MINUTES OF THE SENATE COMMITTEE ON JUDICIARY Sixty-eighth Session June 2, 1995 The Senate Committee on Judiciary was called to order by Chairman Mark A. James, at 8:00 a.m., on Friday, June 2, 1995, in Room 224 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Senator Mark A. James, Chairman Senator Jon C. Porter, Vice Chairman Senator Maurice Washington Senator Mike McGinness Senator Ernest E. Adler Senator Dina Titus Senator O. C. Lee GUEST LEGISLATORS PRESENT: Assemblywoman Jan F. Monoghan STAFF MEMBERS PRESENT: Allison Combs, Senior Research Analyst Lori M. Story, Committee Secretary OTHERS PRESENT: Marsha Berkbigler, Lobbyist, Nevada State Medical Association Jeffrey Whitehead, Attorney, Nevada State Medical Association Charles "Chuck" McCuskey, Doctor, Immediate Past President, Nevada State Medical Association Randal Munn, Deputy Attorney General, Human Resources Division, Office of the Attorney General April Townley, Deputy Administrator, Welfare Division, Department of Human Resources Fred Hillerby, Lobbyist, Valley Hospital Medical Center, Las Vegas, and Washoe Medical Center, along with Hospital Health Plan Bill Prezant, Lobbyist, FHP Inc., St. Mary's Health Network, Inc. Nancy Angres, Chief Deputy Attorney General, Human Resources Division, Office of the Attorney General Thom Riley, Acting Deputy Director, Department of Human Resources Don Winne, Deputy Attorney General, Human Resources Division, Office of the Attorney General Shiela Leslie, Lobbyist, Action for Nevada's Children Janine Hansen, Lobbyist, President, Nevada Eagle Forum Harvey Whittemore, Attorney, Lobbyist, City Bank NA, a Subsidiary of Citicorp John P. Sande, III, Lobbyist, Nevada Banking Association Kenneth T. Scruggs, Regional Director, Lobbyist, Household Financial Group, Ltd. Mary Santina-Lau, Lobbyist, Retail Association of Nevada Daryl Capurro, Lobbyist, Representative, Nevada Franchised Auto Dealers Association The hearing opened as a subcommittee consisting of Chairman James, Senator Adler, and Senator Porter. SENATE BILL 531: Provides evidentiary privilege for certain medical review committees. The chairman opened the hearing on Senate Bill (S.B.) 531, noting the bill deals with the evidentiary privilege for medical review committees. He told the audience the bill was one he requested. It deals with peer reviews that physicians undergo when there is a need to determine whether a doctor needs to be disciplined or some other problem arises about patient care. While there has been a nebulous statutory holding, the evidence brought forth in these peer review committees is not discoverable, it has never been indicated the evidence is not admissible. Thus, if there was some type of "purloined" document or one obtained under some other less than honest means, it could be admitted as evidence in civil litigations, the senator explained. The bill has taken a lot of work, he noted, starting at least 1 year ago. The bill, as it is drafted, allows a privilege to all participants in the peer review, which cannot be waived, except by all who hold the privilege. Before the first witness took the stand there was a full quorum of the committee. Senator James called the hearing of the full committee to order and proceeded. Marsha Berkbigler, Lobbyist, Nevada State Medical Association, presented the bill. Ms. Berkbigler introduced Jeffrey Whitehead, Attorney, Nevada State Medical Association, and Chuck McCuskey, Doctor, Immediate Past President, Nevada State Medical Association. Mr Whitehead confirmed the chairman's representation of the bill's intent. Documents and materials used in peer review of various entities should be protected from admissibility in civil litigation, he told. The bill is in tune with federal law that protects participants in peer review matters, if they perform according to law and to certain standards set for peer review activities. There is a need to ameliorate any "chilling effect" that is potential if "purloined materials" are admitted in litigation. Senator Adler asked if medical files, which are generally available in hospitals, would be subject to the privilege, if it were part of a peer review. Mr. Whitehead replied in the negative, noting there is an exception which states materials generally available under Nevada Revised Statutes (NRS) 629.601 are still available. The intent is not to make materials or other things that are otherwise available to the public inadmissable or privileged. It is meant to encourage the already federally mandated activity and to allow the evidence brought to remain confidential, he explained. Senator Adler asked, if he were a doctor, who did a written statement to a peer review board, the document would be privileged. Mr. Whitehead agreed, along with any response to the doctor from the review board. Senator Porter asked the witnesses to explain exactly what the bill does. Mr. Whitehead responded, noting it addresses a Nevada Supreme Court case which interpreted the privilege under NRS 40.265 to allow materials which are not discoverable through the normal process, but obtained by other means, to be admissible in a court. The senator asked for examples of "other means." Mr. Whitehead answered someone might steal the documents and turn them over to the other party. Specifically, the witness told, the bill prevents an unintentional waiver of the privilege afforded parties and documents of the peer review boards, and the admission of these records which might result from this unintentional waiver. The next party to speak on S.B. 531 was Randal Munn, Deputy Attorney General, Human Resources Division, Office of the Attorney General, who came to the stand with April Townley, Deputy Administrator, Welfare Division, Department of Human Resources. Mr. Munn noted both he and Ms. Townley represent Medicaid and he offered the committee copies of their prepared testimony (Exhibit C) to be read by Ms. Townley. He reported Medicaid is not opposed to the peer review concept and agrees there are a lot of good public policy reasons for such reviews. The way the bill is drafted, he noted, presents an obstacle for the managed care area of Medicaid. Ms. Townley reported Medicaid has no problem with the peer review having the privileges extended, but the way the bill is drafted appears to cover all quality assurance. Medicaid is required by federal regulation to assure the HMO, if that is what is being used as a managed care provider, has a quality assurance program in place, and to maintain access to the records of that program, she explained. Senator James asked if this access could be a condition of the HMO's participation in Medicaid. The witness referred to section 3 of the bill, which gives the right to the committee or review panel itself, not the parent organization or HMO. With this, it was believed the HMO would not be able to waive the privilege on behalf of the review panel. Also, section 4 affords the privilege to any person on the panel, or testifying before the panel, she said. Senator James held a differing opinion, noting the HMO should be able to waive the privilege, on behalf of their own committees or panels. Mr. Munn stated it is feared the bill allows the privilege to both peer review panels, as well as quality assurance committees. If these committees are brought under this cloak of privilege, he observed, the HMO would be in a position that would prohibit it from waiving, through contract, the privilege. This would keep the HMOs from winning Medicaid contracts, he added. Senator Adler asked if the witnesses wanted language that would specify the statute does not apply to HMO quality control committees, or the like. Mr. Munn agreed that some language making a distinction between bona fide peer review and quality assurance would be best. He noted that most medical organizations are structured so that peer review allows the physicians to police each other. This should be secret, he opined, to allow the most honest and forthright exchange among the professionals. The broad spectrum of quality assurance and the respective plans that an HMO would have embraces too broad an area, which would also cross into a lot of areas and issues, Mr. Munn testified. Senator James opined the same public policy applies to quality assurance that does to peer review, and that is why it is included in the statute. There is a need to promote and facilitate open communication about things which might cause fear of liability. This is to be encouraged, he stated. He stated situations of malpractice could be proved by other means; thus, there is no need to have access to the records being protected by the proposed law. The senator opined taking the quality assurance programs out of this privilege would "swallow part of the public policy of the bill." He stated it is his opinion the HMO would have adequate control over its own quality assurance committee to be able to waive the privilege for purposes of participating in a Medicaid managed care program. The chairman asked that representatives from HMOs or potential Medicaid HMOs provide testimony about this situation. If these organizations testify there is a problem, he will be more convinced, but if they do not, the Legislature should not be too concerned either. He stated, "If they cannot structure in such a way that they can make sure they can waive that privilege by contract, in certain cases, then, perhaps they just eliminate themselves from the ability to participate, where others may be able to do that." Ms. Townley stated her agreement that some HMOs may just have to eliminate themselves from being able to compete for Medicaid. However, section 4 still causes concern, because any person who comes before the quality assurance committee, could refuse to waive the privilege. The HMOs could not control every person who would be a party to the proceedings of a quality assurance committee, she opined, especially the party who is the subject of this review. Ms. Townley described the need to be allowed to examine quality assurance committee records dealing with hearings looking at a specific treatment or a particular problem that has come up on a broad spectrum. She offered an increase in the number of low-birth-weight babies as an example of something the quality assurance committee would review and that Medicaid would need access to meet the federal regulations. Section 4's provision about the individual having the authority to block this access is the primary concern, she stated. The chairman noted he understands the concerns brought by Mr. Munn and Ms. Townley and offered to have the questions addressed by others. The next witness was Fred Hillerby, Lobbyist, Valley Hospital Medical Center, Las Vegas, and Washoe Medical Center, along with Hospital Health Plan. Mr. Hillerby noted Hospital Health Plan anticipates being a successful contractor for the Medicaid managed care program. He opined the chairman had adequately addressed the concern that a contractor may not be able to waive the privilege in certain circumstances. As part of the contract, it can be indicated that Medicaid has access to certain information and that it will be kept confidential, he opined. Senator James asked Mr. Hillerby his view of the individual privilege as outlined in section 4 of the bill, wondering how this might be addressed. Mr. Whitehead speculated the way to address the concern is to examine the way the reviews take place, providing the needed information without providing the names or actual occurrences contemplated by the peer review statute. Federal law mandates certain exceptions to privileges, in any case, no matter what state law says, he pointed out. Thus, this statute would not prevent Medicaid from doing the quantitative quality assurance that is required. Senator James asked for confirmation that the federal government would be bound, as a litigant, by a state law privilege. For example, the senator noted, if the federal government desired some privileged document held by the senator, he would be able to assert the privilege. Mr. Whitehead replied the Health Care Quality Improvement Act of 1986 recognizes one major exception to any "immunization," that is, if someone acts in bad faith. This is the situation when federal law would control, he explained, and it would be a federal court action. Mr. Hillerby continued addressing the previous testimony regarding Medicaid managed care contracts. A problem arises when trying to differentiate peer review from quality assurance review. Part of the quality assurance process in a hospital, he reported, involves incident reporting which identifies things in the hospital that need correction. If those become discoverable, he emphasized, the incident reports stop coming. Thus, if quality assurance is provided a different treatment under the provision, peer review would be impacted. Senator Adler referred to the portion of the bill which states, "any person whose work has been reviewed by the committee or any person who has offered testimony, opinion, or documentary evidence before the committee is a holder of the privilege." Thus, if state Medicaid attempts to do quality assurance, anybody that appeared in front of the committee can exercise the privilege, he opined, and the HMO could lose their contract. This is a serious problem, as written, he stated. Bill Prezant, Lobbyist, FHP, and Saint Mary's Health Network, Inc., responded to the senator's concern. He stated that what currently occurs in Medicare is "somewhat akin" to what would happen in Medicaid with this legislation. An HMO that does Medicare risk contracting enters into certain contractual obligations, he explained, and in this particular instance the contractual obligation with the state would be the waiver of application of this particular provision. Senator Adler interjected it is impossible to waive a privilege that "rests with somebody else." That is a basic rule of evidence, he stated. Mr. Prezant speculated that everyone involved in the quality assurance aspects of handling Medicaid would be part of that contractual agreement. Senator Adler asked if the plan is to have anyone who might show up at a quality assurance hearing to sign a waiver. The witness stated as part of the contractual agreement with Medicaid the HMO would have the obligation to permit Medicaid to review the quality assurance materials. The senator insisted this is not possible, because it would require waiving a privilege belonging to someone else. Mr. Prezant replied that these quality assurance panels do not have "just anyone" come before them, or serve on them; and as part of the employment, the privilege would have to be waived. Senator Adler asked this be spelled out precisely in the bill. Senator James suggested it is possible to "draft around the problem" by inserting language to the effect that "nothing herein shall be deemed to prevent a HMO from contracting for a limited waiver of the privilege for purposes of disclosing quality assurance information...," or "...HMO acting pursuant to `such and such' a statute of NRS from contracting..." something to that effect. This would give notice that there is a limited waiver of the privilege made by the HMO on the behalf of any person involved in quality assurance review, he stated. If, the panel is for purposes of peer review or any other reason not within the limited area discussed above, concerning Medicaid, the full privilege applies, the chairman emphasized. Mr. Whitehead suggested the view be taken that part of the peer review or quality assurance process includes the government's review, and thus, they would have access, for this limited purpose, to be part of the review process. Senator James opined this was an even better solution, noting it is possible to indicate Medicaid is a participant, and disclosure to them does not waive the privilege. Mr. Munn came back to the witness table offer a qualified, agreement to the proposal. He qualified his response, he explained, because this is really up to the federal government. Response would not be forthcoming until the state submits their application and the federal governments responds, one way or the other. The chairman noted he had been requested to add in language referring to a "medical facility" in the bill. Senator Adler asked if there is a statutory definition of medical facility, and he was informed there is, but it is a very broad definition. Nancy Angres, Chief Deputy Attorney General, Human Resources Division, Office of the Attorney General, told the committee the definition of medical facility includes such facilities as independent centers for adult group care, convalescent hospitals, nursing facilities, psychiatric centers, etc. Senator Adler asked if this definition would open up the review process and Medicaid involvement in convalescent hospitals. Mr. Munn brought up another question, referring to the Bureau of Licensure and Certification for the Department of Health and the fact it is not clear in the bill whether the proposal is being added into the existing statutes or whether it is repealing the old statute. He noted that section d of paragraph 1 of NRS 629.061 gives an authorized representative or investigator of the state licensing board the right to view health care records during the course of an investigation; and he wondered if that would be continued, noting the bill does cite to NRS 629 and queuing back into the licensing board's ability to review HMOs. He then stated he had answered his own question. He next questioned if the privilege would bar the insurance commissioner, who is not a licensing board, from looking at HMOs, which are also insurance companies. The chairman asked the witness not be get too far afield with his wondering, noting there already exists a privilege, and the bill is intended simply to replace it with a more clearly worded privilege. Additionally, the definition of medical facility in the statutes includes some of the facilities referenced in the bill. Therefore, there seems to be no good reason not to apply the privilege to all medical facilities, he observed. Senator James asked the bill's proponents to work with others to draft language that would clarify the status of Medicaid quality assurance in HMOs in the privilege as well as a definition of facilities where the privilege would apply, in as broad a fashion as possible. There was no further testimony, and after thanking Ms. Berkbigler for all her hard work with the bill, he closed the hearing on S.B. 531. ASSEMBLY BILL 503: Makes various changes to procedures for adoption of a child. The chairman opened the hearing on Assembly Bill (A.B.) 503. Assemblywoman Jan D. Monoghan introduced the bill, offering a packet of information about the bill (Exhibit D. Original is on file in the Research Library.). She gave a brief overview of the bill noting section 1 outlines a form for the acknowledgment of paternity and a means of distribution. Section 3 requires the Welfare Division to prepare a report including medical records and sociological history of the child, excluding any information about the natural parents. This report will be forwarded to the adoptive parents, to provide as much information as possible, she reported. Section 4, the assemblywoman explained, provides the presumption that remaining in the home of the adoptive parent is in the best interest of the child after the consent is set aside and the relinquishment absolved, to protect the child. Section 6 provides that after the adoption is granted, there is a presumption that remaining in the home of the adoptive parents is in the best interest of the child. Section 7 provides notification to the adoptive parents that they are eligible for a grant of financial assistance, as well as information about applying for the grant. Section 8 also declares the best interest of the child must be primary in determining the consideration of the court, Mrs. Monoghan concluded. She introduced Thom Riley, Acting Deputy Director, Department of Human Resources. As indicated, Mr. Riley told, the department has worked very closely in developing the bill. The department strongly supports the proposal, as do the adoptive parents in the state, he explained. Mr. Riley referred to section 3 of the bill which would require the division to provide the necessary social and medical summary information to adoptive parents. While this is a current practice, it is only a recent development. It is important for adoptive parents to have information that will assist them to make an informed decision about adoption, he explained, especially in the case of a child that has suffered abuse or neglect or been affected by drugs or alcohol. This information is also very important after the child is adopted, he added, to allow the adoptive parents to make proper decisions about health care and education for their adopted child. Section 4, he opined, is the most important part of the bill because it puts into law the presumption that it is in the child's best interest to remain in the adoptive home after the adoption is finalized. Many adoption agencies fear that even after the adoption is final, the child may be removed by the parents. This fear, he stated, has come to fruition recently in the cases of Baby Jessica in Michigan and Baby Richard in Illinois. During the Assembly hearings, Mr. Riley told the committee, numerous adoptive parents testified that this is one of the adoptive parents' biggest fear. Senator James asked if Michigan and Illinois had laws similar to this proposal. Mr. Riley stated it is his understanding they do not but they are attempting to address the issue now. After discussions with the state attorney general's office, Mr. Riley said, this proposal seems a good way to protect the adopted child and the adoptive parents. Mr. Riley explained that section 7 of the bill deals with the adoption subsidy program, perhaps the most important program the state has to get the special needs child adopted. Many adoptive parents have complained that they were not informed of the special needs of their child or that they are entitled to a subsidy to cover medical costs for the child, he pointed out. The crucial point to this, Mr. Riley stressed, is the request for the subsidy must be signed at the time of finalization of the adoption; and if it is not done, it can not be done later. Mr. Riley asked to make one minor amendment which he explained. In section 4 the language requires the consideration of the best interests of the child, in section 8, there is the same language which addresses the termination of parental rights, he stated. There is one word in that section which as inadvertently changed. The word "adoption" which should be replaced with "termination of parental rights," he stated. Thus, page 4, line 33 of the bill would read, "In any action commenced by the natural parent of a child to set aside a termination of parental rights after petition for adoption...." Senator Adler offered an anecdote regarding an adoption where the natural mother was threatening to rescind an adoption if the adoptive parents took some particular action she did not like. The adoptive parents were panicked about the situation, he remarked. Don Winne, Deputy Attorney General, Human Resources Division, Office of the Attorney General, explained the reason the bill covers both the adoption and the termination of parental rights is to create the protection like the skin of an "onion," where it is necessary to remove several layers to get to the desired part. If the natural parents wish to regain the child they must set aside the parental rights termination first, then they must overturn the adoption as well. The two separate proceedings makes it much more difficult, he explained, to contest an adoption. Senator Washington asked if the committee had just recently heard another bill, dealing with the termination of parental rights. The chairman agreed they had, noting it was consistent with this bill. Senator Washington asked if the bill will speed up the adoption process at all, noting it is a very tedious and frustrating process for prospective adoptive parents. Mr. Riley replied the bill would not actually speed the process, but it provide greater assurance that once the adoption happens, there will be much less chance the adoption would be overturned. Mr. Winne explained there is another bill to be heard which is designed to speed up the adoption process. Senator Washington stated the process takes so long that many willing parents lose heart and fail to complete the adoption process. Mrs. Monoghan explained the knowledge that there were other bills in the works to address the various aspects of adoption made the goal more of one to tighten each aspect of the entire process. The next witness to speak in support of A.B. 503 was Shiela Leslie, Lobbyist, Action for Nevada's Children. Ms. Leslie voiced definite support for the bill, noting her organization is a statewide citizens' advocacy group working on behalf of children. She offered a copy of her testimony as Exhibit E. This group, she explained, truly believes that children's needs must be first and foremost in consideration. ASSEMBLY BILL 177: Revises provisions governing best interests of child in termination of parental rights. ASSEMBLY BILL 302: Makes best interests of child determining factor in cases concerning termination of parental rights. A.B. 503 works in concert with two other Assembly bills (A.B. 177 and A.B. 302) to create a "nice package of bills" which do place children first. There are three major reasons for support of the bill, Ms. Leslie explained. One, it adds the presumption of the best interests of the child to cover children who are adopted; two, it mandates that adoptive parents receive medical histories and social summaries of the child at the time of adoption; and three, it entitles adoptive parents of special needs children to get the subsidies they deserve. She urged the committee's consideration and passage of the bill. Senator Washington asked the witness how many parents are willing to adopt children. Ms. Leslie said her experience as the director of the Children's Cabinet in Washoe County showed her many people who are willing to adopt. She cautioned that, while they may be willing to adopt, they are also nervous about the cases where adoptions were overturned and the child lost. She confirmed for the senator that most people are interested in adopting infants or very young children. Janine Hansen, Lobbyist, State President, Nevada Eagle Forum, spoke in support of A.B. 503, telling the committee that the Nevada Eagle Forum has been active in adoption support. Ms. Hansen reported Nevada ranks 40th in states for adoptions. She offered an anecdote about a couple who had lost a baby back to the natural parent during the course of an adoption. This couple was heartbroken and miserable, she told. Ms. Hansen told that many states have different conditions that must be met in order to proceed in an adoption, including the termination of parental rights. Ms. Hansen reminded the committee how painful it is for the children in these situations, along with the adults. She spoke in support of promoting the adoption of special needs children. She reported there is a national waiting list to adopt Down's syndrome children. She also noted that targeting particular residential areas, such as urban areas of Los Angeles, by networking with the churches in the area, promoted adoption for many children who need families. The witness encouraged the committee to continue their efforts and to increase them, to get children into homes with families which can love them and look out for their best interests. There was no further testimony on the bill. The chairman stated the proposed amendment seemed understandable, and noted the bill would be taken up in a work session to follow the day's hearing. He closed the hearing on A.B. 503. SENATE BILL 516: Revises provisions governing credit cards issued by financial institutions. SENATE BILL 517: Revises provisions governing retail installment sales. Next, the chairman opened the hearing on S.B. 516 and S.B. 517. Harvey Whittemore, Attorney, Lobbyist, City Bank NA, a Subsidiary of Citicorp, and John P. Sande, III, Lobbyist, Nevada Banking Association, presented the bills to the committee. Mr. Whittemore explained that S.B. 516 is the proposed adoption of a model credit card act, and S.B. 517 makes changes in the existing chapter 97 of the Nevada Revised Statutes (NRS), made necessary by adopting a new chapter in the statutes dealing with credit card issuers. Senator Adler interrupted to ask the witness what model act was used to draft the bill. Mr. Whittemore would not provide the source of the model act, but noted it was not from the Uniform Commissioners or others of that sort. The purpose for segregating the retail and non-retail credit transactions is simple, Mr. Whittemore stated. He then explained the difference between retail (i.e., purchase of merchandise with a time payment plan from one merchant that issues the credit) and non-retail (i.e., a credit card issued by a bank or other financial institution, with a line of credit that is open-ended and can be used to purchase from multiple merchants) transactions. The current combining of these two types of transactions in NRS chapter 97, the witness reported, has caused extreme confusion in interpretation of the law. For example, the retail credit statement might make reference to a finance charge, and in the credit card agreement the term interest charge in more frequently used. The confusion was increased during the last legislative session when changes were made to non-retail credit card portions of the chapter regarding interest, that were not applicable to the retail portions. Mr. Whittemore emphasized the bills are a "package because if you make changes in one you necessarily impact changes in the other chapter." He explained credit cards are regulated by the Federal Truth-In-Lending Act, which defers to state law in certain instances. He then offered to go over the bills to point out the identical areas and answer questions. Referring to sections 3-14 of S.B. 516, the witness explained this portion of the bill contains definitions. Of these terms, "beneficial use," "secondary cardholder," and "joint account" are not addressed by federal law, but are part of the daily business of a credit card operation, he said. The goal is to supplement the federal act with those regulations that are part of the daily business of credit card issuers. He jumped back to section 1, page 1 of S.B. 516, explaining the bill adopts a new title and chapter to the statutes, an entirely new chapter with contents that are duplicative of what is already contained in chapter 97, along with the necessary changes to differentiate the retail and non-retail transactions. Section 15 covers the "meat of the transfer" of the sections from chapter 97 to the new chapter, Mr. Whittemore continued. Subsection 1 of section 15 says a credit card cannot be issued without a written or oral request; subsection 2 outlines that use of a card indicates acceptance of the card issuer's contract; subsection 3 allows the parties to agree to the interest rate charged; subsection 4 says a card issuer can make any changes to the conditions of the use of a credit card, but if the change increases cost it cannot be in effect for 30 days. Senator Adler asked for confirmation about subsection 4's intent. Mr. Whittemore concurred, offering address of payment as an example of the type of change that would not require notice. Mr. Whittemore emphasized this provisions adds rights to the consumer that do not presently exist. The committee voiced incredulity at the possibilities this provision brings. Another example, the witness offered, is an increase in the customer's credit line, asserting that this provision is an expansion of benefits to the consumer. He offered to amend the section to include language that might clarify the intent. Kenneth T. Scruggs, Regional Director, Lobbyist, Household Financial Group, Ltd., addressed Senator James' question about why it is important for the credit card company to make unilateral changes to the terms of a credit card agreement without prior notice to the customer. He explained there are changes the company needs to make to a customer's account from time to time. If the customer does not incur increased costs, he opined the company ought to be able to make those changes and then inform the customer. The chairman asked if he would object to inserting language that requires 30 days' notice if the change will detrimentally affect the contractual rights of the customer. Mr. Scruggs noted in an earlier draft of the bill there was language to the effect "...any decision that would adversely affect or increase the costs to the consumer." The parties agreed this would be an acceptable change. Mr. Whittemore continued his overview of the bill going section by section. Senator James asked about section 17 of S.B. 516, wondering about its source. Mr. Whittemore replied it is a new section that combines existing processes in a way that outlines current accepted business practices. Additionally, this section provides for optical imaging to accommodate the new technological advances in data reproduction and storage. The witness continued. The chairman asked if the provision removes any affirmative defenses that might belong to the customer. Mr. Whittemore denied that would be the result. He moved on. Section 18 of S.B. 516 is the same as section 3 of S.B. 517 and relates to the Uniform Commercial Code, chapter 104. Section 19 allows the credit card issuers to share information about the customer with an affinity group, as long as that affinity group's name appears on the face of the credit card, Mr. Whittemore stated. An affinity group might be General Motors, who works with a banking institution, such as Household Financial Group, to issue the GMCard, he explained. The witness offered a list of proposed technical changes to this portion of the bill (Exhibit F). S.B. 516 section 24 repeals all the provisions in NRS chapter 97 that are not necessary for the credit card issuer, but are necessary for the retail installment sales, the chairman summarized, after Mr. Whittemore attempted, unsuccessfully, to explain the final provisions of S.B. 516. These bills must be passed together, Mr. Whittemore reasserted, because if they are not, it will be absolutely necessary to make major amendments to whichever bill survives. There are sections in each bill which impact the provisions of the other bill and the original chapter 97 of NRS, he stated. Mr. Whittemore moved next to explain S.B. 517, noting it changes the word "interest" to "finance charge" with respect to all of chapter 97, and thus chapter 97 is changed to a retail credit card chapter, rather than a non-retail credit card chapter. Senator Porter referred to section 12 of S.B. 517 which allows for changes in interest simply by the customer using of the card after notice is sent. Mr. Whittemore agreed with the senator's understanding, noting this provision is already in existing law. He also reminded the senator there is no limitation on interest rates in the state of Nevada. This provision really only clarifies the use of the term finance charge, rather than interest rate. These bills simply separate the statutes affecting the two types of credit transactions into their own respective chapters, Mr. Whittemore asserted. This will allow the two different interests to come before the Legislature to make their own arguments for changes in their own chapter. Additionally, the goal is to bring predictability and certainty into the relationships that banks and lenders or retail credit issuers have with their customers, he stated. Mr. Whittemore referred the senators to page 5 of S.B. 517 which makes the notice of changes in the conditions of credit provision as was discussed earlier in S.B. 516. This notice requirement for retail sales agreements is different, because they do business differently, he pointed out. Senator Adler asked about section 12 of S.B. 517. The witness explained the language now says the amount of the finance charge in any retail installment contract, and of any other fee, may be in an amount agreed upon by the parties. This give the retailers the same rights that the lenders have with respect to these types of contracts, he testified. Senator James asked why this change was necessary, and Senator Adler speculated the retailer could charge a huge amount of interest, as well as gaining a security interest in the furniture. Mr. Whittemore explained the retail seller can do that currently. Senator Porter pointed out the deletion in section 12 of S.B. 517 is removing a cap that was previously in place for the retail seller. Mr. Whittemore said this is an attempt to make the same rules applicable to both non-retail and retail credit issuers. Senator Porter noted his understanding of the goal, but stated he is not sure this is the best way to go, in the interest of the consumer. Senator James suggested applying the cap, which is being deleted, to the provisions covering the non-retail credit issuers. Senator Adler stated there is a difference between the two kinds of credit. He noted the credit card issuer cannot perfect a security interest in the items purchased using a non-retail credit card, whereas the retail credit issuers can perfect a security interest on the merchandise. Mr. Whittemore had to agree. The senator opined, therefore, that the retailer does have an advantage over the non- retail credit issuers. Mr. Whittemore admitted this change is just a policy issue the Legislature is charged to make. Mary Santina-Lau, Lobbyist, Retail Association of Nevada, was asked to address this particular change. She stated the committee is presuming that furniture is the only thing purchased by retail credit. However, not every item is a recoverable item with a security interest, she asserted. She stated there are ways for retail and non- retail credit issuers to recover their losses, through various charges or time frames for interest application. Mr. Whittemore referred the committee to the existing language on page 3 of S.B. 517, lines 29-30, which says,"...the imposition of any other fee, expense or charge to which the parties may agree." He stated all the change really does is move this language up to lines 21 and 22 and remove the language that is bracketed. He asserted this language change does not substantively change the relationship between the retailer and his customer. The chairman asked if there is a limit on what can be charged for a late charge. The witness replied there is none. Senator Adler stated he might be able to go with the changes, but he does have some constituents who are very susceptible to fine print contracts. He stated he did not believe the larger banking institutions would operate this way, but he did believe there are other, less reputable businesses that would. Mr. Sande interjected there is always some creative mind that can formulate a way, or a special charge that will circumvent the usury laws, were they to be reintroduced. Mr. Whittemore stated the presentation was completed and reminded the committee of the changes proposed for S.B. 516 and that if the bills are not processed together, they will require extensive technical changes to one or the other. The chairman asked the witnesses to meet with him in order to make sure the proposed changes are clear. He explained the bills would be moved at a later work session. Senator McGinness referred to section 15, subsection 4 of S.B. 517 which states that "No notice is required if the change involved:..." He asked what the difference is between the two bills regarding the notice issue. Ms. Santina-Lau responded this provision falls under the Fair Credit Reporting Act. She asserted notice would actually be given through the regular process of notice of delinquency in payment, etc. Senator James stated his understanding of the intent of the bill. He pointed to subsection 4 of section 15 of S.B. 516 along with subsection 4 of section 15 of S.B. 157 stating these provisions should be consistent in terms of adversely affecting the customer and in terms of the time period in which notice is required to be given. These things need to be brought into line, he said. Ms. Santina-Lau referred to page 5, line 18 of S.B. 517, and told the committee there is a current requirement that customer statements contain a legend stating the customer can pay his unpaid balance at any time. This is not being printed on the statements in many of the companies she represents. It is, however, printed in the contract, she stated. The original draft had requested this requirement to be deleted, for this reason. On section 9, subsection 2 needs clarification that third-party credit, such as Household or GE has the right to assignment, Ms. Santina-Lau explained. The chairman asked her to bring these changes to the work session to be held early in the week. Daryl Capurro, Lobbyist, Representative, Nevada Franchised Auto Dealers Association, offered to work on the bill as well. He suggested, because of the differences in definitions in retail charge agreement and retail seller, it might be appropriate to eliminate sections 20-23 of S.B. 516 and allow the changes in S.B. 517 to be made. He opined that passing both bills will result in a conflict in definitions of retail charge agreement and retail seller. Mr. Whittemore noted "the changes made in S.B. 516 are a smaller circle as those compared in S.B. 517. There will not be a conflict, he stated, because if one is adopted, the broader definitions in S.B. 517 will subsume the ones in S.B. 516. There was no further testimony on the bills and the hearing was closed. The committee moved to a work session. The chairman moved to S.B. 531, noting the amendment proposed is to add subsection e in section 2 to include "a medical facility as defined in NRS 449.0151. Additionally in subsection 2 of section 4 language would be added to the effect, "the privilege is not waived even if the matter has been submitted to a government or regulatory agency of the state or the federal government." Mr. Prezant noted the various groups who spoke before the committee are in complete accord with the proposed amendments. Senator James asked if the proponents would wish to also add language "...submitted for purposes of compliance with federal statute or regulation governing..." Mr. Prezant opined the original change probably would allow the federal or state governments to obtain the necessary information, in connection with the Medicaid issues, as well as providing for unexpected new requirements. He opined the original change covers every objection the state might have. The chairman noted he would use the word "disclosed" rather than "submitted" in the amendment. As well as adding "... The privilege is not waived by disclosure of the information to a governmental or regulatory agency of the state or the United States...(for a purpose related to the regulatory...). Mr. Whitehead pointed out the information would not be submitted otherwise. Mr. Prezant suggested, "..United States pursuant to statute or regulation...." Senator Adler opined this change would not work because if there is a Medicaid fraud investigation going on, that would require submission of information. Mr. Prezant pointed out that Medicaid fraud investigations are a statutory thing. The senator stated the investigations become public at some point. The chairman stated he would ask the bill drafters to provide the language. Mr. Prezant stated, in regard to Medicaid fraud, that he could not think of a circumstance where a peer review/quality assurance committee would be involved in a Medicaid fraud issue. Senator James offered language "...as may be required by law." Mr. Whitehead opined this suggestion would be general enough. This would prevent a party from gratuitously submitting the report, the chairman noted. Senator Adler speculated the real concern is someone taking a "key report and dumping it into a peer review panel on a Medicaid fraud case, so that it would be privileged." The chairman called for a motion to amend and do pass S.B. 531 as proposed. Senator Porter interjected he did not really understand the bill, but would support it, with the understanding he would have it further explained at a later time. SENATOR LEE MOVED TO AMEND AND DO PASS S.B. 531. SENATOR PORTER SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. ***** Next, the chairman moved to A.B. 503 which requires one technical change at line 44, which requires substituting "termination of parental rights" for "adoption." He called for a motion. SENATOR ADLER MOVED TO AMEND AND DO PASS A.B. 503. SENATOR PORTER SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. ***** There was no further business before the committee and the hearing adjourned at 10:05 a.m. RESPECTFULLY SUBMITTED: Lori M. Story, Committee Secretary APPROVED BY: Senator Mark A. James, Chairman DATE: Senate Committee on Judiciary June 2, 1995 Page