STAND. COM. REP. NO. 339-00

                                 Honolulu, Hawaii
                                                   , 2000

                                 RE: H.B. No. 2352
                                     H.D. 1




Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committee on Consumer Protection and Commerce, to which
was referred H.B. No. 2352 entitled: 

     "A BILL FOR AN ACT RELATING TO SERVICE CONTRACTS,"

begs leave to report as follows:

     The purpose of this measure is to protect service contract
holders in this state by creating a regulatory framework
governing the provision of all types of service contracts to
consumers.

     Your Committee received testimony supporting this measure
from the Office of Consumer Protection (OCP) of the Department of
Commerce and Consumer Affairs, Insurance Division of DCCA
(Insurance Division), and the Service Contract Industry Council
(SCIC).  The Insurance Division and SCIC suggested amendments.
Testimony in opposition to the bill was submitted by the Hawaii
Automobile Dealers' Association (HADA) and Insurance Investments.

     Your Committee heard testimony that a law is needed to
protect consumers and address consumer complaints arising from
service contract agreements.  Your Committee finds that any
service contract law must be clear, comprehensive, and uniform
with the laws of other states.

     During the 1999 legislative session, your Committee assisted
in the formation of a group composed of representatives of the
OCP, Insurance Division, HADA, and the Retail Merchants of Hawaii
(RMH), for the purpose of developing the needed comprehensive

 
 
                                 STAND. COM. REP. NO. 339-00
                                 Page 2

 
legislation that addressed the concerns of both providers and
consumers.  Your Committee understands, however, that HADA
believes there was insufficient time to fully evaluate the bill
and participate in its drafting.  In addition, testimony
submitted by SCIC requested a number of amendments to the
measure, that includes provisions from the National Association
of Insurance Commissioners (NAIC) service contract model act, and
provisions developed by OCP.

     Your Committee believes service contract legislation can
benefit both consumers and the service contract industry, and
finds that an essential component of such legislation is its
recognition of the interests of all parties concerned.
Accordingly, your Committee has amended this measure to replace
its contents with the service contract industry's version of the
NAIC service contract model act, which includes many of the
amendments requested by SCIC.

     Your Committee has also made technical, non-substantive
amendments for purposes of clarity, consistency, and style, and
has replaced the effective date of the measure with a blank to
ensure further discussion of the amended bill by all parties
concerned.

     As affirmed by the record of votes of the members of your
Committee on Consumer Protection and Commerce that is attached to
this report, your Committee is in accord with the intent and
purpose of H.B. No. 2352, as amended herein, and recommends that
it pass Second Reading in the form attached hereto as H.B. No.
2352, H.D. 1, and be referred to the Committee on Finance.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Consumer
                                   Protection and Commerce,



                                   ______________________________
                                   RON MENOR, Chair