National Conference of State Legislatures
Communications, Financial Services & Interstate Commerce Committee
News from the States
Summer 2008
The Communications, Financial Services and Interstate Commerce (CFI) Committee met July 22-26, 2008 in New Orleans, Louisiana. At the NCSL Legislative Summit, the Committee addressed several crucial state-federal policies and explored key state issues. Topics included streamlined sales tax, identity theft, credit card regulation, statewide information technology policy, the communications marketplace, disasters and insurance, mortgages and foreclosures, emergency communications, protecting financial services consumers, life insurance, corporate taxation and government e-mail. In addition, Committee members voted on the following policies and resolutions:
Policies
Resolutions:
For meeting handouts, see the CFI Committee Agenda web page or contact Committee staff, Jo Anne Bourquard, Heather Morton or Neal Osten.
At the CFI Committee meeting April 22-26, 2008 in Washington, D.C., the agenda included sessions on streamlined sales tax, Surplus Lines Multi-State Compliance Compact (SLIMPACT), accessibility of government information, foreclosure mitigation efforts, communications tax, NFL equal access, and regulation of credit and debit cards. Committee members also participated in the Task Force on Corporate Formation and the Digital Preservation Legislative Advisory Group. See the Committee's Spring Forum web page for handouts.
Recently, the National Association of Insurance Commissioners (NAIC) released their annual survey of insurance premiums for homeowners' and renters' insurance. As part of the survey, NAIC determined the average insurance premium on owner-occupied homes. The ten most expensive locations in which to insure a home in numerical order are: Texas, Louisiana, Oklahoma, District of Columbia, Mississippi, Florida, California, Rhode Island, Alabama and Kansas. Thanks to the combination of hurricanes, wind, rain, hail and tornadoes, Texas homeowners pay on average $1,372 in premiums annually.
Many factors can influence insurance premiums. One factor is the exposure to catastrophes, including tornadoes, hurricanes, earthquakes, hail, windstorms, snow storms, freezing rain, and brush, grass and forest fires. Real estate values also impact insurance premiums as the cost of homeowners insurance is based on the value of the home. Homes built in densely populated areas tend to be higher in value resulting in higher insurance premiums. In addition, construction and repair costs may impact insurance premiums depending upon the availability of building materials and local building regulations.
From flooding in the Midwest, to forest fires in the West and hurricanes and tropical storms in the coastal regions, the weather this year has demonstrated that disasters can strike anywhere. In May 2008, the NAIC surveyed consumers about their insurance coverage to determine how prepared they are to deal with potential disasters. The survey found that the majority of consumers do not have the insurance necessary to cover specific types of disasters that are not reimbursed under standard homeowners insurance policies:
- 69 percent do not have earthquake insurance
- 65 percent do not have flood insurance
- 56 percent do not have insurance for a water line break
- 55 percent do not have insurance for a sewer line break.
Insurance regulators recommend that consumers review their homeowners policies, as they may not understand the difference between purchasing an actual cash value policy and a replacement cost policy. An actual cash value policy covers the amount it would take to repair or replace damage to the home and its contents after depreciation. A replacement cost policy covers the amount it would take to replace or repair damages with materials of similar kind and quality, without a reduction for depreciation.
- Submitted by Heather Morton
Piloting Small-Dollar Loans
In 2008, the Federal Deposit Insurance Corporation (FDIC) kicked off a two-year Small-Dollar Loan Pilot Program. The pilot program will identify effective and replicable business practices to help banks incorporate affordable small-dollar loans into their other mainstream banking services. The pilot program is testing whether financial institutions can make a profit and assist their customers by offering an alternative to payday loans and fee-based overdraft protection programs. Thirty-one banks have been selected to participate in the pilot program. The participating banks have general guidelines to follow, including:
- Loan amounts of up to $1,000
- Annual percentage rates (APRs) below 36 percent
- Payment periods that extend beyond a single paycheck cycle
- Low or no origination fees
- No prepayment penalties
- Prompt loan application processing
- Automatic savings component
- Access to financial education
For the first quarter of the pilot program, 20 banks originated more than 1,500 loans of $1,000 or less, with a combined principal of approximately $1 million. The average loan size was $678, the average interest rate was 15.1 percent and the average loan term was 10 months.
The FDIC has published an article summarizing the pilot program and the first quarter results that is available through its FDIC Quarterly
- Submitted by Heather Morton
In June, the U.S. Treasury Department announced that it would start using debit cards for recipients of Social Security and Supplemental Security Income (SSI) benefits who still receive an actual paper check once a month. Building on its successful campaign to switch federal benefit recipients to direct deposit, the new Direct Express debit cards aim to help recipients who do not have bank accounts.
The Treasury Department estimates that four million Social Security and SSI check recipients do not have bank accounts, placing them at greater risk of check delivery delays due to poor weather, national or local emergencies, and other check related problems, such as lost or stolen checks. According to the Treasury Department, nine times out of 10, problems with Social Security payments are linked to paper checks, not direct deposit.
Each month, payments will be automatically deposited on the Direct Express card account on the recipient's designated payment day. Card holders will be able to access their money at ATMs and financial institutions nationwide. They will be able to use their card to get cash back and make purchases at retail locations, as well as pay bills and make purchases online. In addition, these accounts are PIN-protected, FDIC-insured, and subject to federal consumer protection regulations (Regulation E).
Switching to electronic payments could save the federal government as much as $42 million a year
- Submitted by Heather Morton
The Interstate Insurance Product Regulation Compact (IIPRC) is a state-based modernization initiative to enhance the efficiency and effectiveness for filing, reviewing and approving insurance products. By streamlining the process, the compact provides speed-to-market for the insurance industry and quicker access to more competitive products for consumers.
Thirty-two states and Puerto Rico have adopted the compact to date, representing one-half of the insurance premium volume nationwide. In 2008, Alabama, California, Connecticut, the District of Columbia, Illinois, Missouri, New Jersey and New York introduced legislation to adopt the compact. The bills introduced in Alabama, Connecticut and Missouri did not pass before these states adjourned their sessions.
- Submitted by Heather Morton
Internet and Information Technology
Of all types of Internet fraud reported to law enforcement, Internet auction fraud is by far the most frequently reported offense, according to the Internet Crime Complaint Center (IC3). Internet auction fraud makes up about 45 percent of all complaints received. IC3 is a partnership of the FBI and the National White Collar Crime Center.
Consumers who believe they are victims of Internet auction crime can make a report on the IC3 website. IC3 serves as a central source for complaints involving Internet related crimes, and can refer the criminal complaints to federal, state, local, or international law enforcement and/or regulatory agencies for investigation.
General state consumer protection and fraud laws can help protect consumers who are victims of these types of crimes, but in recent years, at least four states also have enacted statutes to regulate Internet auctions.
In California, a person is required to hold a license as a "secondhand dealer" if (1) he or she owns a "drop-off" store located within the state where secondhand tangible personal property is accepted for sale to be conducted on an Internet auction website, (2) the property is held for display or in storage at the store or off the premises, (3) the property is advertised and sold by an Internet auction website, (4) the store owner arranges for payment and delivery of the property sold, and (5) he or she charges the seller a fee for services rendered. (Cal. Bus. & Prof. Code §21626 and Cal. Civil Code §1812.600 et seq. (as interpreted by a 2005 California Attorney General opinion).
Illinois law (Ill. Rev. Stat. ch. 225, §407/10-27) provides for the registration of Internet auction listing services through the Illinois Office of Banks and Real Estate. A Maryland statute (Md. Crim. Code §7-101 et seq.) provides for the crime of "using an Internet auction listing service or an interactive computer service with the intent to defraud an individual of property, services, or anything of value."
In addition, consumers may find some protections if their state has adopted the Uniform Electronic Transactions Act (UETA). The official comment to the Act (which most states have adopted) states the following: “It is essential that the term commerce and business be understood and construed broadly to include commercial and business transactions involving individuals who may qualify as "consumers" under other applicable law. If Alice and Bob agree to the sale of Alice's car to Bob for $2000 using an Internet auction site, that transaction is fully covered by this Act. Even if Alice and Bob each qualify as typical "consumers" under other applicable law, their interaction is a transaction in commerce. Accordingly their actions would be related to commercial affairs, and fully qualify as a transaction governed by this Act.” A list of states that have adopted the UETA and the citation to the statutes can be found on NCSL's UETA website.
- Submitted by Pam Greenberg and Ashley Nichols
The use of Radio Frequency Identification (RFID) technology has raised privacy concerns in some states in recent years, particularly with regard to the potential implantation of RFID chips in humans or the possible linking of personal information with RFID tags in consumer products. RFID tags are increasingly used in retail products to increase efficiency. For example, an RFID tag can hold information related to the expiration date of a product, record whether a product has been exposed to excessive heat, or could be used to assist with product recalls. An RFID-tagged product can be tracked as it moves in commerce, providing better ways to identify and meet consumer demand for products. When stimulated by a remote "reader," the tag sends information to the reader via radio waves.
In 2005, 2006 and 2007, several states introduced legislation that would require disclosure when RFID devices are used in consumer products or that would prohibit linking RFID data to personal information. Three states--California, North Dakota and Wisconsin--enacted laws to prohibit requiring an individual to undergo the implanting of a microchip.
In 2008, Washington become the first state to outlaw skimming of personal information from an ID card that uses RFID chips. Washington in early 2008 had started issuing enhanced drivers' licenses that contain RFID tags. (Enhanced drivers licenses can be used in place of a passport when crossing the border from Washington into Canada). Washington House Bill 1031 became effective June 12, 2008. The new law makes it a felony to intentionally scan another person's personal ID remotely without consent for the purpose of fraud, identify theft, or other illegal purpose.
- Submitted by Pam Greenberg
Telecommunications
A recent Harris Poll discovered that nine out of 10 adults own a wireless telephone, a 12 percent increase from a similar study conducted in 2006. During this same time period, ownership and use of conventional telephone services has declined. As with the development of conventional telephone services, wireless telephone services are not without their own unique challenges and frustrations for consumers. And, as a result, several states have recently enacted wireless telecommunications bill of rights laws.
The Louisiana wireless telephone law prohibits wireless telephone companies from automatically renewing a consumer’s service contract. The Kentucky law requires the Kentucky Public Service Commission to retain jurisdiction to assist in the resolution of consumer complaints. And, the U. S. Virgin Island law requires certain wireless providers to comply with the Cellular Telecommunications and Internet Association’s Consumer Code for Wireless Service. The wireless carriers that are signatories to the code are required to disclose rates and terms of service to consumers; make available maps showing where service is available; provide contract terms and provide for a variety of other consumer rights and protections.
At least five states, including Illinois, Maryland, New Jersey, New York and Pennsylvania, have introduced wireless consumer bills in 2008. The Illinois bill requires wireless carriers to offer consumers an option to opt out of all text message services on wireless service agreements. The Maryland bill requires a wireless telephone service provider to send written notice to residential customers after any change in the rates, terms, or conditions are made. The New Jersey bill creates the Wireless Telephone Consumer Protection Act, establishing consumer protections for wireless telephone subscribers. The Pennsylvania bill, among other things, provides for disclosure of terms and charges of wireless service plans.
- Submitted by Bob Boerner
Experts tout broadband as a vital economic engine, an essential vehicle for enhanced learning and distance medicine, and a critical element of the entertainment and news industries. Broadband technology makes it easier for schools to offer content-rich learning tools and on-line testing. Videoconferencing, using broadband technology, makes it possible for physicians to treat patients in remote areas, reducing costs and providing better medical services.
In an effort to increase broadband deployment in the United States, several states are considering innovative measures in 2008. Seven states, including Colorado, Kansas, Michigan, Minnesota, Virginia, Washington, and West Virginia have passed into law a variety of broadband bills in 2008. For example, Colorado lawmakers passed a measure requiring the state to identify and map existing broadband service areas in order to extend services to un-served areas. Minnesota lawmakers passed a measure establishing the Ultra High-Speed Broadband Task Force. The purpose of the Task Force is to make recommendations to the governor and the Legislature regarding ultra high-speed broadband in the state. And, the West Virginia measure establishes the Broadband Deployment Council and creates the Broadband Deployment Fund. The new law directs the Council to develop a strategy to provide universal broadband access by stimulating demand for broadband services and by constructing telecommunications systems.
For additional information about these broadband measures, please visit the Telecommunications Web page, on the NCSL Web site at:
http://www.ncsl.org/programs/telecom/2008BroadbandBills.htm.
- Submitted by Bob Boerner and Michelle Larson-Krieg
