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 S.B. No. 481 entitled:

begs leave to report as follows:

The purpose of this measure is to allow for the evaluation and payment of bonuses and commissions on an indirect basis as to the sales of collision damage waivers (CDWs) while maintaining the penalties in section 480-2, Hawaii Revised Statutes (HRS), relating to all sales of CDWs.

Testimony supporting this measure was received from Catrala-Hawaii, Dollar Rent A Car, Enterprise Rent-A-Car, and ANC Rental Corporation. The Department of Commerce and Consumer Affairs submitted comments on this measure.

In the past, there were over thirty-five U-drive companies in fierce competition and selling CDWs. This competition resulted in hard sell and misleading tactics in selling CDWs. The Legislature in response passed a law banning compensation to and evaluation of U-drive employees relating to CDW sales and made it an "unfair and deceptive trade practice (section 480-2, HRS, violation) if a U-drive company misleads a renter in its CDW sales and its general business practices.

Your Committee finds that the environment has changed since there are now only about fifteen U-drive companies and that the penalties in section 480-2, HRS, (treble damages and payment of attorneys fees and costs) have worked as an effective deterrent in correcting the hard sell and misleading tactics relating to CDW sales and the general operations of U-drive companies. Your Committee further finds that the total ban on compensating and evaluating U-drive employees on CDW sales has worked to the disadvantage of Hawaii employees when compared to their mainland counterparts in their evaluations and awards of bonuses and commissions. Hawaii is the only state that has such a total ban relating to CDW.

This measure seeks to allow Hawaii employees to be fairly treated when being compared to their mainland counterparts since gross receipts from CDW sales in accordance with Hawaii law must be excluded for evaluation and overall bonus and commission purposes. This measure will allow evaluating and compensating a U-drive employee as to CDW sales as long as it is one of many factors used along with other factors in such total evaluation and total bonus and commission award ("indirect basis"). Compensation and evaluation of CDW sales on a "direct basis" ($.25 for each CDW sale) which were the problems of the past will continue to be banned. Further, this measure does not remove or alter the section 480-2, HRS, penalties which have been the major deterrent in correcting past CDW abuses. These penalties shall remain a deterrent in preventing abuses relating to CDW sales regardless as to whether such sales are done on a "direct basis" or "indirect basis".

To allow for further discussion and deliberation on this measure with possible amendments, your Committee has amended this measure by providing an effective date of July 1, 2050.

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 S.B. No. 481, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 481, S.D. 1, and be placed on the calendar for Third Reading.