Senate Insurance and Commerce Committee

January 30, 2025

 

Senator Blake Johnson [00:00:00] Senate Committee on Insurance Commerce to order. I see a quorum. We're going to begin with Senate Bill 48. Who is that? Is that Missy? Missy, your dog is barking. If it's all right with the members, I'm just going to have the presenter just past us because it's a long ways down there. Is there anybody you want to bring to the table with you? Okay. All right. It's Senate Bill 48. Just introduce yourself and you're recognized to begin.

 

SB 48: Adding deductibles to first page (Passed)

Senator Justin Boyd [00:00:42] Senator Justin Boyd, Senate Bill. 48. This law is Just a good, consumer friendly bill. All it does is it clarifies the need to put policy deductibles on the declaration page, which is usually the first page of an insurance policy. It's kind of an insurance summary, and it clarifies that it's for owner occupied residential property. So this is not for people who have investments in properties per se. That's insured in a different way. 

But if it's Justin Boyd and I own a house and I'm living in that house, then it requires those deductibles to be on the declaration page, all of them ,not hidden somewhere else in the policy that some people might not so readily see. So it's good for the consumer. And this is good consumer friendly legislation. And I know of no opposition to it.

 

Senator Blake Johnson [00:01:40] Senator Flowers.

 

Senator Stephanie Flowers [00:01:43] Thank you. Thank you, Senator Boyd, for bringing the bill. I don't oppose the bill, but you did amend it the other day, did you not? And you put in owner occupied. And my concern is, and I appreciate that because as an owner of a residential property that I live in, I do want to know what my deductibles are. I think the insurance company I deal with lists those anyway. But I have concern about those persons who lease properties for residential purposes and it seems like they always get the short end of the stick and I think they should have a right to know what deductibles are for properties that they insure that they lease as residential spaces. I'm not sure if that is done. Obviously, it's not. I don't think. I don't know. Maybe somebody in the insurance department could say. 

But it just seems that the people that don't own the things, like you've got to own something or you've got to be a corporation to get the benefits of the disclosure and know this. And I'm going to support your bill, but at some point we ought to consider those people that can't afford to own. And one thing I guess this is covering people that are purchasing a property owner occupied.

 

Senator Justin Boyd [00:03:28] Yes.

 

Senator Stephanie Flowers [00:03:28] So if they got a mortgage on it, it still covers them.

 

Senator Justin Boyd [00:03:33] Right, it's not covering people who have made investments in properties. It's owner occupied. This is specific to residential property. What I would say is if you and I want to have a conversation with the insurance commissioner about rental property, like renters insurance, I say we have that conversation. But that's not the intent of this legislation. This is intended to fix a specific problem that happened in Arkansas that there's no need to get into details about. But we just want to make sure that owner occupied people have the ability to see right front and center of what it is.

 

Senator Stephanie Flowers [00:04:10] Thank you.

 

Senator Justin Boyd [00:04:11] Thank you.

 

Senator Blake Johnson [00:04:12] Any more questions? Seeing none, there's nobody written down to speak for or against the bill. Motion by Senator Irvin. Second by Senator Johnson. All in favor, say aye. All opposed like sign. Thank you, Senator. So I will pass over Senator Johnson's. He's got a House amendment. It should be over here pretty, pretty quick so we can put him back down the calendar. Next is Senate Bill 94. So, Senator, do you want to come up here? I can't handle that.

 

Senator Missy Irvin [00:05:02] Can I ask a question?

 

Senator Blake Johnson [00:05:03] Yes.

 

Senator Missy Irvin [00:05:05] On Senate Bill 77, I'd like to have a fiscal impact for Medicaid. Will that be provided to us?

 

Senator Blake Johnson [00:05:29] It has not been identified by Segal. They usually pull those ones.

 

Senator Missy Irvin [00:05:34] But that's not for Medicaid. Segal is different. That's on employee benefit division and state health plan. And I'm speaking about Medicaid. Do you know? Have they given you a fiscal impact? [Off-mic] Okay. Well, I just thought it would be good for us to have Medicaid look at it and get a fiscal impact.

 

Senator Blake Johnson [00:06:18] Maybe we can hear it and you can check on that to confirm it.

 

Senator Missy Irvin [00:06:26] Yeah, check on it with Medicaid. I just-- Good information to have. Thanks.

 

Senator Blake Johnson [00:06:30] All right. Thank you for your indulgence. Senator Dotson, if you will introduce yourself, is there anybody you need to bring to the table with you?

 

Senator Jim Dotson [00:06:40] Not at this time.

 

Senator Blake Johnson [00:06:41] All right. Go ahead. You're ready to go.

 

SB 94: Removing service center requirement from ATV dealers (Pulled down)

Senator Jim Dotson [00:06:43] Thank you, Mr. Chairman. Senator Dotson presenting Senate Bill 94 here, which regards ATV vehicles and the requirement that's currently in law that requires any new ATV dealer to have a service center on premises or at their location. What this would do, would add an exception to the motor vehicle statute as it currently is that says that an ATV dealer or new low speed vehicle dealer is not required to have a dedicated service center and parts area inside their building or structure where the dealer's established business is conducted or perform repairs and warranty services on a motor vehicle at the licensed location. 

So it expands the ability for dealers to have more options and give consumers more choices in where they buy their vehicles. And it's a good free market piece of legislation. Currently, Arkansas is only one of two states that has this restriction on our ATV vehicles. And when this was presented to me, I thought this would be a great addition to give more consumer choice to the marketplace, give availability of businesses to have more options to sell to consumers and customers in their locations. So more than happy to try to answer any questions. It's not a long bill, but I think there's going to be some opposition to it.

 

Senator Blake Johnson [00:08:24] So, Senator, this pretty much lets ATV and slow motor vehicles from the motor vehicle code and treats all dealers of new products the same, right?

 

Senator Jim Dotson [00:08:41] Correct. Yeah.

 

Senator Blake Johnson [00:08:44] Go ahead, Senator Flowers.

 

Senator Stephanie Flowers [00:08:47] So I heard what you said about the marketplace and all that. But I'm concerned about whether there are sufficient businesses that do repairs to these ATV's or I think that's what you're talking about. I saw something. This is not the UTV.

 

Senator Jim Dotson [00:09:18] All terrain vehicle.

 

Senator Stephanie Flowers [00:09:19] ATV's. But you know, I'm just concerned because the work force is not producing a lot of mechanics. And personally, when I buy things, I haven't bought an AT,. But you buy things and they break down and you have a warranty and you don't know where to get the warranty activated or get repairs done under the warranty. It costs the consumers so much to go out and find a place. 

And it seems to me ATV's, I haven't seen a lot, but we have some in my district and I don't know that they don't do their repairs that dealership that I see all the time. But I just think the consumer, you talk about the consumer spending money for one of these vehicles. Seems to me like they ought to be able to know where their warranty is going to be satisfied if the thing breaks down. I just think that's fair. Talk about free market, but I mean, how much dumping are we going to do on the consumer in terms of their purchase of a product? They have a warranty. Sometimes you have to buy the warranty. And still you're at a loss. 

And then you might find out that it could be cheaper for you to buy another one than just try to figure out how to get the warranty serviced. So what's your response to that? Do you concern yourself with people that have spent big bucks on these vehicles and they can't find a place to get them serviced?

 

Senator Jim Dotson [00:11:19] Well, with any type of purchase that you make, whether it's for a car, truck, ATV, lawnmower, whatever type of purchase that you make, there is an option for a dealer to do the servicing on it. Or, I don't know, I generally take my car to a friend of mine that knows how to fix cars and is significantly cheaper than some other places. But I shop around when I do my vehicle maintenance. Same thing is true with all terrain vehicles. 

I would imagine if you are able to buy a new one for cheaper than what you can get it serviced, that's probably not going to be the case on most of these things. They're designed to be repairable. But there are going to be anything from actual dealers that have service center for warranty repair work to mom and pop shops that do repair work on any of these types of vehicles. In some cases, if you buy your lawnmower, say at Walmart like I generally do, it's oftentimes cheaper to go buy a new one than it is to deal with warranty and service after a couple of years or a couple seasons using it. 

So I think the consumer has that choice. And that's kind of the design of the free market. And that's why I'm bringing this in front of you is, if you want to go to a dealership that has a service center in their location, you have the freedom and the flexibility to do that. If you want to go somewhere else that doesn't have one, that's your consumer's choice there. But the state government should not stand in the way of the free market and the ability for businesses to invest in products that consumers want to buy. And if they're not selling them, they won't be carrying them for very long and they'll move on. 

But that's kind of the free market is allowing the consumers to make those choices themselves, allowing businesses to offer the products. And if they can make money off of it, they stay in business. If they can't, then they go do something else. So that's what the purpose of this bill is for.

 

Senator Blake Johnson [00:13:54] Yeah, just a second. Senator Boyd, then I'll come back.

 

Senator Justin Boyd [00:14:00] Is there anything, Senator Dotson, that would limit one of the repair shops, say it was associated, to start repairing other brands? Is there something that just says they have to? Is there something under their contract? I don't know enough about the market and it's a legit question.

 

Senator Jim Dotson [00:14:19] There's nothing in the statute or anything that would prohibit a dealer service center from, say, entity A over here sold a ATV that they did not have a service center in their location under this new change and they wanted to go to entity B to provide warranty and service repair work and everything like that, then absolutely they could certainly do that.

 

Senator Justin Boyd [00:14:49] And if they wanted to charge an extra fee because it wasn't sold there or something, is there anything in the statute that you're aware of that would--

 

Senator Jim Dotson [00:14:56] Not that I'm aware of.

 

Senator Justin Boyd [00:14:57] -- prevent them from charging an extra fee if the market wanted to work that way?

 

Senator Jim Dotson [00:15:00] That is, in essence, the free market.

 

Senator Justin Boyd [00:15:03] Thank you.

 

Senator Blake Johnson [00:15:07] So, guys, if it's okay with y'all, y'all don't have to stand up. We got all these seats. Come on. Come on up. Fill from the back to the front, if you would. Y'all want to stand up? Okay. Senator Flowers.

 

Senator Stephanie Flowers [00:15:40] I just wanted to follow up. I mean, when you look at the geography of the state of Arkansas and where you have more places that are selling these vehicles, you know, it might be fine in your area to find your special mechanic and all.

 

Senator Blake Johnson [00:16:01] Senator Flowers. We can't hear you.

 

Senator Stephanie Flowers [00:16:03] You can't hear me? I'm sorry. Normally I speak too loud. But I'm just saying, in different parts of the state, it may not be a lot of access and availability of mechanics. And if a place is going to sell, especially in rural areas, because a lot of these ATV's are purchased and used in rural areas and a lot of people are not mechanics. They don't know. This has been under the motor vehicle part of the code. 

And I don't understand why, if it was placed there, why are you trying to make an exception to its placement and to the requirements that when you buy something new from a dealer, they can't honor their own warranty. That just doesn't seem fair. And it doesn't take into consideration all the hoops, the money that a person that has purchased one of these things has to go through to get a new vehicle repaired. I just don't see that as favoring. 

You know, I can think of, like, and there's so many things with these new vehicles that the mechanics that I grew up with are not familiar with all the little nuances in the specs that have developed with these new products. And so that makes it even harder for a consumer that's purchased something to find somebody to fix it. I just think that I'd like to know why, if it's the case for ATVs that you want exempted from having a repair place at the dealer, why not for every car. What's next? You know, are we going to be buying these cars and they're defective or dysfunctional-- and I know we are not putting all new cars in here, but I'm just saying, what's next? If you can't depend on a dealer that sold you something new to honor the warranty for a vehicle that's going to be on the road.

 

Senator Jim Dotson [00:18:54] So, Senator.

 

Senator Stephanie Flowers [00:18:55] I'm just saying. You go ahead and respond. I wasn't finished with my question, but you go ahead.

 

Senator Jim Dotson [00:19:02] So I just want to be clear. When we're talking about all terrain vehicles, we're talking about things like three wheelers, four wheelers, that sort of thing, not SUVs.

 

Senator Stephanie Flowers [00:19:11] I know that.

 

Senator Jim Dotson [00:19:12] Okay. I mean, you're talking about new cars. And so this is changing the section of code under motor vehicles. It didn't specifically mention all terrain vehicles prior to this particular piece of legislation. And it's making a distinction that a new car like a Ford truck or Ford dealership, Chevy, things like that are motor vehicles, there's a distinction between that and all terrain vehicles that are four wheelers and things like that.

 

Senator Stephanie Flowers [00:19:47] So it's not a motor vehicle, is that what you're saying?

 

Senator Jim Dotson [00:19:50] It's a motor vehicle.

 

Senator Stephanie Flowers [00:19:51] Yes.

 

Senator Jim Dotson [00:19:52] But I can't speak to how long this has been on the books in Arkansas versus other states that have this distinction, because we're only one of two states that do. This has been lumped in under motor vehicles as kind of a catch all. And this is simply separating it, saying that a car dealership service center, new car dealership, things like that, that's different. That's a motor vehicle. But an ATV or all terrain vehicle, your four wheeler, side by side, things like that, that's where the distinction is. You're not going to go down to the Lowes and buy a new F-150 off the floor. And we wouldn't expect them to have--

 

Senator Stephanie Flowers [00:20:41] I think you miss my point. It's a motor vehicle. You acknowledge it's a motor vehicle.

 

Senator Blake Johnson [00:20:46] Thank you. Senator McKee.

 

Senator Matt McKee [00:20:49] Thank you, Mr. Chairman. Senator Dotson, is it possible that this legislation would open this all-terrain vehicle market up to people at a lower price point who would not normally have had access to that market?

 

Senator Jim Dotson [00:21:03] I think it's entirely possible. More competition typically allows for a fuller range of services to be offered and generally at a cheaper price and increase in quality because people have to be more competitive with the offerings that they have. So, yes, I think it would definitely open up the range of products available to consumers.

 

Senator Matt McKee [00:21:28] And if we open up that market to those individuals who wouldn't have previously had access to that market and they need vehicles fixed, is it possible that a market will develop to fix those vehicles?

 

Senator Jim Dotson [00:21:42] I would say yes. Whether it's other local dealers that are doing that or mom and pop shops that are there popping up to be able to service the fuller range of products that are out on the marketplace locally.

 

Senator Blake Johnson [00:22:00] Senator Mark Johnson.

 

Senator Mark Johnson [00:22:03] Thank you, Mr. Chairman. Senator Dotson, I think that Senator Flowers kind of brought up a point that I think maybe needs some future clarification. It appears, and I don't know this, it just appears that when these things came into existence-- and I can remember when they didn't come into existence. They just started popping up. First they were three wheels and then people didn't like those. They had some safety issues. And then they were four wheels. But they were stuck in the motor vehicle code. 

And I'm not sure that that's the same thing as what we think of cars and trucks. And when you say motor vehicle, that's what I think. Do you know of examples where we force someone that sells a product to actually service it? I mean, I think of things that I buy. A computer, for example. I buy a laptop computer. Well, I can buy it from a place that has a service department like Best Buy. They have the Geek Squad or whatever like that. Or I can buy it from someone that will sell it to me and someone else up to and including an entity identified or authorized by the manufacturer to provide that kind of off premises service. 

The fact that the language in this bill talks about 'maintains adequate space in a building or adequate facilities to perform repair and service work,' that's when I think of a definition of a car or truck dealer, not basically a toy. And I know you do work with them and I know our chairman probably has one on his farm that certainly does work. But the point is that this is more of a fun thing and not what gets you to work and back and get your kids where they need to be delivered. 

So without trying to pigeonhole you into where you need to totally rewrite this section, I think, would you agree that this is more akin to a consumer product as opposed to what we've traditionally stated as motor vehicles? And again, as you mentioned, opening up opportunities, and Senator McKee, also, that for maybe someone that would provide this kind of service independently? Is that a possibility?

 

Senator Jim Dotson [00:24:20] Yeah, I think to your point, there are various uses for different types of products. And I think probably the thing that's most closely related would be something like lawnmowers. You can go to Walmart, Lowe's, Home Depot, wherever you want to go, and you can get a push lawnmower or you can get a-- at various times I've seen a John Deere rider in there. And they don't necessarily have the service center right there inside their facility. Where you switch over, and if you're going to use it on the farm, you probably don't want to get a John Deere tractor from Lowe's or Home Depot. You're going to have a service center and go to the dealer and all that kind of thing.

 

Senator Mark Johnson [00:25:02] But that is the consumer's decision.

 

Senator Jim Dotson [00:25:05] Consumer's choice.

 

Senator Mark Johnson [00:25:06] I definitely participate in the lawn mower thing. I have a very big diesel 60 inch zero turn lawn mower and I have gotten parts and had things done from the-- it's a Grasshopper-- from the Grasshopper dealer. But I also have an excellent independent shop just a few miles from my house that can maintain it as well. So this is probably more analogous to those larger lawn mowers than it is to a car, would you say?

 

Senator Jim Dotson [00:25:39] Correct.

 

Senator Mark Johnson [00:25:40] All right. Thank you, sir. Thank you, Mr. Chairman.

 

Senator Blake Johnson [00:25:42] Senator Irvin.

 

Senator Missy Irvin [00:25:44] Do we require used car dealers to have dedicated service and parts area?

 

Senator Jim Dotson [00:25:54] No, I don't believe so. According to this section of code, if you look on page one, line 26, it talks about a license for a new motor vehicle dealer. And so this is, I believe, only a requirement for facilities within new motor vehicle dealerships.

 

Senator Missy Irvin [00:26:17] Okay. Thank you for the clarification.

 

Senator Blake Johnson [00:26:20] Senator Flowers.

 

Senator Stephanie Flowers [00:26:23] Since you mentioned Line 26, does the ATV have to be licensed through DFA?

 

Senator Jim Dotson [00:26:35] I couldn't answer that. I don't know for sure. I don't believe they do.

 

Senator Stephanie Flowers [00:26:42] If they don't, why are you even bringing this?

 

Senator Jim Dotson [00:26:45] Because right now the Motor Vehicle Commission, I believe, is the one who regulates this. And under their current practice, they're regulating this industry as related to new motor vehicle dealers. So this is a clarification in the law that says basically new all terrain vehicle dealers are not. I guess somebody must license the new all terrain vehicle dealers themselves, dealerships. I don't know if it's DFA.

 

Senator Blake Johnson [00:27:33] I think that's the juxt of line 26. If this bill passes, I don't think new ATV and slow power sports will have to be licensed through that. I mean, you're not talking about the Revenue Office where you license it?

 

Senator Stephanie Flowers [00:27:58] Since you've been identified as having an ATV.

 

Senator Blake Johnson [00:28:01] I do.

 

Senator Stephanie Flowers [00:28:04] Did you have to purchase a license?

 

Senator Blake Johnson [00:28:08] To get it covered under your insurance,  you go to there and you give them your certificate of origin, and you pay your sales tax. Or the alternative is, if it gets stolen or something, your insurance won't cover it.

 

Senator Stephanie Flowers [00:28:25] Will not?

 

Senator Blake Johnson [00:28:25] Will not cover it. But I think this is talking about licensing through the motor vehicle on this license part of it.

 

Senator Stephanie Flowers [00:28:35] Like for a license tag?

 

Senator Blake Johnson [00:28:37] No, no. This is for a license--.

 

Senator Stephanie Flowers [00:28:41] A title.

 

Senator Blake Johnson [00:28:42] To be able to sell those vehicles.

 

Senator Stephanie Flowers [00:28:46] So your ATV doesn't have a tag?

 

Senator Blake Johnson [00:28:48] No, no, no, no. What I was telling you is the process that you got to go through to get it covered under insurance. There is no license tag, because it don't have the safety options on it to be able to be on the highway. There are a few that have the blinkers and the seatbelts and the mirror, but I don't even know if those are available. There's going to be some folks that can speak to that later on. But I was just telling you about the process in the revenue office. That's really just for you being able to get insurance coverage. And I think this is talking about being able to be licensed as a new vehicle dealer. So I think this would exempt from that process. Those new ATV dealers would be exempt from that process being licensed under the motor vehicle division. There may be somebody here that can speak to that.

 

Senator Jim Dotson [00:29:54] Well, and Mr. Chairman, if I may, I don't think this exempts them from having the requirement to be licensed dealers, just a licensed dealers requiring them to have a service center inside their facility where they are licensed at. So they can still sell them. In order to sell new ATVs, they would still have to have the dealer's license. But they wouldn't have to have the service center at that location.

 

Senator Blake Johnson [00:30:21] Okay. I get what you're saying. Senator Irvin, you already got yours? All right. Any other questions? Seeing none, I'm going to go down the list of people who want to speak on the bill. I'm just going to go straight down the list. And if you would, the folks on the list to speak, just make your statement concise and not repetitive, tell your own story, not multiple times the same story. And the senators can ask questions of you and those responses. So we'll start with Mike Johnson Powersports. And whenever you get there, introduce yourself and you're welcome. Sit down and you got to push the button. He is against.

 

Mike Johnson [00:31:36] My name is Mike Johnson. I've got a power sport store in Russellville and Hot Springs. I've been in business in Russellville 46 years. My opposition to this is being unfair. As a manufacturer that I represent on service, we have the special tools to do it. Mom and pop store is not going to invest in that. We have the ability to talk with the manufacturer. If there is an issue that is a gremlin that is, so to speak, hard to find, we've got the ability to do that. We have parts service sales. 

If you come into a powersports dealership, you can walk to a parts department, get the parts. If you want to repair it, you can also get advice on how to do that. It's one stop. If you want service, you can walk into the service department at any of our dealerships, the powersports dealers here. You can speak with a service representative. You can get an estimate to get it done. You can even get some guidance as to what's wrong with it. Some people choose to try to do it themselves. That is fine. We're not there to make an enemy. We're there to keep a customer.

 To sell the things, we're required to have the facility to educate the people when they buy the machine, the hazards of it, the safety operation. The Consumer Safety Product Commission monitors us on all these machines. The manufacturer also pays the people to take a safety course, which is offered in the area. The consumer is protected by coming through our dealership with the part sales service, the pre-delivery of the thing, the safety guidance and the incentive to take a course to operate it safely. I do not understand why the big box stores want to get into this and not follow the rules that we're under when they have so much under roof, they cannot dedicate one person to do this. 

Go into a big box store, try to get somebody to help you with an issue you've bought. It's usually a replacement. They're not going to walk you to the parts counter. They're not going to walk you to a service center and try to resolve the issue that you have. Competition. We've got competition because there are major lines all in the state of Arkansas, and people can shop where they want. But that's about what I've got to say. If anybody's got any questions, I'll be happy to answer them.

 

Senator Blake Johnson [00:34:08] Thank you, Mr. Johnson. Senator Irvin.

 

Senator Missy Irvin [00:34:10] Mr. Johnson, could you describe to me with new vehicles, I mean, new, not just vehicles, but new ATVs or whatever, the warranty process and is the warranty then just only upheld if it's serviced with you as a dealer? Or just could you just describe to me the warranty just so that we have it on record and we can talk about that? Just push your button again and sorry.

 

Mike Johnson [00:34:42] Yes, ma'am. The warranty on a vehicle, if I sell one, they can take it to any manufactured vehicle in the state. If I sell one in Russellville, they can take it to the competitor fellow dealer in Jacksonville. They can take it to Searcy. They can take it to northwest Arkansas. Any of those dealers, the warranty is valid. Now warranty on the machines, some of the manufacturers offer up to three years. They run a promotion. It's good anywhere. Parts and service. A lot of times, we're one stop. 

You bring it to us, a dealer, we can do everything right there. You don't have to go around. You don't have to search. If you had an ATV of any size, whether you got it in the back of your truck on a trailer, we all have someone that will step outside, help you unload that, take the issue that you've got with it, contact you later on the repair. You come back to get it, we're going to load it, give it to you. We are one stop. We provide all that services. 

The big box stores that are wanting to do this, they want to sell it and pretty much be done with it. You don't want to run all over town looking for, where's my service facility at? Can you do this? Do you have the part? All the machines that we have, there are special tools to work on those for disassembly. If it requires something so simple as replacing a seal, it may be an internal seal, something's got to come apart, takes pullers to get it apart. We've got that. The manufacturers automatically send that to us. We have training seminars, in-person and online that we have to take. We have to do that in order to maintain our franchise.

 

Senator Missy Irvin [00:36:29] Okay. Sorry, just specifically, though, about the warranty. But the warranty is only with service dealers. The warranty doesn't work if you take it somewhere else to get it serviced. Is that correct?

 

Mike Johnson [00:36:41] Yes, ma'am.

 

Senator Blake Johnson [00:36:44] Keep your button. Thank you.

 

Mike Johnson [00:36:47] Yes, ma'am. It does not apply to a mom and pop shop, as it's called. It has to go to a franchise dealer. =

 

Senator Blake Johnson [00:36:56] Senator Flowers.

 

Senator Stephanie Flowers [00:36:58] So, Mr. Johnson, what I think I'm hearing you say this is a matter of public safety in terms of the training and even the upkeep and maintenance of the vehicle.

 

Mike Johnson [00:37:13] Yes, ma'am.

 

Senator Stephanie Flowers [00:37:15] And could you offer any kind of-- you mentioned mom and pop and special tools. And that's what I'm concerned with, because what I'm seeing is a lot of vehicles now are different. You just don't change the oil and go or you don't have a straight six engine. Then you got electrical stuff in there that can lock up on you and all kinds of stuff that a lot of places don't know about, don't know how to repair those things. That's been my experience.

 

Mike Johnson [00:37:50] Yes, ma'am.

 

Senator Stephanie Flowers [00:37:51] Would you agree with that?

 

Mike Johnson [00:37:55] Yes, ma'am, I would, because technology today has sent them, all of my technicians have a laptop. We're all the time getting something in that the manufacturer, if there is a recall, they want it re flashed. You've probably have that done if you've got a late model vehicle. There is all the time some update coming out that makes it work better, perform better, operate better that we do. That is all provided by the manufacturer for free.

 

Senator Blake Johnson [00:38:27] Senator Penzo.

 

Senator Clint Penzo [00:38:30] Thank you, Mr. Chair. Help me work through something. You mentioned warranty work. I know a lot of the dealerships-- I don't know how many brands are out there, but Honda, Kawasaki, Polaris come to mind. If you have a franchise dealership, which is assuming how this works, you probably have an area where nobody else could sell your brand within that area. Is that right?

 

Mike Johnson [00:39:03] That's correct.

 

Senator Clint Penzo [00:39:04] So if one of these box stores is selling an ATV, it's going to be have to be a different brand than your mainstream. Is that correct?

 

Mike Johnson [00:39:22] That's correct.

 

Senator Clint Penzo [00:39:23] Okay. So I'm trying to think how to ask this. So if there's different brands being sold, you wouldn't have the right equipment maybe to do the repair work on those anyway.

 

Mike Johnson [00:39:41] No, sir.

 

Senator Clint Penzo [00:39:42] Okay. So would there be anywhere to fix these other brand equipment? Because if it's one of these major brands that has a dealership, they're going to have a place in the state to get their repair work done. If it's one of these box stores, it would have to be a mom and pop shop, right or wrong?

 

Mike Johnson [00:40:07] I assume that it would have to be a mom and pop. I assume that it would have to be a mom and pop store. A franchise dealer, I've got no specifications on it. I've got no way to get parts for it to service it. Yeah, we're looking out for the consumer. This is where I'm coming from for my investment. Looking out for the consumer. If you have a unit and you bring it to me, if you just want to get the oil and filter changed and do it yourself, I can sell you the stuff. I can give you guidance as to how to do that, where it is located, the capacities. It's going to be in an owner's manual that you get. People don't normally do that. They don't read the owner's manual anymore.

 

Senator Clint Penzo [00:40:49] Okay. So the scenario might be the consumer may be able to get a discount on a different brand ATV, but there may not be warranty. There may or may not be a warranty. And there may or may not be a place, a repair shop convenient. I mean, is that kind of what the scenario looks like?

 

Mike Johnson [00:41:14] That's what it looks like to me. Because I go back, you've got a big store. They've got no one dedicated for the one thing that they are servicing and selling. We do. Any need that you have with your machine, we can take care of it. We have the accessibility, ability to do it under that same roof. You don't have to go somewhere else. We can do it.

 

Senator Clint Penzo [00:41:41] Okay. So it's one of those buyer beware situations.

 

Mike Johnson [00:41:46] Very much so.

 

Senator Clint Penzo [00:41:46] You can pay the higher price. So this is kind of a situation where I'm struggling with it because I love free markets and the ability to go buy a different piece of equipment. You have the ability to buy a four wheeler or side by side that you may not be able to buy one of the big name brands. So it increases people's access to ownership. But then they might have a situation where they can't get a repair. And that's kind of a possible trade off of somebody buying in the market. So I understand the concerns, and I just appreciate your time to clarify that for me.

 

Mike Johnson [00:42:32] Thank you. Another thing to add to that, a consumer comes in, we've got multiple finance sources. We've got the people who are challenged. We have programs for them to obtain a machine. The people with the top tier credit, lower credit rate. They can choose a rebate. They can choose a lower interest. Our manufacturers offer a variety of options to get into a machine. 

An import machine that a big box store sales, yes, it could be cheaper. More than likely it's going to be Chinese. But the consumer's not protected when the consumer has an issue. If they've spent several thousand dollars on the machine and they can't get it fixed, who do they go to? Who are they going to go to? You make it sound in theory that, well, we're going to have some mom and pop store that's going to do our service work and provide parts. 

They've got to go chase someone down, get that done. A mom and pop store, who knows where you're leaving it, if they've got insurance to cover it for theft or fire. All of us do. We have to carry that. The machine is protected while it is there.

 

Senator Blake Johnson [00:43:53] Senator Murdock.

 

Senator Reginald Murdock [00:43:58] Thank you, Chair. Let me ask you this question. So. Will your service department service any ATV that comes to you or only the ones that you sell?

 

Mike Johnson [00:44:08]  The ones that I sell. If it's the brand that I sell, let me clarify that, if someone come in with a brand that I don't sell, let's say they want a tire, let's say they want brakes, and it's a good customer that has one of my units, yes, we're able to do that. That is not technical, to change a tire or to put brake pads on. That is simple. If they want an oil or filter change, I can do that. But I only do it if it is normally a customer that has one of my machines already in service with themself.

 

Senator Reginald Murdock [00:44:49] So let me ask the question again and see if If you answer it. Will you service any ATV that comes into your store, whether it's for tires, oil change or whatever you have the capacity to do with your service team? Will you service any that comes because service is a revenue stream for many-- I don't know a mechanic that cannot-- I mean, there are some specialties, but most there's a lot of mechanics, they're going to service everything that they can fix just because there's a revenue stream. Are you saying that you all will not or do not?

 

Mike Johnson [00:45:26] We will service any thing that we have the ability to do. I do not have the programs if it requires re flashing, readjusting something that is electronic in the computer system. I will not have that manufacturer's program to complete that task.

 

Senator Reginald Murdock [00:45:46] So to do major surgery, you don't have that. But the common task of keeping vehicles moving, you seem to say that you have that ability to do that.

 

Mike Johnson [00:45:56] I have that ability.

 

Senator Reginald Murdock [00:45:57] And will do that?

 

Mike Johnson [00:45:58] I can do that. I will do that.

 

Senator Blake Johnson [00:46:01] Is there any other questions? Thank you, Mr. Johnson. We have six more. Sandy Stroope, against.

 

Sandy Stroope [00:46:24] Thank you very much, sir, for allowing us to come and speak. I speak against this bill. Is my-- mic's on. Okay. Everything that Michael Johnson said, I'm with. But there's a couple of three things that questions was sort of asked and maybe kind of answered. One thing has to do with titles. In the state of Arkansas, DFA says that every vehicle has to be titled. You have to pay sales tax on it at the dealership, and then you have to take all that paperwork down to the revenue office and you do get a title. You turn that MSO, manufacturer's statement of origin, into a title. 

And as was said earlier, a lot of times it's for insurance purposes for sure, but you are supposed to title them. Doesn't matter. You may never take it off your farm. You may take it and put it on your farm, but by law in the state of Arkansas, you're supposed to title them and pay sales tax on them. And the dealers are required by law in Arkansas to collect that sales tax. It's a little different from automobiles or even motorcycles are different. And then when we talk about warranty, there's a little bit of confusion on.

 I'm an ex powersports dealer, by the way, 30 years powersports dealer and then retired and worked as the director of the Motor Vehicle Commission for five and a half years. As a dealer, dealers are required by their sales and service agreement. Dealers don't have a franchise. They have a sales and service agreement with their manufacturer, and they are required by those manufacturers to do warranty work on those machines. 

So if you're a Honda dealer and you're selling Honda, then you're required to do warranty on that. And would we do service on other machines? Absolutely. It's the warranty issue that's the real problem, because if you're not licensed or don't have a sales and service agreement with the manufacturers to do warranty work on the machines, you cannot. As Mike said, yes, he would work on them. But if somebody brought in a brand that he didn't sell, he can't do warranty work. 

And that's the real big issue right there is the warranty. Because once they get out of warranty, yeah, there's a lot of little mom and pop shops around that can work on those machines. But while they're still under the manufacturer's warranty, it has to be a dealer that has a sales and service agreement with that manufacturer in order to be able to do that work. And then the other thing that I wanted to just touch on is the price. I do understand that is a true issue to some people and there are licensed sales and service signed agreements with certain dealers with these manufacturers. 

So there are some dealers around that are legitimate, licensed with the state of Arkansas, and have sales and service agreements with manufacturers that sell the lower priced machines. So I don't want that misconception that if you're a licensed with the state of Arkansas dealer today, that you're only selling the high end stuff. There are people out there that are legitimate dealers and do the warranty that are selling machines that are much lower priced. Any questions, I'd be glad to answer.

 

Senator Blake Johnson [00:49:54] Thank you. Go ahead, Senator Flowers.

 

Senator Stephanie Flowers [00:49:57] I appreciate your comment and the fact that you used to be over motor vehicle.

 

Sandy Stroope [00:50:05] Yes, ma'am.

 

Senator Stephanie Flowers [00:50:06] Well, you're the right person to be here about this, because I know very little. I don't have an ATV. I did buy one of those riding lawnmowers once from Lowe's that every year after the season was not such that I needed it I had to take it somewhere to get it fixed to run again. And that was not cheap. But it did have a warranty. I just couldn't find anybody to service it. But you know, I appreciate what you said. And you helped to kind of make me understand about the licensing process of the dealership or the dealer. Can you go into more detail about that? These things are considered motor vehicles?

 

Sandy Stroope [00:51:05] Yes, ma'am.

 

Senator Stephanie Flowers [00:51:06] And so what does the state require in terms of licensing? I don't know if you see the bill, but Line 26 on page one, not the underline, but the applicant for a license as a new motor vehicle dealer. If we accept the exception that the sponsor is suggesting, what would happen then in terms of the requirement of a license for that new motor vehicle dealer for ATVs?

 

Sandy Stroope [00:51:59] Yes, ma'am. There's a lot more to this law, obviously, than just what's on these two pages. And there are several requirements to be a motor vehicle dealer in the state of Arkansas. One, you have to have a place of business. I mean, you have to have a bricks and mortar place of business, and then you have to have a sales and service agreement with a manufacturer that is licensed by the state. The Motor Vehicle Commission also licenses the dealers. 

So if you're a General Motors dealer, you're a Chevrolet dealer, you have to have a sales and service agreement with General Motors, with Chevrolet Division of General Motors, and then they have to be licensed with the state of Arkansas, which obviously they are. But some of these smaller Chinese manufacturers, and that's what we're really talking about, because these are smaller manufacturing concerns that ship just very few units into this country. But they also have to be licensed with the state of Arkansas. 

And then you have to have certain other things within your facilities. And it has to do with a showroom, minimum, 120 square feet. And it says you have to offer warranty. And it says you have to offer a place to do that warranty and have a parts and repair facility available.

 

Senator Stephanie Flowers [00:53:19] So just to follow up, Mr. Chair. It's okay, I think. But. So it sounds like there's some revenue that the state receives. Plus, it seems like the overriding factor of this whole part of the code is for the protection of the consumer. Is that right? Do I understand that to be the case?

 

Sandy Stroope [00:53:46] Yes, ma'am.

 

Senator Stephanie Flowers [00:53:47] So about how much in revenue are we talking about here? Do you have any idea?

 

Sandy Stroope [00:53:55] No, ma'am, I honestly don't. I know I've worked with the Revenue department, with Wayne Hamrick quite a bit when I was in my position with the state. I know it's a substantial amount of money, but, no, ma'am, I really can't tell you exactly how much it is. But I will say this, with automobiles, you go to the revenue office and you pay your sales tax. In powersports industry, if you're selling off road vehicles-- and the manufacturer statement of origin will say specifically for off road use only. And if it does say that, then the dealer has to collect that sales tax and they then submit it to the state of Arkansas to DFA. So it is a substantial amount of money. Yes, ma'am.

 

Senator Stephanie Flowers [00:54:41] But just go back to the point for me, the overriding fact is protection of the consumer.

 

Sandy Stroope [00:54:49] Yes, ma'am.

 

Senator Stephanie Flowers [00:54:50] Now, I heard somebody speak of it as if it was a toy or something, because it's not on the highway, on the regular public roads. But when you've got your teenager out on rough terrain, riding on these things, seems to me like the state of Arkansas would use extra caution in eliminating where these things are repaired and getting some kind of warranty or license or requirement to make sure that the public is protected. Do you agree with that? Does that make sense to you?

 

Sandy Stroope [00:55:30] Yes, ma'am, it does.

 

Senator Stephanie Flowers [00:55:31] Thank you.

 

Senator Blake Johnson [00:55:35] Are there any other questions? So I have-- well, I think I know the answer to it. But my mother bought one out of Missouri and they don't have the same process and bought it from an individual. It still had the certificate of origin. So in that case, she gave it to my son and he had to go to the revenue office and pay the sales tax. It wasn't a dealer sales tax situation. So, I mean, that happens in those border areas like where I'm from. And Missouri's different than Arkansas. So I think we got that cleared up. But is there other states like that around us?

 

Sandy Stroope [00:56:26] Yes, sir. It's different in pretty much every state. It happens on, not just ATVs and side by sides. Missouri is a great example because my business was in Harrison, so I crossed the border quite a bit. I'd have people come in trading with me and they have one rule for UTVs and then they have another rule for ATVs. UTVs are the side by sides that you sit in. ATVs, you straddle. And they have two different rules. And then they don't really make the dealers collect the sales tax. So a lot of times sales tax doesn't even get paid on them in Missouri. So Missouri's a little different and every state is. Every state has a different rule that they go under. I was also a marine dealer for a long time. And boy, it really gets confusing when you start talking about boats and trailers and outboard motors. So, yes, every state is a little bit different.

 

Senator Blake Johnson [00:57:19] Thank you, sir. You've been very helpful.

 

Sandy Stroope [00:57:21] Yes, sir.

 

Senator Blake Johnson [00:57:23] Seeing no other questions, we're going to the next one who is against. And I think it's Bryan or Ryan Carson.

 

Bryan Carson [00:57:37] Hi, I'm Bryan Carson from Searcy, Arkansas, with Sunrise Motorsports. We have another location in Rogers, Arkansas. A lot of the things I want to touch on have already been covered, but there are a couple of them that came up. These machines are very expensive. You know, I don't know if anyone has shopped an ATV or side by side or anything that they're looking to sell at big box stores, but they are not cheap. Probably 80 to 85% of these at the end of the day are financed by our consumers. 

And not having warranty in place, shop in place to take care of these customers-- from my experience, I have 20 years in the business-- and these people, whenever they can't get their machine fixed, the first thing they quit paying on is their ATV or their side by side. And they're defaulting on loans because they can't use it. They don't use it, they don't pay for it. And they turn these machines back in. It's a common occurrence. The second thing I want to touch on, which hasn't been talked about a lot, is the regulations that we have in age requirements. Everyone in our dealership is required to take training on age requirements. 

And if you walk into my parts department or my service department or you walk up to the receptionist and you say, I need a four wheeler for my four year old, our automatic response has to be, We don't offer four wheelers for four year olds. Can these big box stores put that in place? Will they have every employee in the business trained on this matter? I know there are major concerns about public safety in this, and having your staff trained is very important. So we take it very, very seriously. And this is something that everyone should think about. That's all I have to say.

 

Senator Blake Johnson [00:59:30] Thank you. Any questions? Seeing none, thank you for coming today. Next is Seth Maxwell against.

 

Seth Maxwell [00:59:49] Thank you. Seth Maxwell from Doug Reynolds Suzuki in Little Rock. I have a powersports dealership. The biggest concern that I've got is leaving the consumer out to hang. You know, we've seen with the Chinese manufacturers, a lot of us have been in that business and we've had some different products come through. The one consistent is the manufacturers behind those brands typically do not care about the customer at all. The consumer is kind of the least. 

It's a push it fast, get it everywhere we can and go from there. And that's kind of the same process here. We've seen these machines come in and then you sell it and then the customer is left high and dry with nowhere to have warranty done. Warranty and service to keep your machine operating safely, is we'll all agree, is probably the number one concern. When they come into our store, we're concerned that that machine leaves with the correct repair. Again, we've trained our individuals. 

And if you throw that to a simple mom and pop store, so to speak, who doesn't have the equipment and they can't perform these tasks the way they should be, that haven't properly been trained, etc., you're really laying the customer out there for potential hazards. So that would be one of the bigger concerns for us. So that's all I'm saying.

 

Senator Blake Johnson [00:01:28] Thank you. Is there any questions? Senator Johnson.

 

Senator Mark Johnson [00:01:33] Thank you, Mr. Chairman. Sir, you're a Suzuki dealer?

 

Seth Maxwell [00:01:37] Suzuki, Kawasaki, CFMOTO and SSR.

 

Senator Mark Johnson [00:01:40] Okay. CFMOTO is a European brand, is it not?

 

Seth Maxwell [00:01:43] Chinese manufacturer.

 

Senator Mark Johnson [00:01:44] It's Chinese? Okay. Is it a poor quality product?

 

Seth Maxwell [00:01:50] That's one of the very few Chinese that are actually a good product. We've been through the Chinese--

 

Senator Mark Johnson [00:01:56] Now you're a young man, but I'm an old guy. If you remember the line in Back to the Future where the guy said, Doc, these parts are no good; they're made in Japan. He said, Well, now that's where all the good stuff comes from. And I'm not going to defend China. I'm a Republican senator. I don't defend China. But the fact is that I buy power tools at Harbor Freight, where five years ago I knew that it was going to get me through the job I'm working on and then it's probably going to be pitched. 

Well now they're selling some pretty good stuff made in China. And I don't know that we should dump everything that comes from a particular thing. And you mentioned this CFMOTO is maybe one of the exceptions that they can build a quality product. I guess I'm a little careful to extend the nanny state within the state of Arkansas to protect everybody from their own stupidity. 

And I appreciate the fact that, in your position trying to run a business, you've got to weed out the idiot that would put their four year old on an ATV. And the people that are clearly after they get tired of this thing and those payment books start coming in the mail aren't going to make their payments. I empathize with you and know exactly what you're dealing with, but I'm just trying to find a happy medium where, yes, we protect the consumer. 

But I can't help but come back to what I asked Senator Dotson about. Why in the world is this in the motor vehicle code? Because these are consumer products, not like a car or a truck, which I think is a totally different situation. But, again, the world changes and the way people buy things. I mean, I presume a lot of these things you're talking about, you might could buy on Amazon.com now. I mean, I don't know if I would. But I guess theoretically you could. So I'm I'mjust trying to find some kind of a way to not, Well, we've always done it this way. Well, I think we always did it this way because when they first hit the market, we just said, well, we'll stick them under Mr. Stroope's agency over there in Motor Vehicle. 

And Sandy, you had to regulate them whether you asked for it or not. So I know we're getting a little bit off the main subject here, but I empathize with you. But I'm just wondering, do you have a response, though, to say that we just need to have a little bit more of being educated consumer? And if you're not sure about your ability to tighten that chain adjustment and all that, maybe you need to buy one from a franchise dealer that has the shop in the back to do all that for you. Is that fair to basically have a two tiered way of looking at it?

 

Seth Maxwell [00:04:50] Yes, sir. And the impulse buyer that goes in and purchases a machine from one of these facilities and it's shiny, no one's going to come up front and say, well, you can't get service here and we're not going to warranty it, you'll have to find someplace else to do it unless that customer asks. Well, now that consumer, and there would be a lot of those, they come into all of our stores quite a bit. 

We have the Amazon machine that comes to us, and that's part of the problem. We don't have the ability to repair that particular machine. We're not trained in it and there are no where to find parts. So we can't take care of those customers and they are left high and dry. And that's my concern with the box store. 

You know, they'll go in and make a purchase, and then before they can find out there's no one to repair it, there's no one to repair it. And so it's a consumer issue for us. They end up coming to our doorstep looking for repair. We can't even send them anywhere because the box store has already pushed them out and there's no one else to repair that machine.

 

Senator Mark Johnson [00:05:57] Thank you, sir. Thank you, Mr. Chairman.

 

Senator Blake Johnson [00:05:59] Senator Penzo.

 

Senator Clint Penzo [00:06:02] Thank you, Mr. Chair. And I don't know if this is a question you can answer. If you can't, we'll leave it up to the bill's sponsor to answer at the appropriate time. But you mentioned there they may not warranty it. That's probably my biggest concern, because I know that when I go to a big box store, they always offer the warranty. I don't know that I've ever bought an extended warranty through a big box store because the reality is the burden is on me to figure out how to get it where-- do we know if the big box stores will offer warranties? 

And if so, is there any going to be any kind of arrangements made locally with any kind of dealership or mom and pop to fulfill that warranty if the buyer needs to exercise the warranty, if there's any kind of issues. That's probably my biggest concern is selling the warranty or providing the warranty and then the consumer can't exercise it. 

Now if I buy something without a warranty, I mean, that's the free market because if I make that choice myself and there isn't a warranty. I just would hate for somebody to buy a warranty and then they're like, you have to pay for shipping to get it to this location to do it. So that's something I'd like to kind of work through. Whether you can answer that or the bill's sponsor may have an answer.

 

Seth Maxwell [00:07:32] Manufacturers are required to have a warranty on their power sports machines. So I'm sure those machines out of a box store will have some sort of warranty. And I guess that's the clarification. The issue that I have is, where are they going to go? You know, that the whole point of what this bill has that's being struck is, we're required to have those facilities so that customers are not left out with nowhere to warranty a new machine. 20 miles in and this machine breaks down. 

And again, let's be honest, we're looking at inexpensive machines and we've all been through it. There's usually multiple issues with these. And so you now you have this vast array of customers who might have issues with brand new machines they've paid for and nowhere to go to have a good licensed technician work on the machine and keep it up to par, safe.

 

Senator Clint Penzo [00:08:28] So yeah, so that's probably one of my biggest concerns. So I don't know if we need to look at maybe if you do offer a warranty, there has to be-- I don't know about mandating somebody to have an onsite facility, but at least have a contract with somebody within a so many mile radius or something of a box store that they have a contract with to do warranty work. Something like that would alleviate a lot of my consumer protection concerns. But I don't know that I would. I think anybody should have to have the-- that might be a good idea to add. I mean, that's my concern is having a warranty and then the only place you can fix it is a dealership in California. Well, I'm not going to get my product there to get repaired. So we might want to consider something like that. That's just my two cents. Thank you.

 

Senator Blake Johnson [00:09:27] Thank you, senator. Thank you for your testimony. We're going down the list. Next is Steve Good, for.

 

Steve Good [00:09:45] Good morning, Mr. Chair and members of the committee. Thank you very much. My name is Steve Good and I represent the Arkansas Retailers. I appreciate all the questions so far and I'll certainly try to get to all of those. I want to just start off by saying that we represent pretty much all the retailers throughout the state. Grocery, a big box, supercenter throughout the state, we represent them. 

The reason this bill was even brought to my attention was that there was a retailer that made a substantial investment in Arkansas a few years ago, almost $200 million. They created 500 new jobs. And when they came in for their ribbon cuttings to announce the new jobs, to open up their new distribution facility. Some of their management team went out and did store tours. And when they were out doing store tours, one of their management members noticed that some of the items that were going to be actually distributed through this warehouse in Maumelle weren't being able to be sold in their Arkansas stores. 

And so they asked, why are our UTVs, our ATVs, not in our stores today. And the answer was, well, because there's a law that says you must have a service center. And so here's a company that's made a substantial investment in Arkansas. They're employing 500 people. They've got retail locations throughout the state. And yet because of this service center requirement, they're not allowed to sell in Arkansas, brands that they sell throughout the nation in the other states that they're in. So that's the first point I'd like to make. 

The second point I like to make, Senator Penzo, you had a question on warranties. And throughout the nation, where they are in other states, yes, they do have authorized dealers that are in those states that perform those warranty works for them throughout. Just a cursory search here in Arkansas, even though they're not able to sell the brands in Arkansas already, just a cursory search in Arkansas, there are locations located throughout the state, from as far northwest as Fort Smith to as far southeast as McGehee, from as far north as Harrison to as far south, again, there are several in Hot Springs, but located throughout the state, there are already service centers that are authorized service centers today to perform warranty works on these different brands that these retailers sell. 

So to answer your question, yes, sir, they're already here. And our thought process would be that as more units are sold, there will be more authorized dealers that will come online. There's been some mention that, and again, I appreciate Senator Johnson's comment on China. You know, I'm certainly not here to defend China either. Some of the brands that our stores sell are made in China. Some of the brands that our stores sell are not. Massimo is made in, I think Garland, Texas. I mean, it's a Texas made brand. And in Arkansas being from Texas may be about as bad as being from China. 

But anyway, that's an American produced product as well. I think, again, to talk for it, as you go throughout and you shop, if you shop at a mom and pop, and listen, most all of you know, I'm a small independent grocery retailer, as well as we represent clients here in Little Rock. So I have sat in their shoes. I am the little guy. And so I'm not here to defend the big guy. But what I am here to do is defend consumer choice. You know, my consumers in Clinton have the ability to come shop with me in my grocery store or they have the ability to go shop at Walmart or they can drive to Conway and shop at Aldi. 

You know, the consumers need and have choices. When consumers have choices, better services are provided, better prices are provided, better selection is provided. And so that's what our retailers want to do here. Again, I would take you back to, let's use a zero turn lawn mower, which is very popular today. Many people have zero turn lawn mowers. Some dealers, some big box retailers sell zero turn mowers. 

The service and warranty work is not done at those locations. They have authorized dealers, the manufacturers have authorized and signed with dealers, and those warranty services are done at those authorized dealers throughout the state. The same thing will happen here with these side by sides and UTVs. I think that's all I have. Again, I would just like to say, while we appreciate the investment that these retailers have made in their communities, our retailers have certainly made sizable investments throughout the state. 

We employ countless Arkansans throughout the state. And again, our retailers are located almost from north to south, from east to west throughout the state and that want to sell these brands. So I think that's all, Mr. Chair, unless somebody has some questions for me.

 

Senator Blake Johnson [00:14:56] Senator Penzo.

 

Senator Clint Penzo [00:14:58] Thank you for kind of clarifying the warranty work. I know in other states where this has taken place, is that by choice or by statute?

 

Steve Good [00:15:07] Senator Penzo, I couldn't answer that. I just know that the restrictions in other states are not as restricted as what we have here in Arkansas on that. So, you know, one of the points was, I think a governmental relations person ran into Senator Hester at a leadership conference somewhere, and he pointed out to Senator Hester that our restrictions in Arkansas are more restrictive than even California when it comes to selling side by sides. And I can't speak to other states, but I do know that when we've asked that question to these retailers, they've told us that there are authorized dealers throughout the states.

 

Senator Clint Penzo [00:15:45] Okay. Well, like I said before, I'm a big fan of free markets. But also to have a truly free market, it has to be a fair market. Can't give a big box store an advantage over a small dealership. I would like to see something stating that there has to be some sort of service agreement contract in place. This is just me personally. I'm not telling the bill's sponsor this is how it's got to be. It's just this is what I would like to see in order to be more comfortable with it. 

And I don't know if that same courtesy shouldn't be extended to the dealerships because, like I said, I have a hard time giving a chain, a huge corporation an advantage over a small corporation on anything, doesn't matter if it's alcohol. I mean, all these bills come up that always try to push for the corporation to have an advantage over mom and pop, whether it's pharmacies. And the little guy gets crushed. 

So I don't think I can get comfortable with this unless there's a little bit more in place stating that this warranty work has to be similar to whether it's a contract with a dealership within a so many mile radius. That's just personally what I would like to see. So I don't know. You can do some thinking on that, find out what you're comfortable with and kind of let me know.

 

Steve Good [00:17:13] Yes, sir, again today there are locations located throughout the state and they're not even selling them here. But certainly that's something that if Senator Dotson is open to us pulling that back and having me to have my clients take a look at it, I don't think I have an issue. But I would want to leave that up to the bill's sponsor and make sure.

 

Senator Clint Penzo [00:17:33] And he may have the votes. I don't know. But I don't think I can get comfortable with it without that.

 

Senator Blake Johnson [00:17:39] Senator Johnson.

 

Senator Mark Johnson [00:17:42] Thank you, Mr. Chairman. Mr. Good, let's don't beat around the bush. You're talking about Tractor Supply. I went to the groundbreaking of their Maumelle distribution center, so I know we're talking about Tractor Supply.

 

Steve Good [00:17:54] Yes, sir.

 

Senator Mark Johnson [00:17:55] I go to Tractor Supply. I like Tractor Supply. I also like my neighborhood hardware stores that are locally owned. I buy stuff from them, too. The Tractor Supply over here off 430, I pulled up. I'm looking. They have brand new Bad Boy mowers. Where are Bad Boy mowers made?

 

Steve Good [00:18:16] Right here in Arkansas.

 

Senator Mark Johnson [00:18:17] Yes, sir. That's right. And here's another manufacturer, Spartan, that they're in Batesville as well. Okay. Do those companies make products that fall into the category of this bill as well?

 

Steve Good [00:18:31] Yes, sir, they do.

 

Senator Mark Johnson [00:18:32] Okay. But Tractor Supply can sell you a 60-inch, $5,000 Bad Boy lawn mower, but they can't sell you another product made with that same company right here in Arkansas.

 

Steve Good [00:18:44] Not under current law today. Yes, sir. That's correct.

 

Senator Mark Johnson [00:18:46] And as you stated, if you go there and you buy that lawnmower, then there's somebody that Bad Boy has a contract with that so you have a warranty problem, you say go to Joe's over here. He's our authorized service center. Is that kind of how it works?

 

Steve Good [00:19:02] Yes, sir.

 

Senator Mark Johnson [00:19:02] Okay. I guess this is why I'm having a problem. Now, warranties, and again, I don't know about this product. I do know that there's a thing called the Magnuson Moss Warranty Act. That's federal law. It has to do with anything, I guess, that's sold in interstate commerce. And I have to presume all these products fall under interstate commerce. So there's federal law requiring these warranties to be honored?

 

Steve Good [00:19:32] Yes, sir.

 

Senator Mark Johnson [00:19:33] And thank the Lord the state of Arkansas doesn't have to get in the middle of that and enforce that. But these warranties from the manufacturer, the manufacturer has to comply with that. And I come back to the whole thing of we've taken this consumer product and we've stuck it in the motor vehicle code, and I don't think it belongs there. The fact that that business can sell a Bad Boy lawnmower, but they can't sell a Bad Boy side by side, probably made on an adjacent assembly line with some common parts, I just I think it really begs several questions. But I just want to get those facts and see if I was understanding this correctly. Did I pretty well get that right?

 

Steve Good [00:20:21] Yes, sir. Yes, sir.

 

Senator Mark Johnson [00:20:22] Okay. Well, I don't want to beat this horse. And it's up to the sponsor whether they want to change it. And I agree with Senator Penzo that consumers ought to be able to get their warranty honored. But what this bill talks about is a facility. It in effect uses the car dealer model. You got a showroom up front and you got a shop in the back. And if you don't have a shop in the back, you can't sell these things. 

And I think as long as the consumer can get what they need and the manufacturer must under the law honor that warranty, then it's really not necessary for it to be in a specific location on the same premises as where they bought it. And I'm for the consumer. I think Senator Flowers made some great points on protecting people from predatory salespeople. But this is, I think we maybe are sticking our nose in where it just kind of violates free enterprise and innovation on how consumer products are presented to the public. Thank you, Mr. Chairman. Thank you, Mr. Good.

 

Steve Good [00:21:25] Yes, sir. And Senator Penzo, to your question there. You know, I think if I go back to what Sandy said earlier, the former director of motor vehicles, that the dealers have to be licensed as well. And so, it may be that we don't put it in this code, but it's part of rule that if the bill is passed, then we put in rules that will be adopted that dealers have, to be able to sell, they have to provide warranty work within a certain mile radius. And I don't know what you would want that to be. Again, this was just us doing a quick search. But we found locations throughout the state. 

Like I said, McGehee, Fort Smith, Searcy, Benton, Mountain Home, Harrison, Hot Springs, Hot Springs, Hot Springs, Higdon, Cabot. And so that was just a real cursory search just real quick. We didn't do a deep dive. We just would punch in the different ones and find out where their authorized service center was here. So I think that to Senator Flower's point, if you look at that, really anything other than probably the Delta is covered, the East Delta, and McGehee would be covered as far as the Southeast Delta. But that's today. 

And then obviously, for that part of the world, you'd want to pick up a Wynne or a Forrest City or Brinkley or West Memphis or something in that part of the world as well. And there might be there already. We just didn't find them as we did a real quick search knowing that that question may be asked.

 

Senator Blake Johnson [00:22:56] We're not buying that junk. I'm from over there. Senator Irvin.

 

Senator Missy Irvin [00:23:07] Just, you know, I think, an all terrain vehicle, I think I just want to say, I mean, from somebody who's a farmer, I mean, we utilize this on the farm and it's an important farm vehicle. But I think about Mahendran and some of the ATVs that are being manufactured right now that really reflect and resemble the old Willis jeeps. And they are actually driven on many roads because we do have the law, well, maybe not legally. 

Well, they do legally. Actually, we did pass a law that says that you can drive from trailhead to trailhead if it's on road. So we do have that in place. And so they are traveling our roads both legally and illegally. But, I mean, when you go to rural Arkansas, in my neck of the woods, people are driving them on the streets. I mean, they really are.

 And so, and that's somewhat enforced and maybe not enforced in some areas, but it is a little bit of a different-- it's not a-- it's a different type of a vehicle. So I just, I think for clarification, I just wanted to say that we do have in the law that you can drive them on roads from trailhead to trailhead. And so we did make that change. I think was Fran Cavenaugh's bill that we passed. And so I just, I do hear that the small business owners and their testimony and I came in to this saying yes for this bill. 

And I like the free market approach, but I'm similar to Senator Penzo. And I think it's the work of the committee. And hearing the testimony today, I worry about the warranty part of it. I really do. And I think that Senator Penzo outlined it really, really well. And Senator Flowers brought up some really good concerns. So does Senator Johnson. And so I just, I kind of think that you might want to just try to work together on figuring out what would be a smart approach, because we want to make sure it works for everybody as best we can. 

And I think Senator Penzo has a good point. And I just wanted to state that. I think I just wanted to state that. So I think he has, maybe I would just urge Senator Dotson just to work with Senator Penzo maybe and some of the dealers in the room and see if you could figure out some sort of an approach together.

 

Steve Good [00:25:37] Yes, ma'am.

 

Senator Blake Johnson [00:25:39] Senator Flowers.

 

Senator Stephanie Flowers [00:25:42] Thank you, Mr. Chair. Mr. Good.

 

Steve Good [00:25:46] Yes, ma'am.

 

Senator Stephanie Flowers [00:25:48] You mentioned that there are all these repair places throughout the state of Arkansas. Are those independent repair places? Are these dealers repair?

 

Steve Good [00:26:02] They are, the term mom and mom and pop has been used several times. My Google search has probably gone away. Real quick, Senator Flowers, give me just a moment and I'll see if I can pull that back up. So real quick Google search.

 

Senator Stephanie Flowers [00:26:47] Make sure it's not AI.

 

Steve Good [00:26:48] Yes, ma'am. Yes, ma'am. So  I live in Faulkner County, Senator Flowers. So I've been using a Conway zip code 72032. And when I put in for Massimo motors, it gives me five different locations that would be authorized service centers for them in Arkansas. Benton Outdoor Equipment, Bad Boy Superstore, Horn's Outdoors, Damon's Outdoors, and B & B off road. And those are within 36, 39, 59, 64 and 87 miles of Conway. And so that's just, as I said, what we've done is just done some real quick searches for the different brands that we know that our retailers are going to sell. And so that's what comes back to me when we punch that one in.

 

Senator Stephanie Flowers [00:27:33] So those are prospective if this bill passes dealers.

 

Steve Good [00:27:38] I think they're already servicing. According to to the official Masimo website, they're already servicing the vehicles here in Arkansas because, again--

 

Senator Stephanie Flowers [00:27:48] But do they have a license to sell those new vehicles here in Arkansas?

 

Steve Good [00:27:53] I'm not sure if their a service center, Senator Flowers, or if they're selling. I know our retailers would get the license here in Arkansas to sell.

 

Senator Stephanie Flowers [00:28:01] Just like these.

 

Steve Good [00:28:02] Yes, ma'am. Absolutely. Yes, ma'am. We don't want to change anything other than the service center requirement. We will still have to get the authorized license that the dealers have to get. We will still offer the same sales. To Senator Johnson's point, the warranty work will still be offered at the store. To Senator Penzo's, when you go in and buy that John Deere lawnmower at one of the big box retailers today, you're given the option at checkout, Do you want to purchase a warranty? And so you certainly have that option no different from if it was bought at a John Deere dealer. You have the option to buy the warranty there or not. And so, yes, ma'am, these are just the ones that are known today.

 

Senator Stephanie Flowers [00:28:48] Well, like I said, I'm concerned about consumer safety. And we're talking about, and I don't hate on China, but I do hate a lot of those products that have bought from China that break. And then they take them to a repair place and they say, well, it will be cheaper for you to buy another one. You know, I've got video cameras that I can't even look at my videos that I took because nobody can fix it.

 

Steve Good [00:29:18] Yes, ma'am.

 

Senator Stephanie Flowers [00:29:19] And but what I'm saying is and asking, so under the law now, and what's proposed, it seems like the people that are in business that offer the repair at their location under their agreement with the franchise, they are at a disadvantage because they're still going to be required to have that service location. Is that not right?

 

Steve Good [00:29:54] I think the law would allow them to not have the service location or not. And I certainly don't know their business model, Senator Flowers.

 

Senator Stephanie Flowers [00:30:01] But they said they had an agreement with the franchise. So, I mean, unless they get out of the franchise. And if they think they got a good product that they're offering to the public and they're concerned about the public. And obviously the state of Arkansas, at some point when they put this in law, was concerned. I think we better be careful because when we're talking about these things, I can see children, teenagers, trying to fix something or riding on something and a defective product and stuff. I wouldn't want a child of mine or any of my neighbor's children or anybody in my district children on these things that are not protected.

 

Steve Good [00:30:47] Yes, ma'am.

 

Senator Stephanie Flowers [00:30:48] It just makes sense to me.

 

Steve Good [00:30:50] Yes, ma'am.

 

Senator Stephanie Flowers [00:30:50] We have to be more concerned about people as opposed to a business to me. So that's what I have. That's my concern. And we're talking about the state of Arkansas basically being impacted. And I'm not sure that this would not in some kind of way affect the state of Arkansas in that regard.

 

Steve Good [00:31:27] We think it would, Senator Flowers, in a positive way. Because right now we think that there are consumers that are going out of state to buy some of these brands because they're more economical. And so we think there will be more sales tax collected by more units being sold. And quite frankly, you talked about the service aspect of it. You know, I will speak highly of the gentlemen and ladies that are here representing these.  I buy a brand and come to your hometown.

 I come to Pine Bluff. I use a dealer down there. I bought a brand from them. They provide great service. I come there every year. And so that's the type that I've chosen to buy. That doesn't mean that if these are available in Arkansas, doesn't mean that I won't buy from one of the retailers that we represent. But certainly that service work is important. And you ask the question, will they be required to by the franchise. I don't know their franchise agreements and I don't know their business models, but I would almost venture to say that they probably net out as much on service work as they do on sales work.

 

Senator Stephanie Flowers [00:32:26] That's just being responsible.

 

Steve Good [00:32:28] Yes, ma'am.

 

Senator Stephanie Flowers [00:32:28] That's me. It's just a matter of being responsible and caring about people's lives.

 

Steve Good [00:32:37] Yes, ma'am.

 

Senator Stephanie Flowers [00:32:39] To me. And I'm glad you mentioned Pine Bluff, because I knew we had one of those dealerships down there and they do do service.

 

Steve Good [00:32:45] It's a good one.

 

Senator Stephanie Flowers [00:32:46] Yes. Yeah, but you didn't mention them, so I guess that wasn't that other brand that's trying to come in without a repair location.

 

Steve Good [00:32:54] That's right. It's not.

 

Senator Stephanie Flowers [00:32:55] How many--

 

Senator Blake Johnson [00:32:57] Senator Flowers.

 

Senator Stephanie Flowers [00:32:59] I just want to know.

 

Senator Blake Johnson [00:33:00] Just one second. Okay. Senator Dotson, would you like to be recognized?

 

Senator Jim Dotson [00:33:07] Thank you, Mr. Chair. After listening back and forth and listening to the committee and everything, I think this bill may need a little bit more massaging or at least a little more discussion. But with your permission, I'd like to pull it down today, take a look at it a little bit longer. And then we can bring it back with if we can come to some agreement.

 

Senator Blake Johnson [00:33:33] Senator Dotson, there's two others who would like to speak. Greg Donohoe and Rob Gregory. Do you have any objection for this bill to be pulled down for today and come back to a later day with possible changes? Any of those two that are still--

 

Unidentified [00:33:56] I would still like to speak.

 

Unidentified [00:33:57] I would too.

 

Senator Stephanie Flowers [00:34:04] I would think that if it is going to be pulled down and brought back, I'd like to see a fiscal impact from DFA on this. I mean it's already been testimony that it's going to be impacted. So I think it's only prudent on our part to get that.

 

Senator Blake Johnson [00:34:24] It wasn't testified by DFA, but if the sponsor of the bill would like to see if they have any comment, that would be good. But Mr. Greg Donahoe.

 

Greg Donahoe [00:34:44] Thank you. I'll be brief.  I'm Greg Donahoe with Heartland Honda up in Springdale. Been a dealer for 28 years. Honda only in our case. I want to speak on the warranty because I've dealt with this on the power equipment side directly with like Home Depot selling Honda lawnmowers. And you go check out, you buy a lawn mower, you think you have a warranty. That's all great. 

The way dealers do it is we warranty register stuff. We do it on a daily basis, our dealership. It's a requirement by our OEMs. That way if a recall comes out, consumer information is there and they can be communicated and contacted accordingly. You take a side by side that gets rung up at a cash register at a big box, no consumer information, no way to let them know there's a recall on this, that is injustice to the Arkansas consumer. I could go on and on about that and we've seen it happen . But like I said, I'll be brief. Thank you for your service to the great state of Arkansas, and thank you for allowing me to speak.

 

Senator Blake Johnson [00:35:43] Sure. Thank you. Rob Gregory.

 

Rob Gregory [00:35:52] Thank you for allowing me to talk even after you decided to possibly amend the bill. Let me start from the beginning. Our company, Gregory Polaris, is actually Glagg Inc. That stands for Gregory Lawn and Garden Inc. At the age of seven, I grew up in a lawn mower store. I knew that industry was being destroyed once the big box stores were allowed to have large equipment. And it did. 

So if you study that industry, it destroyed that industry of prominent dealers and service for the consumer. And so much of what the big box stores sell is what we refer to as tongue depressors. Use it, throw it away. That's doing no justice to the consumer. When we talk about the brand that TSC is trying to bring in. He mentioned Texas. It's only assembled in Texas. All the products come from all over the other rest of the world, Vietnam, China, things of that nature. They avoid the tariffs by not sending it in as a whole unit. Similarly in Texas. They do offer, it does come with a manufacturer's warranty.

 But if it was that great of a product, then every dealer here would sell it. It's a very inferior product. We talk about the safety. Not only do our dealers know the safety laws that we're under federally by Product Safety Commission, we also sell safety equipment, helmets, all of this stuff for the young children. So you're not going to regulate. There's just no way they're going to be able to regulate the age of the people that are going to be riding on this and the safety aspects of someone being injured on this. 

When we talk about the warranty, Polaris, so let's go with another federal mandate that we're going EFI fuel injection. We're getting away from carburetion. And you're going to have 26, 28, 32 mandates where all of this smaller equipment, whether it be lawn equipment or not, there's going to go to fuel injected in a lot of that stuff. 25 horse and above so far has already been mandated to be fuel injected. In order to work on a fuel injected machine, you got to have a laptop. How much does that cost? How many techs do you have? And then let's talk about program. Polaris' program is $2,000 annually. Your mom and pops can't afford that. The mom and pops, the 5 or 6 that are in the state are mom and pops that are trying to find something that they can sell that they can afford to sell. 

So Mossimo has come to them because of this agreement with TSCs all over the nation. Those dealers, once we go EFI, they will not be able to just be a warranty center with the expense of the required tools and the electronics that are needed. And this is a huge consumer issue that if you do this, you're allowing them to buy and pay good money for tongue depressors. Let's talk about the title process. The title process with us is going to do the recall information. There's many times, five, six, seven years later, there's a recall on a unit. There is a safety recall. It's not a recall because it's not working. It's a safety recall. TSC no longer handles that brand. That brand is gone because it's inferior. If it was that great of a product, they wouldn't be trying to sell it at a big box store. 

The titling process is you buy the unit. We provide a certificate of origin. You're supposed to go to the state of Arkansas and get it titled on the day that you buy it. Most people are going to insure it because of the expense of it. But they're not insured liability wise or theft wise until the titling is done. Is TSC going to tell them that? No, they don't have a clue. So one of these units is going to get somebody hurt. They're going to have purchased the insurance because of the expense of it.

 But it's not going to be covered in any way, shape or form because they don't know that they got to go get their registration done with the state of Arkansas. And the state of Arkansas is also going to provide a sticker for the Game & Fish commission that shows when it's on public lands that that unit has been registered properly with the state of Arkansas. Any questions?

 

Senator Blake Johnson [00:41:30] Thank you, sir. Senator Dotson, you're recognized.

 

Senator Jim Dotson [00:41:38] With permission of the chair, like I said, I'd like to try to pull it down.

 

Senator Blake Johnson [00:41:41] What?

 

Senator Jim Dotson [00:41:42] I said with the permission of the chair, I'd like to pull the bill down for today.

 

Senator Blake Johnson [00:41:46] Without objection. Thank you, Senator Dotson. We're going to go to Senator Johnson. Go back to Senate Bill 77.

 

Senator Mark Johnson [00:42:01] Should I stay here, Mr. Chairman?

 

Senator Blake Johnson [00:42:02] Absolutely.

 

Senator Mark Johnson [00:42:03] Okay. Thank you, Mr. Chairman.

 

Senator Blake Johnson [00:42:06] Hang on just a minute there. They're going to pass out the amendment. The amendment is just adding a house sponsor.

 

Senator Mark Johnson [00:43:00] Whatever the recommendation of staff is. This is just adding Representative Mayberry as a House sponsor.

 

Senator Blake Johnson [00:43:16] We can do that on member's own. Whatever your preference is if you want to check on the possible impact and do that.

 

Senator Mark Johnson [00:43:22] I don't think that's going to be necessary. It may be necessary, Mr. Chairman, but not to get this amendment on.

 

Senator Missy Irvin [00:43:27] Yeah. If you want to get the-- sorry.

 

Senator Mark Johnson [00:43:30] Okay, then I'll just do it members own.

 

Senator Blake Johnson [00:43:33] Thank you, Senator Johnson.

 

Senator Mark Johnson [00:43:34] Thank you, Mr. Chairman.

 

SB 133: Prohibiting Central Bank digital currency use (Passed)

Senator Blake Johnson [00:43:38] We have one other bill, Senate bill 133. Senator Boyd, do you want to. All right. We will do what we can do if we have to. Yeah. You're recognized.

 

Senator Justin Boyd [00:44:06] Thank you, Mr. Chair. So last week I presented Senate Bill 47. This is a rewrite of that. It's the same language minus the amendment that we adopted last time. I had a miscommunication with someone. We did not need the amendment, so I just withdrew that bill and Senate Bill 133 is the original bill. So my testimony is not changing from last time. It all does the same thing it did before. 

It's all about clarifying and putting a speed bump in place with the state of Arkansas to say we don't want to participate with Central Bank digital currency. The Trump White House has come out and said, we're not going to do this right now, but that doesn't preclude somebody else from another federal administration down the road from saying we want to invade people's privacy. So that's really my testimony. 

The banking association people are here. If you have concerns or you have need some kind of clarification, they provided a nice handout to talk about exactly what Central Bank digital currency is and why it matters to your community and your community bank members.

 

Senator Blake Johnson [00:45:11] This has been debated. The Bankers Association would come to the table. That's you. Come to the table. Just right there where you're at is fine. Just recognize yourself and we'll see if there's any questions.

 

Lori Trogden [00:45:42] Lori Trogden, president and CEO of the Arkansas Bankers Association.

 

Senator Blake Johnson [00:45:46] Is there any questions? Senator Flowers and Senator Murdock.

 

Senator Stephanie Flowers [00:45:52] Good morning again. You know, I'm trying to understand all of this stuff, this phrase digital currency, crypto. And I did do some research since we were in here last. You weren't here. And I came across the title of an act, the EMMER Act,  E-M-M-E-R, that precluded digital currency from something. I've forgotten now, because this has been several days ago so a bunch of things run through your brain and you kind of. But I don't understand what digital currency is in Senator Boyd's bill. 

It's quite clear to me that it should not be labeled money. But what is it and what is it used for now, if it's used for. I asked him also about the Federal Reserve and the mention of the Central Bank digital currency, which I saw a blurb on my phone yesterday about the Federal Reserve authorizing some, I think it was crypto. I'm not sure, but they authorized something to be used. And I'm just not understanding digital currency. Is it something we use to pay a credit card? Does any government agency recognize it as payment or something? Now, can you help me?

 

Lori Trogden [00:47:52] I will try my best. So I think it's in the background that I gave you. The Biden administration asked the Federal Reserve, which is also the Central Bank-- they are one and the same. People use that name interchangeably. Central Bank, Federal Reserve. Asked them to do a study on possibly creating a digital currency. So instead, it would be backed by the US dollar, but instead of you-- I think Senator Boyd did a good job. 

Instead of you walking into the bank with a $1 bill, it would be just a digital dollar. Crypto is not backed by the US dollar, so that's set aside over here. It's an entirely different thing. And I think what you were referring to with the Fed announcement yesterday was they held interest rates, and Jerome Powell remarked that he thought banks could deal with crypto if they can do it safely and soundly. It was kind of a remark. They didn't authorize anything necessarily. But crypto is over here completely aside. 

So right now money moves electronically. So your dollars, if you go into the bank, Senator Boyd gave you a check of his bank account, you bank at a different bank, you go deposit that check. They move the money electronically across the payment route. So that exists. A digital currency would be an electronic dollar that is backed by the US dollar that would move-- I'm sorry, a digital dollar that is backed by the US dollar that would also move electronically. 

So that's why you'll see in the paper that I gave you, the banking system doesn't think-- the industry doesn't think we need a CBDC. CBDC being Central Bank digital currency. We don't believe that we need a CBDC as the Fed was looking at it because money already moves electronically. So in essence, this is a digital dollar. Instead of holding a dollar bill in your hand, you have a digital dollar that lives online in the Federal Reserve Bank.

 

[00:49:54] [question off mic

 

Lori Trogden [00:49:56] Well, it's not here right now. The Federal Reserve did a study. And that's all. They stopped right there and said we can't do anything else until Congress authorizes us to create a digital currency. So right now, there is no digital currency being used anywhere for anything. China has talked about creating one, but that's outside of us. So right now there is no digital currency in use as far as a Central Bank digital currency goes.

 

Senator Stephanie Flowers [00:50:29] Well, can I follow up?

 

Senator Blake Johnson [00:50:31] Yeah.

 

Senator Stephanie Flowers [00:50:32] As Senator Boyd has related to us, he considers this piece of legislation a speed bump to prevent Arkansas from being a part of it if Congress or the Federal Reserve or if Congress allows-- I don't know how that works. Congress has to allow the Federal Reserve to recognize digital currency or does the Federal Reserve on its own have the power to authorize digital currency?

 

Lori Trogden [00:51:09] When the Federal Reserve did their study at the end of the study, they said they felt that Congress had to be the body to create a digital currency. And, of course, then Congress would mandate that they actually do the work to create the digital currency. But Congress has to authorize it, and Congress has not authorized anything. So that's why there is no digital currency in existence right now, no Central Bank digital currency.

 

Senator Stephanie Flowers [00:51:31] Last question, Mr. Chair. If Congress does authorize this and the Federal Reserve as his bill indicates allows this digital currency and we have this legislation in law in Arkansas, are we going to be left out of the loop or something? Am I going to be at a disadvantage or the people of Arkansas are going to be at a disadvantage because we cannot-- And I don't know how that would work, because if the Central Bank, the Federal Reserve-- and that's the question I asked the other day, too. Are our local banks mostly under the or a part of the Federal Reserve system?

 

Lori Trogden [00:52:26] The Federal Reserve is a regulatory body that regulates all banks. Yes.

 

Senator Stephanie Flowers [00:52:30] So how would that impact consumers in Arkansas if you have an opinion on this?

 

Lori Trogden [00:52:37] Sure. I would think since it hasn't been created, we don't know exactly what it would look like based on the study that the Fed did. As an industry, our opinion is that it is not needed because money already moves electronically. I think Senator Boyd pointed this out. This would take the deposits, the money out of the banks and hold them at the Federal Reserve. 

And so we then couldn't take those deposits and loan them back into the community as credit. And so we don't think it's necessary, if that helps with that question at all. Because it doesn't do anything different that can't be that cannot be done with money right now. It's just not held at the Federal Reserve, tracked and monitored and moved around by the Federal Reserve. But money is electronic right now and can move anywhere at any time for any reason. So we don't think there is a need for it. 

So would we be disadvantaged as Arkansas if it passed? In our opinion, if it passed the way that the Fed outlined it in their study, we don't think we would be at a disadvantage because we don't find it necessary. We don't think it's necessary to create it at all.

 

Senator Stephanie Flowers [00:53:56] But if it is.

 

Lori Trogden [00:53:58] If they did create it, since I don't know exactly what it would look like, I couldn't tell you if we'd be at a disadvantage or not, because we don't know what they would create, what the rules would be, how they would use it. That's just not a question I think I can answer.

 

Senator Blake Johnson [00:54:12] Thank you. Senator Murdock.

 

Senator Reginald Murdock [00:54:15] Or even if we would have the ability to opt out, if you will. With the Central Bank being what it is and the authority that it has, us even doing this, I don't even know that this is necessary because of so much of the unknowns. I think I know the intent. But I don't know that with the regulatory oversight as it is, as I understand it from you, that this speed bump would really effectively be anything if they so determined to use this as a method of moving money or whatever, that we would really be able to opt out and be viable in the banking community still as the world changes. 

I don't know without you knowing what it look like, what it would do, that we would be really preventing something that we don't need to prevent. It seems like to me, from what I'm hearing, is that it's  nothing that's needed right now. I'm talking about the bill. Help me if I'm missing. I think I know the intent but I don't know that we know enough to need to do this.

 

Lori Trogden [00:55:32] If they create a digital currency, I don't think it will supplant the dollar bill. We are going to have hard cash money regardless. So you as a consumer could make the choice if it's created that way, as they indicated in their study, you, the consumer, would make a choice. I either want to use Central Bank digital currency, I want to use the dollar, I want to use some of both. But it's not intended to replace our regular dollar.

 

Senator Reginald Murdock [00:56:00] You don't think it will?

 

Lori Trogden [00:56:01] I don't think it will. Now, since it doesn't exist, I don't know. But I don't think so.

 

Senator Reginald Murdock [00:56:05] The legislation as proposed, in your opinion, would be good for us to enact as a precautionary measure?

 

Lori Trogden [00:56:15] I think a Central Bank digital currency is not necessary and not necessary to use if it is created. And that's about as far as I can go, is that we do not deem it necessary and have asked Congress not to create it. We actively advocated for the last several years that it's not necessary and we do not want Congress to create it.

 

Senator Blake Johnson [00:56:38] Thank you. Senator Boyd, are you closed?

 

Senator Justin Boyd [00:56:41] Yes.

 

Senator Blake Johnson [00:56:42] Senator McKee.

 

Senator Matt McKee [00:56:44] Motion at the appropriate time.

 

Senator Blake Johnson [00:56:45] Motion accepted. Second. All in favor, say aye. All opposed, like sign. Thank you, Senator. You passed your bill.