison?
SENATE BILL 100: Makes various changes to provisions governing common‑interest communities. (BDR 10-29)
Karen D. Dennison, Lobbyist, Lake at Las Vegas Joint Venture:
Yes, we have a joint amendment proposed by Mr. Ashleman and me (Exhibit E).
Chairman Townsend:
By removing paragraph (b) of subsection 1, the executive board and any master association would not have to approve the transient use of the unit.
Senator Neal:
There is an exemption for hotels. If we remove paragraph (b) from page 22, line 11, are we saying hotels are not included?
Chairman Townsend:
I hope not. Are we addressing time-shares, or units inside an association used for transient purposes?
Ms. Dennison:
We are only addressing units in an association used for transient purposes. This does not apply to condominiums or time-shares, but only to planned communities.
Chairman Townsend:
I believe this was the issue dealing with the country club concern?
Ms. Dennison:
Yes. You are referring to Lake Las Vegas, a master-planned resort community. It also deals with owning hotels as part of the master association.
Chairman Townsend:
On page 28, section 54 of the work session document, there is a question about removing the rural-agriculture residential, common-interest community exemption. The language was originally written as a result of a debate about larger developments with 40-acre parcels. The exemption applied if the parties behaved appropriately. It was suggested we leave the exemption in, but add a provision stating they must operate under the open meeting law. In this amendment, the exemption was left in place.
Ms. Dennison:
We want to keep the exemption in place. If a community were operating a water system, they would have to comply with all provisions of chapter 116 of Nevada Revised Statutes (NRS) if they were not exempt.
Chairman Townsend:
Do we have anyone here to represent rural associations?
Senator Schneider:
Sam McMullen represented an association in Fernley. There was an issue in Elko with Spring Creek.
Chairman Townsend:
Are you receiving any complaints from any rural associations?
Tammy Devries, Acting Deputy Administrator, Real Estate Division, Department of Business and Industry:
I do not believe so.
Ms. Dennison:
I would like to leave in the exemption. I do represent an association which operates a water system on the Carson River. It would be unduly burdensome for them to have to comply with all provisions of NRS 116.
Chairman Townsend:
We will leave the exemption in as we pass this bill to the Assembly. Are there any other technical suggestions?
Pamela Scott, Lobbyist, The Howard Hughes Corporation:
The language in section 62, subsection 5 of the work session document, needs a technical adjustment to meet our intent. A manager, whether employed by the association, a management company, or by a declarant, could not sit on the board of directors if they managed the community. Nor could a manager for a sub-association subject to a master board sit on that board. Current language suggests a direct employee to an association would not be able to sit on the board, not a management company employee or declarant.
Chairman Townsend:
Mr. Powers, do you understand the issue of defining employees so we do not have a conflict of interest?
Kevin Powers, Committee Counsel:
“Yes. We will have to adjust the language.”
Chairman Townsend:
In prohibiting people from serving in two capacities, we only mention employees, and not someone from a management company inside a sub‑association serving on a master association.
Ms. Scott:
Correct. It does not apply to all managers; just the direct employees of the association.
Chairman Townsend:
We want to broaden the language so there is no conflict of interest.
David Smith, Lobbyist, Las Vegas Chamber of Commerce:
I would like to add a person with a financial interest in the company, whether employee or not, cannot serve as a member of the executive board. What about association managers who live in the complex? They would have access to all records that the board members have, which are not privy to home owners. An association manager would be above other home owners by having this information.
Chairman Townsend:
We have not dealt with the issue of financial interest in our amendment. Financial interest would also cause a conflict of interest. A part-owner in a management company might not be employed by the company.
Mr. Smith:
A developer who owns part of a management company, but is not an employee of the company, could sit on the board. I know of a management company that has three partners, one of whom lives in the development he manages. As it stands, a person can claim they are not an employee, so they are exempt and can sit on the board, with an inside position.
William A.S. Magrath II, Lobbyist, Caughlin Ranch Homeowners Association:
Do not make the language so broad that a manager cannot live in the association. We would love to have a manager live in our association.
Mr. Powers:
“Are we addressing a controlling financial interest, or any financial interest?”
Mr. Smith:
I suggest any financial interest of 10 percent or more.
Chairman Townsend:
If a person has a financial interest, they should declare that interest.
Michael S. Trudell, Lobbyist, Caughlin Ranch Homeowners Association:
On page 28, lines 5 to 7 of the work session document, costs of educating the board are not specified. Are these costs implied in the language?
Mr. Powers:
“I believe those costs are covered. The duties required of the commission are set forth in other sections of the bill. To carry out those duties would be the cost and expense of the commission.”
Mr. Smith:
I am disappointed the fines were reduced to $1000.
Chairman Townsend:
We do not wish to prohibit people, but to make them aware. Once educated, they can make the appropriate decision.
Karen Brigg:
I am with Eugene Berger Management Corporation. On page 53, beginning on line 14 of the proposed amendment, there is some confusion on the requirements of a quorum.
Ms. Dennison:
A person would be prohibited from voting for nonpayment of dues. You would only count those eligible votes to elect the executive board.
Mr. Magrath:
If an association has 2000 members, of which only 500 members vote, a section of this bill allows those 500 votes to count, or the person with the most votes wins. I hope it does not mean 20 percent of the votes that may be cast for the election of a board member count, since there is no quorum requirement. Are we saying 20 percent of the lower number is sufficient? I think the intent is to take 20 percent of the votes that may be cast in the entire election. If the intent is to include everyone eligible to vote, that is fine.
Mr. Powers:
A good starting point would be to look at existing law in subsection 1. It addresses the 20 percent quorum requirement. Subsection 2 tracks the existing language. Depending on how the existing language has been interpreted, the subsection 2 provisions would be interpreted the same way. If the existing language has been sufficient to operate the homeowners’ association, then subsection 2 does not change any component of subsection 1.
Mr. Magrath:
I just want ensure the intent is clearly on the larger number, not the smaller number of votes counted.
Chairman Townsend:
The question is whether the 20 percent of votes are those votes cast, or only those votes which might be eligible.
Senator O’Connell:
The term eligible needs to be clarified.
Mr. Magrath:
If the bill used the word eligible, it would be clearer.
Mr. Powers:
“To be clear, on page 53 line 12, we are changing ‘entitled’ to ‘eligible’.”
Mr. Smith:
When the home owner goes through title closure and receives his Covenants, Conditions and Restrictions (CC&Rs), he is entitled to be provided with NRS 116. Many CC&Rs are out of date. The title company needs to provide a copy of rules and regulations, CC&Rs, and NRS 116. A budget must be done before escrow closes.
Chairman Townsend:
We could add a requirement for a title company to give a copy of the home owner’s CC&Rs, to include not necessarily a copy of NRS 116, but at least a notice informing buyers of NRS 116.
Senator Hardy:
I agree. Many people are unaware their CC&Rs are governed by State law. They think homeowners’ associations are a stand-alone entity. The reason I brought forth S.B. 136, I had referenced NRS 116 and recognized these problems. I agree there could be a reference of NRS 116 given at title closure.
Kevin Ruth:
I am here on behalf of Community Association Institute/Legislative Action Committee. Perhaps the appropriate area to add this language would be in the seven-questions segment of the bill on page 78 of the work session document, which addresses living in a homeowners’ association. This is currently required as part of the seller’s package.
Chairman Townsend:
In NRS 116.41095, it explains what a potential buyer needs to know before he purchases property in a common-interest community.
Mr. Powers:
“On page 78, lines 9 and 10, it specifically refers to the laws of the State.”
Chairman Townsend:
It reads, “You have certain rights regarding ownership in a common-interest community that are guaranteed you by the State.” It then lists those rights, followed by seven questions. Then the bill requests the buyer’s initials and the date.
John Briggs:
I am here for Elk Point Country Club. On page 70, line 4 deals with personnel records, “except for those records relating to the salaries and benefits of those employees.” I am going to submit an amendment to the Assembly, which will not block out all employee information except relating to salaries and benefits. Our club has a problem obtaining work logs. This is a technical issue which we hope to resolve.
Paul J. Enos, Lobbyist, The McMullen Strategic Group:
I am with the The McMullen Strategic Group representing the Humboldt River Ranch Homeowners’ Association. We are pleased you have left in the proposed amendment, on page 29, lines 6 through 9, the section dealing with county populations of 50,000 or less.
Ms. Scott:
On page 18, line 6 of the proposed amendment, I would like to add to “which is attached to an exterior common element” the word “limited” between exterior and common. Our intent is flagpoles can be placed on patios and balconies. Existing language implies they could also be placed on a three-story building roof. On line 9, we need to add “limited” before “common element.” Limited common elements are those the home owner has direct control over. In condominiums and multi-story buildings, patios and balconies are described as limited common elements, as the owner has exclusive use of those areas. The roof of a three-story building would also be a common element, but not a limited common element.
If you live in a house, you can put a flagpole on the porch or wherever you like, because your unit includes the entire lot. In a condominium, the unit includes the interior of the unit and the limited common element, which is the patio or balcony.
Mr. Powers:
“The term limited common element is defined in NRS 116. It is has specific statutory meaning.”
Senator Schneider:
Perhaps Ms. Scott could meet with interest groups to make sure the technical concerns heard today are included in a proposal.
Chairman Townsend:
No, I want to move this bill to the Assembly. Ms. Devries has identified the unintended interchanging of the words commission and division. I would like to get the technical suggestions to Mr. Young, who will determine if technical or policy changes are needed. We will then address those changes and move this bill on to the Assembly.
Senator Schneider:
If anyone has technical concerns, the time is now to bring those forward.
Mr. Trudell:
Is it your intent for the hearing commission personnel to receive per diem expenses? On page 5, lines 15 to 18 do not specify that they do receive per diem expenses.
Chairman Townsend:
On page 5, line 14 of the proposed amendment, when we discuss independent hearing officer, are we including the people from the Department of Administration?
Mr. Powers:
“Those people would be employees of the commission or the division. As State employees, they should be entitled to the per diem travel expenses that every other State employee is entitled to.”
Ms. Devries:
The members of the hearing panel would be appointed by the commission, and would be entitled to the per diem costs.
Chairman Townsend:
Senator Schneider and other members interested in these issues will meet with Mr. Young after he has received all technical changes. Any substantive changes will be brought back to the committee.
SENATOR O’CONNELL MOVED TO AMEND AND DO PASS S.B. 100.
SENATOR SCHNEIDER SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
*****
Mr. Magrath:
I would like to thank your staff. Mr. Scott and Mr. Young created a working document which we all appreciate.
Mark Kaplinsky:
On behalf of home owners in Las Vegas, we appreciate the work. This is a great
effort.
Chairman Townsend:
We will now hear S.B. 379.
SENATE BILL 379: Establishes various provisions relating to identity theft. (BDR 52-266)
James L. Jackson, Lobbyist, Association of Health Insurers of America and Consumer Data Industry Association:
I have provided the committee background information regarding the use of social security numbers provided by the Health Insurance Association of America (HIAA) (Exhibit F). We are opposed to this bill.
Chairman Townsend:
I have noticed on my credit card receipts, most of my credit card numbers are blacked out. Is this an industry-wide incentive to stop potential identity theft?
Mr. Jackson:
This is one of many steps taken to cut down on theft incidences. If a card is swiped more than twice, whether it was swiped too quickly or was not read correctly, a security alert is raised. The credit card company then puts a hold on that card until the customer is verified and to whom the card belongs. The industry is trying to be proactive.
Chairman Townsend:
Some companies use software programs to track patterns of charges. I took a last-minute trip and did not charge my flight. The credit card company observed I was making charges in another city, which was not my normal pattern, and they asked to talk to me over the phone to verify my identity. These are important security measures.
Mr. Jackson:
This industry is constantly battling those who try to exploit it. We are taking every step to stay one step ahead of thieves. We hope to continue to be unshackled so we can advance technologically and remain ahead. Too many rules and regulations slow down our advances.
Mr. Smith:
I used to work for Visa. I read a news release saying Master Card and Visa will no longer print the full number of the credit card numbers. When I was in Las Vegas staying at the Hilton Las Vegas, my wife’s Diner’s Club card number was stolen. They did not steal the card, but the number. The thief ran up charges of $1200 in Las Vegas. These purchases were all on take-out, as they did not need the physical card. I empathize with the companies who had to eat those costs.
Chairman Townsend:
We will now hear S.B. 136. Our work document, Exhibit D, addresses this bill.
SENATE BILL 136: Revises provisions governing assessment of fines by unit‑owners’ associations. (BDR 10-897)
Senator Hardy:
We have discussed not requiring a hearing for a continuing violation.
Mr. Powers:
“It is addressed in the amendment, on page 6, line 14. That is a restoration of the paragraph dealing with continuing violations returning to its existing state of the law. It would not change the process for continuing violations.”
Senator Hardy:
The other substantive amendment, which arose after the hearing, was the inclusion of the language dealing with construction penalties. We want to clarify the language.
Ms. Scott:
I am comfortable with the language as written. I submitted one minor technical change (Exhibit G).
Senator Hardy:
I received your submittal which deals with the discovery of the violation. I agree.
Chairman Townsend:
What if a person from Zurich, Switzerland, purchases a lot in your association for an investment until they retire. How do you deal with weeds and trash on their lot? When they sign the buyer’s forms, is there a caveat the lot must be maintained?
Ms. Dennison:
The declaration of CC&Rs is very specific on maintenance requirements. They apply to an empty lot as well as a lot with a house.
Mr. Powers:
The construction penalty provisions came from A.B. 43, section 4, which was inadvertently left out of this proposed amendment... . This would fit on page 5, line 6… .After violation on line 6, there is an except clause from A.B. 43 that deals with construction penalties… . It may impose a fine against the unit’s owner for each violation, except for a violation that is subject to a construction penalty, pursuant to the other provisions… . This is a separate penalty provision and should not subject one to a fine and a construction penalty, but just for the construction penalty.
Kevin Ruth:
Previously, a home owner who committed a violation, prior to a fine, was given the opportunity of a hearing. Senate Bill 136 expands the language to include not just an opportunity, but also a scheduled hearing on the violation. Is that hearing of the executive board, or a hearing committee? If it is a hearing of the executive board, is it a required noticed hearing to be heard in executive session?
Senator Hardy:
It is a hearing of the executive board, unless the board decides to appoint a committee to hear these violations. This is a change to say a hearing must be held. A hearing will be held unless the individual pays the fines, executes a written waiver, or fails to appear. If the person fails to appear, he has waived his due process to a hearing.
Mr. Ruth:
Can we add the wording so the bill reads, “the hearing of the violation will be heard by the executive board or by a board-appointed committee”? I am not sure if NRS 116 addresses this clearly.
Mr. Powers:
Subsection 7, page 6 clearly provides that. The governing board appoints a committee that exercises all the powers and duties of the executive board… . Although it does not specify executive board or hearing committee throughout the bill, subsection 7 deems the hearing committee to be the executive board when the hearing committee is acting on behalf of the executive board… . Otherwise, in the law we would have to add the words “or hearing committee” in many places within the chapters, which would make the law more cumbersome... . For the record, I will read section 4, subsection 7 of the proposed amendment. “If the governing documents so provide, the executive board may appoint a committee, with not less than three members, to conduct hearings on violations and to impose fines pursuant to this section. While acting on behalf of the executive board for those limited purposes, the committee and its members are entitled to all privileges and immunities and are subject to all duties and requirements of the executive board and its members.”
Mr. Ruth:
Would the committee be required to give notice of the meeting? Do these appointed committees have the same notice requirements as the executive board?
Mr. Powers:
“I think, from the language, they would have to provide the same notice of meetings as the executive board would provide notice of its meetings.”
Mr. Magrath:
My concern is the cost of placing a meeting on notice. For large associations, the cost could be over $1000. The limit on the fine is $500. This may not be economically feasible. If committee meetings were to be held in an executive session, they would not require the notice.
Senator Hardy:
I agree. We are dealing with a home-owner violation. All members of the association do not need to know about the hearing. I do not see a compelling need for a public notice.
Ms. Scott:
We want to make sure the person who is in violation receives notice. Since it is an executive session, the home owners cannot attend except the subject of the violation. It would not need to be noticed to the entire association.
Mr. Magrath:
I want to avoid making public a person’s violation.
Mr. Powers:
“If the executive boards are not providing notice now for executive sessions, then the hearing committees would not need to provide notice for executive sessions.”
Senator Hardy:
That is my intent. I do not wish to provide an unnecessary burden on the homeowners’ association, but to provide due process before a home owner can be fined.
Mr. Ruth:
I agree with your intent. My concern is the interpretation by different attorneys. If an executive meeting can be held without notice, some attorneys will agree and others will disagree, saying it is a board meeting and under NRS 116, there is a meeting-notice requirement. It is pointless to send notice to the entire homeowners’ association membership of a meeting they cannot attend. It costs money.
Senator Hardy:
This change would not impact other matters of the executive board. If the requirement is currently in place, it remains. This wording does not change the process by adding an additional requirement.
Mr. Ruth:
I feel the additional requirement is not clear. If the committee agrees the hearing does not need to be noticed to the general membership, then we agree.
Mr. Smith:
The association I belong to posts the executive sessions on the agenda. If a home owner wants a public hearing, he should have that choice. I would hope the association would notify the membership. Notice could be included in the association bimonthly- or monthly-notice mailings. They do not have to do an extra mailing.
Mr. Ruth:
I agree if the board or committee were meeting monthly, the notice would give a reasonable amount of time to handle the violation. Some communities only meet quarterly and that is too long for a violation issue to linger. This is not in the common good of the community.
Mr. Magrath:
I agree if a home owner desires a public hearing, it could be delayed until the next general meeting of the association. I do not agree with putting the name of the home owner in violation on the agenda, which is mailed to membership. This brands a person. If a person wants a private meeting, they should be given one as quickly as possible.
Chairman Townsend:
Another bill, S.B. 371, allows a home owner to bring an ombudsman, a representative, or an appointed or elected official to these executive meetings. It is not clear by law that you cannot bring someone to the meeting. Is there any objection to this allowance? If I want to invite my city councilman to a meeting, he can attend.
Ms. Scott:
Our association states our board meetings are open to members of the association, but we have had councilpersons and representatives from the ombudsman’s office visit. We have never thrown anyone out. We are fine with these types of visits.
Mr. Ruth:
We manage 25 associations. We have no problem allowing people to attend our meetings, as long as they are reasonable.
Senator Carlton:
As primary sponsor of the bill, I have a comment. On page 5, line 9 of the proposed amendment to S.B. 136, I am concerned about the issue of guests, as they relate to violations. We state a unit owner can be jointly and severally liable. If the governing documents do not allow for joint and several liabilities, then residents and home owners would be liable for their guest’s behavior. How far does the word guest expand? Would it include the pizza deliverer? If we backtrack this to current documents, will it be effective?
Senator Hardy:
Are you saying the joint and several option provided here should be available to anyone, regardless of whether or not it is addressed in the governing documents? I believe the homeowners’ association has to have the ability to hold someone responsible for actions occurring in their neighborhoods. I do not have a problem with the joint and several portion of the bill. We could expand that liability to everyone regardless of how the governing documents read.
Senator O’Connell:
Do we have an interpretation of the word guest? It could include someone invited, which could include the pizza deliverer.
Mr. Briggs:
I am on an association dealing with this problem. There is no definition of guest. Guest could include a family member.
Mr. Powers:
“The question is should guests be defined, and how should they be defined?”
Chairman Townsend:
In a court of law, a guest would be someone there at your authorization or invitation. It would exclude family members, which are defined separately. Who would pay the fine for a pizza deliverer speeding through a residential area with children around? If the pizza deliverer did not pay the fine, since that person is your guest, it seems that you may be responsible for the fine.
Senator Hardy:
I would hope our homeowners’ board would have the ability to sift through these situations and not fine the home owner. If not, we have a much bigger problem than the issues addressed in S.B. 136.
Mr. Ruth:
How far do we take this premise? Does the United Parcel Service man, who delivered a box to my home and was observed speeding on that day, become my responsibility, if he gets a speeding ticket?
Chairman Townsend:
That depends on where you live.
Senator Hardy:
I believe you would need a burden of proof. Speeding is a criminal violation. Do home owners have the ability to do this?
Mr. Magrath:
If you are referring to public roads in an association, the association could not enforce criminal laws. The city would do this. However, if a person speeds in a gated community with rules, then it becomes a violation of a rule. If a person is found in violation of a rule while coming to my house, I am entitled to a hearing. If the homeowners’ board exercises any self-restraint, they would probably tell me to ask the guest not to do it again. The only person to receive CC&Rs in the first place is the owner when he buys the property. The owner is responsible. If the owner is called on the carpet, the next call will be to a different pizza delivery service, or lease to someone more responsible if it is a lease situation.
Chairman Townsend:
The bottom line is someone must be responsible.
David Stone:
If Nevada Power comes by and services every house on my block, and speeds from house to house, who is responsible?
Mr. Smith:
How do we get reasonable, realistic board members who are neither vindictive nor retaliatory? If we have good boards, this would not be an issue.
SENATOR HARDY MOVED TO AMEND AND DO PASS WITH THE STAFF PREPARED AMENDMENT AND THE PROPOSED AMENDMENT BY THE HOWARD HUGHES CORPORATION S.B. 136.
SENATOR O’CONNELL SECONDED THE MOTION.
THE MOTION CARRIED. (SENATORS NEAL AND CARLTON VOTED NO. SENATOR SCHNEIDER WAS ABSENT FOR THE VOTE.)
*****
Chairman Townsend:
We will now hear S.B. 399.
SENATE BILL 399: Revises provisions governing trade practices and resident agents. (BDR 52-429)
John McGlamery, Deputy Attorney General, Bureau of Consumer Protection, Office of Attorney General:
I have provided recommended amendments (Exhibit H). These were written after hearing testimony. In our handout, under section 2, paragraph 3, we recommend the wording, “any material and significant aspect of the performance,” and removing the wording “efficacy and nature.”
Chairman Townsend:
Given the loose wording of NRS 598, what will happen if we add your amendment?
Mr. McGlamery:
We will be able to track those cases where the consumer has had someone charge against that consumer’s bill, and has been unable to resolve those charges. I can ask the company to show verification. If they cannot, then they have violated the trade laws. Often the credit card company in question will say it is up to the consumer to prove they are at fault. We are trying to switch the burden back to those making the charge, rather than the credit card owner.
Chris MacKenzie, Lobbyist, American Express:
I have not read the proposed amendments.
Chairman Townsend:
Are you referring, in section 2, to a specific charge on a credit card?
Mr. McGlamery:
Not just credit cards, but also bank charges, electronic billings, and automatic debits. For example, one company told a customer they needed to be able to charge his bank account directly. The customer gave the company his bank account number, and soon he was getting numerous electronic debits against his bank account.
Chairman Townsend:
Why would anyone give out his or her bank account numbers?
Mr. McGlamery:
It happens all the time. Last year we received about 200 such complaints.
Chairman Townsend:
You have identified two issues. One issue is the customer giving out his bank account information, which is a banking - or financial-institution relationship. The other issue is credit card information being used inappropriately. Some credit card companies, such as American Express, will delete the charge if the customer claims they did not make the purchase.
I am more concerned when senior citizens give away bank account information. Once it is out, the problem escalates. With credit card fraud, there is a third party involved so the consumer has a chance to avoid the charges.
Mr. McGlamery wishes to add the term “any material and significant aspect of the performance or central characteristics of any goods or services that are subject of the offer.”
Mr. MacKenzie:
I would like to share this amendment with my company. I do not see American Express having any problems with it, but I am not the one to make that call.
Senator Neal:
American Express sends a monthly bill to the customer who reviews it before making payment. The debit cards take charges right out of the account, without the customer having it in writing.
Chairman Townsend:
We are trying to be proactive, especially for our more vulnerable citizens. As important as it is to prosecute after the fact, we would like the problem not to occur in the first place.
Mr. McGlamery:
We are trying to shift the burden from the consumer back to the person making the charge. Some credit card companies regard the merchants as their primary customer, rather than the consumer.
Mr. Smith:
Generally if a customer disagrees and states they did not make the charge, the credit card company will erase that charge and return it to the merchant. As a small business owner, I feel for the businesses that have to absorb those costs. Most companies are not able to take a loss of thousands of dollars.
Senator Hardy:
Although not an expert on deceptive trade practices, I think this is expanding deceptive trade practices to include things a business owner fails to disclose. I am concerned about this. I recall the story of man selling guaranteed roach killers. He would mail customers two 2- by 4- inch boards and instructions to place the roach on one 2- by 4-inch board, and hit with the other 2- by 4- inch board. That is a deceptive trade practice. To expand this to include all a company has to disclose is a big concern to me.
Mr. McGlamery:
I want to point out these are already required in the telemarketing sales rules. We are simply trying to extend these rules to Internet sales and fax or other non-face-to-face sales. Telemarketing sales rules are much stricter.
Senator Hardy:
Then I have a problem with current law.
Chairman Townsend:
When you first testified about non-face-to-face sales, you talked about resident agents, and whom they represent.
Mr. McGlamery:
I was pointing out that some merchants try to hide their locations from new or unhappy customers. Many scam companies do this by setting up a business through a resident agent or a postal mailbox. They do this to avoid being traced. We find this a deceptive trade practice, if the company hides from a customer when there is a problem.
I also want to recommend taking the word “goods” out of the language regarding verification in section 2, subsection1, paragraphs (c) and (d), and keeping in “services,” which is the bigger problem. Services cannot be traced. We looked at the pattern of complaints we received, and 95 percent were dealing with services. There is a bill, S.B. 297, which deals with unordered goods. We provided a definition of goods and services with our amendment.
SENATE BILL 297: Makes various changes relating to personal identifying
information. (BDR 15-28)
Chairman Townsend:
We need to meet and further discuss the details of the bill. There has been a good-faith effort to clarify the language, and yet it needs to be more specific.
Senator O’Connell:
I want to ensure you addressed Sprint’s concern. They had a problem with billing procedures which would cost them financially.
Mr. McGlamery:
This bill says you have to disclose the name and address of the person originating the bill. Under current law, only third-party billers need to disclose. The customer has a difficult time finding the company. By making the originator of the bill disclose his address and information, the consumer will save time finding these people. Many times, the third-party billers do not have the authority needed to find resolution. It should be going back to the originator of the bill. I did not realize Sprint had a concern with this.
Senator O’Connell:
Yes, their concern is on record.
Senator Carlton:
I believe the issue was regarding units versus minutes, not disclosure. When a company bills on units and not minutes, which is a tariff rate, they would have to go through the regulatory process to change that process.
Mr. McGlamery:
This does not require a change, but disclosure of the length of the call. It would only apply to non-flat-rate situations. We will look into this concern.
Senator Hardy:
I understand this is expanding to keep up with technology. If we look at narrowing the scope, I would like to do this in all statutes dealing with this issue. If this language is taken from another section of law, then we need to narrow and specify that language as well.
Mr. McGlamery:
Those are federal and not State regulations. We cannot change them.
Chairman Townsend:
We will get back after the parties meet and discuss as requested. We will hear S.B. 93.
SENATE BILL 93: Authorizes State Board of Nursing to allow certain persons to practice nursing in this state without license issued by Board. (BDR 54‑96)
SENATOR HARDY MOVED TO DO PASS S.B. 93
SENATOR O’CONNELL SECONDED THE MOTION.
THE MOTION CARRIED. (SENATORS SHAFFER AND CARLTON VOTED NO. SENATOR SCHNEIDER WAS ABSENT FOR THE VOTE.)
This meeting will adjourn at 9:09 a.m.
RESPECTFULLY SUBMITTED:
Makita Schichtel,
Committee Secretary
APPROVED BY:
Senator Randolph J. Townsend, Chairman
DATE: