March 23, 2001

LEGISLATIVE UPDATE Volume 6 – 2001

· PRIVACY BILL PUBLIC HEARING, MONDAY, MARCH 26, 2001

· LD 10, SOUNDLY DEFEATED

· TELEMARKETING LEGISLATION IS GETTING SIGNIFICANT LEGISLATIVE & AARP ATTENTION

· WORK SESSION ON FARM CREDIT SALES TAX EXEMPTION MONDAY

· UPDATE ON FEDERAL ACTIONS IMPACTING MEMBERS

· WE WOULD WELCOME MORE BANKERS DAY PARTICIPANTS

Privacy Bill Hearing on Monday, March 26^th

LD 1640, An ACT to Conform the State’s Financial Services Privacy Laws with Federal Law will be heard by the Banking and Insurance Committee on Monday, March 26^th in a Public Hearing beginning at 10 AM. Following Commissioner Catherine Longley’s presentation in support of LD 1640, the Administration’s bill, Ryan Stinneford of Pierce Atwood, will present an amendment to the printed bill on behalf of the Maine Bankers Association and other interested groups. This amendment has the support of the Department of Professional and Financial Regulation and focuses on incorporating in the proposed statute more specific language related to the scope and the provisions of Gramm-Leach-Bliley. We are very pleased with the participation and cooperation of all interested parties, including MACB and the Maine Credit Bureau in this amendment process. Talking points being prepared for Bankers Day at the Legislature on April 1Oth will focus on LD 1640 which could be in the Senate or House for its first readings during the week of April 9^th.

Representative John Michael (I) Replaces Rep. Phil Cressey (R) on Banking & Insurance Committee

House Speaker Mike Saxl has transferred Representative Phil Cressey to the State & Local Government Committee and replaced him with the Independent Representative from Auburn, John Michael. Representative Michael was recently censured by the house and had been removed from the State & Local Government Committee for his behavior. The 10 house members on the Banking & Insurance Committee will now consist of 6 Democrats, 3 Republicans, and one Independent.

Maine’s House and Senate Act to Kill LD 10

LD 10, An ACT to Require Credit Card Issuers to Provide Greater Notice of Change in Terms was soundly defeated in both the House and Senate this week. The bill’s sponsor, South Portland’s Representative Kevin Glynn (R), said in the House of Representatives ‘debate on LD 10 that Maine needs to take this action to prevent consumers from being subjected to “bait and switch teaser rates” by banks and their credit card companies and that passage of this legislation would start a national movement in the states to rein in the deceptive practices of the credit card issuers. The House voted 125 to 18 against Rep. Glynn’s legislation, which only would have affected Maine banks and credit unions that issue their own credit cards. LD 10 as amended would have required a 45-day notice for any changes in terms putting Maine in non-compliance with the federal standard of 30 days. Joining Rep. Glynn in voting for the bill and to add additional requirements for Maine banks issuing credit cards were Representatives David Bowles (R) of Sanford, Bruce Bryant (D) of Dixfield, Susan Dorr (D) of Camden, Ben Dudley (D) of Portland, Robert Duplessie (D) of Westbrook, Clift Foster (R) of Gray, Al Goodwin (D) of Pembroke, Jay MacDougall (R) of North Berwick, Boyd Marley (D) of Portland, Bill Pinkham (R) of Lamoine, Tom Shields (R) of Auburn, William Smith (D) of Van Buren, Lois Snowe-Mello (R) of Poland, Joanne Twomey (D) of Biddeford, Paul Volenik (D) of Brooklin, Edgar Wheeler (R) of Bridgewater, and Gary Wheeler (D) of Elliot. The Senate under the hammer with no debate also voted “ought not to pass”, thus killing the legislation.

Utilities Committee Sends Forth Telemarketing Legislation With A Strong “Ought to Pass” Report, AARP SEEKS ITS DEFEAT!

LD 585, An ACT to Remove Telemarketers From The Application of the Consumer Solicitation Sales Laws received a strong 11 to 0 “ought to pass” report from the Utilities Committee at its work session this week. An amendment, supported by the Bureau of Banking and the Administration has been added to the bill exempting only supervised lenders and their affiliates and agents from the provisions of the Consumer Solicitation Act which are different from federal telemarketing laws and limit consumer authorization to only written authorization. Federal law, which is also incorporated in other sections of Maine law, provides for the option of using verbal authorization and e-signatures along with the option of written authorization. Financial institutions, supervised lenders, their affiliates and agents must continue to follow all federal and state telemarketing laws including the maintenance and use of “Do Not Call” lists. Two groups have emerged as opponents of the amended legislation. First is the Direct Telemarketers Association, which is opposing the amended version because not all Maine based telemarketers are included in the exemption. The second group is the AARP. The AARP is waging a national campaign at the state level to institute greater restrictions on all telemarketing. The AARP has a full time lobbyist at the State House whose main mission seems to be to defeat LD 585 and impose stricter requirements on Maine based telemarketers. We expect a lively debate when the legislation appears in the House and Senate. The eleven members of the Utilities Committee voted in favor of LD 585 as amended were Senate Chair Norm Ferguson (R) of Hanover, Senator David Carpenter (R) of Springvale, House Chair William Savage (D) of Buxton, Rep. Monica McGlocklin (D) of Embden, Rep. Al Goodwin (D) of Pembroke, Rep. Lawrence Bliss (D) of South Portland, Rep. Chris Hall (D) of Bristol, Rep. Peter Rines (D) of Wiscasset, Rep. Don Berry (R) of Belmont, Rep. Richard Duncan (R) of Presque Isle, and Rep. Richard Crabtree (R) of Hope. Absent when the Committee vote was taken were Senator Sharon Treat (D) of Gardiner and Rep. Royce Perkins (R) of Penobscot. Both Treat and Perkins voted against the bill in earlier votes. Senator Susan Longley (D) of Liberty is the lead sponsor.

Negative Option Sales Telemarketing Practices to Be Examined at Public Hearing for Attorney General’s Bill

LD 1092, An ACT to Prohibit Negative Option Sales Without a Consumer’s Express Agreement will give the AARP and others opposed to telemarketing a forum at its public hearing on Friday, March 30^th at 9 AM before the Business and Economic Development Committee. Submitted by the Department of the Attorney General, LD 1092 prohibits so-called “negative option sales” and requires a consumer to expressly agree to be charged for a good or service after a trial period. The testimony of the legislation’s proponents include examples of telemarketers pitching discount programs on services and adding to a person’s credit card or mortgage statement the cost of these services without verbal, written, or other affirmative authorization after a trial period. Knowing that our members do not engage in this practice, the Attorney General has asked the Maine Bankers Association to support this legislation at the public hearing. Copies of this legislation have been sent to all MBA CEOs and Legislative Committee members for comment.

Equitable Taxation of Leased Property Work Session on Monday, March 26^th,

LD 577, An Act to Create Equitable Taxation of Leased Property will be further acted upon by the Taxation Committee at its work session on Monday morning, March 26^th. The legislation seeks to remove the sales tax exemption that Farm Credit has as it relates to leasing programs. In addition to asking in last week’s Legislative Update for banker contacts with members of the Taxation Committee, as part of our lobbying effort, we have distributed a one page written summary to Committee members and Legislative leadership detailing why LD 577 should be enacted and why LD 577 would not hurt farmers. Some Taxation Committee members are telling us that while they support our position, they would like to see this issue tabled and then included in a forthcoming study of the Maine’s tax system and its many sales tax exemptions. We will continue to seek full enactment now of LD 577.

Other Bills Having Public Hearings This Past Week

LD 872, A RESOLVE to Create the Commission to Study Privacy Laws had its public hearing on Monday, March 19^th, and will have its work session on Monday, March 26^th. Presented by State Representative William Savage, this RESOLVE would authorize the establishment of a special Commission to review state and national privacy laws and to report to the Legislature in December 2001 on steps that should be taken regarding privacy laws in Maine. Rep. Savage told the Judiciary Committee that steps like this Commission need to be taken to protect Maine consumers as one report on the effectiveness of states in providing consumer information privacy protection has Maine in the lower half of all states. Rep. Savage said that the intent of his bill is to have Maine be one of the top 10 ten states in privacy protection. The bill was strongly supported by the Maine Civil Liberties Union and does include a place on the Commission for a person appointed by the Governor to represent the financial services industry. There was no organized opposition to the bill. While we expect the Judiciary Committee to report this RESOLVE out as “ought to pass”, there may be some problems with getting the Commission funded by the Appropriations Committee because of the budget problems.

LD 849, An ACT Regarding Social Security Numbers Used for Identification Purposes would prohibit all businesses, organizations, governmental entities and all other entities operating in the state from requesting a person’s social security number for any purpose except for the use of social security numbers when necessary to collect or disperse social security funds and when federal law requires the Federal Government to obtain a person’s social security number. This is the third time that Rep. Richard Tracy (D) of Rome has introduced this legislation. There was a number of proponents who talked about identify theft and their concern about the lack of privacy protection when they have given their social security numbers. Speaking in oppositions to the legislation, MBA President Joe Pietroski spoke to the Judiciary Committee about the impact on consumers if Maine’s financial institutions were not allowed to use social security numbers. Mr. Pietroski also spoke to the Committee about privacy protections and practices used by Maine financial institutions. While there may be an attempt to amend the bill to exempt other governmental and regulated industries, we believe that a strong majority of the Committee will vote to send to the full House and Senate an “ought not to pass” report. The work session for LD 849 is Monday, March 26^th at 1 PM.

Weekly Pay Bill expected to be on House Calendar late next week.

LD 57, An Act to Require That Certain Employees Be Paid on a Weekly Basis, was reported out of the Labor Committee with a 7 to 6 “Ought Not to Pass” report. It has not yet appeared on the House Calendar for debate. This may happen late next week. Thus far, we have not noticed any significant organized support for this legislation; but we have joined the Maine Chamber of Commerce and other business groups in signing a letter to all members of the Legislature registering our opposition.

Status of Other Bills We Are Following Closely

LD 375, An ACT to Ensure Parity in the Sale of Securities by Maine Financial Institutions provides parity with the provisions of Gramm-Leach-Bliley. This legislation has had its first reading in the House. We expect no problems with its passage by both the House and Senate.

LD 1040, An ACT to Implement the Recommendations of the Maine Millennium Commission on Hunger and Food Security Concerning Recapitalization of the Vehicle Revolving Fund for Low-Income Families Administered by the Department of Human Services – Public Hearing, Monday, March 26^th at 9:30 PM before Health & Human Services. This legislation would provide additional funding for the “Good Wheels” loan program for low-income consumers making the transition from welfare to work.

LD 1251, An ACT to Enhance Observance of Veteran’s Holidays would require banks and businesses to close on these holidays. The Public Hearing is on Tuesday, March 27^th at 1 PM before Business and Economic Development.

Federal Legislative Issues

Bankruptcy Reform Legislation Now In House- Senate Conference Committee

Senator Collins’ Amendment to Bankruptcy Reform Legislation Gives Commercial Fishermen Opportunity to Reorganize and Keep Fishing was somewhat lost in the Senate debate on Bankruptcy Reform. This amendment offered by Senator Susan Collins makes reorganization under Chapter 12 applicable to fisherman, just as it is to farmers. Chapter 12 has been considered an enormous success in the farm community where 74% of the family farmers who filed for reorganization under Chapter 12 are still farming. Senator Collins in arguing for her amendment pointed out that, “Fishermen should not be denied the bankruptcy protections accorded to farmers, solely because they harvest the sea and not the land.”

The Bankruptcy Reform Bill will now go to a House-Senate Conference Committee. The members of the Conference Committee are likely to be named next week. Part of the delay is because the Senate Democrats are insisting equal representation with the Senate Republicans on the Conference Committee. The reason why there has to be a Conference Committee is because the House and Senate versions contain a number of differences. For example, the Senate version caps at the home exemption at $150,000, the House did not impose a cap. The House version did not address the farmer and fisherman bankruptcy issues. You can expect some major battles before the Conference Committee comes to an agreement and sends the bill to the President for his signature.

Congratulations and messages of thanks for the support are in order for Senator Snowe and Senator Collins who supported the Bankruptcy Reform legislation. Not so with our two Congressmen, John Baldacci and Tom Allen who were major opponents of the reform legislation in the House. Congressman Baldacci has scheduled a press announcement on Tuesday at the State House where he is expected to formally announce his candidacy for Governor.

Interest on Business Checking Accounts and 24-Transaction Sweep Accounts

The House Financial Services Subcommittee on Financial Institutions and Consumer Credit this week passed and sent to the full Committee for further action, H.R. 974, the Small Business Checking Act, and H.R. 1009, the Business Checking Freedom Act. H.R. 974 would immediately provide for 24-transaction internal sweep accounts, Federal Reserve flexibility on setting reserve requirements and the paying of interest on sterile reserves. H.R.1009 would repeal the prohibition of paying interest on commercial accounts and would take effect one year after the bill’s enactment. In seeking to help banks prepare for the impact of paying interest on commercial accounts, the American Bankers Association is strongly supporting an amendment to provide for a three-year transition period. This amendment was introduced and then withdrawn by the sponsor during the Subcommittee’s discussion, but it likely to be brought back when the full House Financial Services Committee meets next week to mark up these bills. It is expected that at least the portion of these bills allowing for 24-transaction internal sweeps and the paying of interest on commercial accounts, with or without the three-year transaction time for the paying of interest, will be passed by the House and introduced in the Senate later this year. There is significant lobbying by business groups for the payment of interest on commercial accounts.

National Ass’n of Attorney Generals Votes to Not Take Action Now on More Restrictive Privacy Legislation

The National Association of Attorney Generals voted last week to not adopt draft privacy principles intended as a vehicle to promote more restrictive federal and state legislation on information sharing. We can expect, however, that the issue will continue to have the attention of the Attorney Generals and their association. Among the most active of the members of the Financial Services Coordinating Council working on the outreach efforts with the NAAG was the American Bankers Association.

New OCC Letter Re-affirms National Bank Act Preempts State and Local Restrictions on ATM Fees

The Office of the Comptroller of the Currency in responding to the New York City Council’s consideration of an amendment that would have prohibited fees on ATM transactions by financial institutions has reaffirmed in Interpretive Letter No. 906 that national banks have the right to set and charge fees for automated teller machine transactions under the federal National Bank Act and that this law pre-empts state and local restrictions.

More Participants Welcome for Bankers Day, Tuesday, April 10^th

We currently have assigned 115 MBA and MACB members to shadow members of the State Legislature. We would like to at least get above 150 participants this year. Please call us if you can join us on April 10^th. The program begins at 8 AM in the Hall of Flags on the 2^nd Floor of the State House and concludes between 2:30 and 3:30 PM.