Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committee on Commerce, Consumer Protection and Housing, to which was referred H.B. No. 736, H.D. 1, entitled:

begs leave to report as follows:

The purpose of this measure is to require that before a person is denied an occupational license or sanctions are imposed against an existing licensee for defaulting on a student loan, that the default and other pertinent circumstances be certified by the loan administering entity pursuant to a court order.

The Hawaii State Bar Association testified in support of this measure. The Department of Commerce and Consumer Affairs (DCCA), Attorney General, and University of Hawaii submitted comments on the measure.

In order to address the problem of student loan defaults, the Legislature last year passed a law authorizing the State's licensing entities to deny, suspend, or revoke an occupational license, or to take other action against a license if a license applicant or licensee had defaulted on a student loan undertaken to finance the applicant's or licensee's education. However, concerns arose regarding the law's lack of due process protections and its failure to allow the consideration of mitigating circumstances affecting the default.

This measure addresses the above concerns by requiring that a licensing entity, before taking action against an application or existing license because of a student loan default, obtain certification of the default from the loan administering entity. The certification must be based upon a court judgment that specifies the default amount, finds the borrower to have the ability to cure the default, and includes proof of service of notice to the borrower that the judgment is being reported to the licensing authority to request summary suspension of the license, denial of the license, or denial of renewal of the license.

Your Committee was advised by DCCA that the reference to "summary suspension" in this measure, at least as it applies to licensees under the jurisdiction of DCCA, would unintentionally impose more stringent license sanction requirements upon the department than intended by the measure.

Under chapter 436B, Hawaii Revised Statutes (chapter 436B), the general law governing DCCA's regulatory authority, the term "summary suspension" specifically refers to a twenty-day suspension imposed only in limited circumstances involving consumer fraud or an immediate threat to consumer safety, and only after a hearing has been held by the licensing authority. By providing that a license may be subject to "summary suspension", this measure incorporates by reference the hearing requirement of chapter 436B, in contravention of the law's intent to allow a licensing authority to proceed summarily after obtaining certification of a student loan default, and in conflict with other language in the measure that authorizes suspension "without further review or hearing".

Therefore, your Committee has amended this measure by replacing the term "summary suspension" with the term "suspension" in those provisions affecting licenses under DCCA jurisdiction. Additionally, your Committee made technical and formatting amendments for purposes of clarity, consistency, and style, and to correctly reflect the existing language of the Hawaii Revised Statutes.

As affirmed by the record of votes of the members of your Committee on Commerce, Consumer Protection and Housing that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 736, H.D. 1, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 736, H.D. 1, S.D. 1, and be referred to the Committee on Judiciary and Hawaiian Affairs.