REPORT TITLE:
Telemarketing Fraud

DESCRIPTION:
Prohibits specified unfair or deceptive telemarketing acts or
practices, and abusive telemarketing acts or practices.  Provides
civil penalties.  Requires that telephone solicitors keep certain
records, that shall be made available upon demand of authorized
governmental entities.  (CD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        947
THE SENATE                              S.B. NO.           S.D. 2
TWENTIETH LEGISLATURE, 1999                                H.D. 1
STATE OF HAWAII                                            C.D. 1
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO TELEMARKETING FRAUD. 



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  The Hawaii Revised Statutes is amended by adding
 
 2 a new chapter to be appropriately designated and to read as
 
 3 follows:
 
 4                             "CHAPTER
 
 5                TELEMARKETING FRAUD PREVENTION ACT
 
 6      �   -1  Definitions.  Whenever used in this chapter, unless
 
 7 the context requires otherwise:
 
 8      "Consumer" or "purchaser" means a person who is, or may be,
 
 9 required to pay for goods or services offered by a seller or
 
10 telephone solicitor through telemarketing and includes but is not
 
11 limited to a consumer as defined in section 480-1.
 
12      "Express verifiable authorization" means express written
 
13 authorization by the consumer, including but not limited to the
 
14 consumer's signature on a negotiable instrument, that
 
15 specifically authorizes the seller or telephone solicitor to
 
16 obtain payment from a consumer's checking, savings, or bankcard
 
17 account.
 
18      "Goods or services" means any real property or any tangible
 
19 or intangible personal property or services of any kind provided
 
20 or offered to a consumer.
 

 
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 1      "Investment opportunity" means anything tangible or
 
 2 intangible, that is offered for sale, sold, or traded based
 
 3 wholly or in part on representations, either express or implied,
 
 4 about past, present, or future income, profit, or appreciation.
 
 5      "Material" means any factor likely to affect a person's
 
 6 choice of, or conduct regarding, goods or services.
 
 7      "Outbound telephone call" means a telephone call initiated
 
 8 by a seller or telephone solicitor to induce the purchase of
 
 9 goods or services.
 
10      "Payment" means anything of value, including any interest,
 
11 benefit, privilege, claim, or right with respect to anything of
 
12 value, whether real or personal, tangible or intangible.
 
13      "Prize" means anything offered or purportedly offered and
 
14 given or purportedly given to a consumer by chance.
 
15      "Prize promotion" means a sweepstakes or other game of
 
16 chance or an oral or written representation that a consumer has
 
17 won, has been selected to receive, or is eligible to receive a
 
18 prize or purported prize.
 
19      "Recovery service" means any business or other practice in
 
20 which a person represents or implies that, for a fee, any amount
 
21 a consumer has paid out to a seller or telephone solicitor may be
 
22 recovered.
 

 
 
 
Page 3                                                     947
                                     S.B. NO.           S.D. 2
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 1      "Seller" means any person, who, in connection with a
 
 2 telemarketing transaction, solicits funds or contributions, or
 
 3 arranges for a telephone solicitor to solicit funds or
 
 4 contributions, or provides, offers to provide, or arranges for
 
 5 others to provide goods or services to the consumer in exchange
 
 6 for consideration.
 
 7      "Telemarketing" means a plan, program, or campaign,
 
 8 including a prize promotion or investment opportunity, that is
 
 9 conducted to induce the purchase of goods or services or to
 
10 solicit funds or contributions by use of one or more telephones
 
11 and that involves more than one telephone call.
 
12      "Telephone solicitor" means any person who in connection
 
13 with telemarketing, initiates or receives telephone calls to or
 
14 from a consumer, where either or both parties to the telephone
 
15 call are located in this State.
 
16      �   -2  Unfair or deceptive acts or practices prohibited.
 
17 (a)  It is an unfair or deceptive act or practice and a violation
 
18 of this chapter for any seller or telephone solicitor to:
 
19      (1)  Fail to commence, within the first minute of an
 
20           outbound telephone call, and complete within the first
 
21           three minutes of the outbound call, and before payment
 
22           is requested and prior to any solicitation, disclosure
 
23           of the following:
 

 
Page 4                                                     947
                                     S.B. NO.           S.D. 2
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 1           (A)  The true purpose of the telephone call;
 
 2           (B)  The telephone solicitor's name and the company or
 
 3                entity on whose behalf the solicitation is being
 
 4                made; and
 
 5           (C)  The goods or services being offered;
 
 6      (2)  Misrepresent or fail to disclose, in a clear,
 
 7           conspicuous, and intelligible manner and before payment
 
 8           is received from the consumer, the following
 
 9           information:
 
10           (A)  Total purchase costs to the consumer of the goods
 
11                or services to be received;
 
12           (B)  Any restrictions, limitations, or conditions to
 
13                purchase or to use the goods or services that are
 
14                the subject of any offer;
 
15           (C)  Any material term or condition of the seller's
 
16                refund, cancellation, or exchange policy,
 
17                including, if applicable, that no such policies
 
18                exist;
 
19           (D)  All material costs or conditions related to
 
20                receiving a prize, including the odds of winning
 
21                the prize, and if the odds are not calculable in
 
22                advance, the factors used in calculating the odds,
 
23                the nature and value of a prize, that no purchase
 

 
Page 5                                                     947
                                     S.B. NO.           S.D. 2
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 1                is necessary to win the prize, and the "no
 
 2                purchase" method of entering the contest;
 
 3           (E)  Any material aspect of an investment opportunity
 
 4                being offered, including but not limited to risk,
 
 5                liquidity, earnings potential, market value, and
 
 6                profitability; and
 
 7           (F)  The quantity, and any material aspect of the
 
 8                quality or basic characteristics of any goods or
 
 9                services offered;
 
10      (3)  Misrepresent any material aspect of the quality or
 
11           basic characteristics of any goods or services offered;
 
12      (4)  Represent that the telephone solicitor or seller is
 
13           registered as a telephone solicitor in the State or has
 
14           in any way received an endorsement or approval by any
 
15           governmental agency of the State;
 
16      (5)  Make a false or misleading statement with the purpose
 
17           of inducing a consumer to pay for any goods or
 
18           services;
 
19      (6)  Request or accept payment from a consumer or make or
 
20           submit any charge to the consumer's credit or bank
 
21           account before the telephone solicitor or seller
 
22           receives from the consumer an express verifiable
 
23           authorization; provided that no express verifiable
 

 
Page 6                                                     947
                                     S.B. NO.           S.D. 2
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 1           authorization is required if the seller adopts and
 
 2           complies with a policy that:
 
 3           (A)  Affords the consumer at least seven days after the
 
 4                receipt of goods or services to review goods or
 
 5                services and return undamaged or unused goods or
 
 6                submit a cancellation of services notice;
 
 7           (B)  Requires the seller to process the full refund
 
 8                within thirty days after receipt of returned
 
 9                merchandise or the cancellation of services notice
 
10                from the consumer; and
 
11           (C)  Requires the disclosure of the seller's return and
 
12                refund policy to the consumer, orally by
 
13                telephone, and in writing with any advertising or
 
14                promotional material, and with delivery of the
 
15                goods or services; 
 
16      (7)  Fail to include on the express verifiable authorization
 
17           in a clear and conspicuous manner, the following
 
18           language:
 
19           "YOU ARE NOT OBLIGATED TO MAKE ANY PAYMENT UNLESS YOU
 
20           SIGN THIS CONFIRMATION AND RETURN IT TO THE SELLER";
 
21      (8)  Procure the services of any professional delivery,
 
22           courier, or other pick-up service to obtain immediate
 
23           receipt or possession of a consumer's payment;
 

 
Page 7                                                     947
                                     S.B. NO.           S.D. 2
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 1      (9)  Offer to consumers in the State any prize promotion, in
 
 2           which a purchase or payment is necessary to obtain the
 
 3           prize; or
 
 4      (10) Fail to comply with the recordkeeping requirements of
 
 5           this chapter.
 
 6      (b)  It is a violation of this chapter for any person to
 
 7 assist, support, or provide substantial assistance to any seller
 
 8 or telephone solicitor, where that person knows or should have
 
 9 known that the seller or telephone solicitor is engaged in any
 
10 unlawful or deceptive practice defined within this chapter.
 
11      (c)  Engaging in any other unfair or deceptive conduct that
 
12 will create a likelihood of confusion or misunderstanding is a
 
13 violation of this chapter.
 
14      �   -3  Abusive telemarketing acts or practices.  It is an
 
15 abusive telemarketing act or practice and a violation of this
 
16 chapter for any seller or telephone solicitor to engage in the
 
17 following conduct:
 
18      (1)  Threaten, intimidate, or use profane or obscene
 
19           language;
 
20      (2)  Request a fee to remove derogatory information from or
 
21           improve a consumer's credit history or credit record
 
22           until:
 

 
 
 
Page 8                                                     947
                                     S.B. NO.           S.D. 2
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 1           (A)  The time frame in which the seller or telephone
 
 2                solicitor has represented that all of the goods or
 
 3                services will be provided to that consumer has
 
 4                expired; and
 
 5           (B)  The seller or telephone solicitor has provided the
 
 6                consumer with documentation in the form of a
 
 7                credit report from a credit reporting agency
 
 8                demonstrating that the promised results have been
 
 9                achieved, the report having been issued more than
 
10                six months after the results were achieved.
 
11                Nothing in this chapter should be construed to
 
12                affect the requirement of the Fair Credit
 
13                Reporting Act, 15 U.S.C. 1681b, that a consumer
 
14                report may only be obtained for a specified
 
15                permissible purpose;
 
16      (3)  Request or receive payment from a consumer to recover
 
17           or otherwise aid in the return of money or any other
 
18           item lost by the consumer in a telemarketing
 
19           transaction, until seven business days after the money
 
20           or other item is delivered to the consumer;
 
21      (4)  Request or actually receive payment of any fee in
 
22           advance of obtaining a loan or other extension of
 
23           credit when a high likelihood of success has been
 

 
Page 9                                                     947
                                     S.B. NO.           S.D. 2
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 1           represented to the consumer by the seller or telephone
 
 2           solicitor;
 
 3      (5)  Cause the telephone to ring more than ten times in an
 
 4           outbound telephone call;
 
 5      (6)  Engage any consumer repeatedly or continuously with
 
 6           behavior a reasonable person would deem to be annoying,
 
 7           abusive, or harassing;
 
 8      (7)  Initiate an outbound telephone call to a consumer, when
 
 9           the person has stated previously that the consumer does
 
10           not wish to receive telephone calls from that seller or
 
11           telephone solicitor; provided that the seller or
 
12           telephone solicitor will not be liable for violating
 
13           this paragraph if:
 
14           (A)  It has established and implemented written
 
15                procedures to comply with this paragraph, which
 
16                procedures shall meet the minimum standards set
 
17                forth in 47 C.F.R. 64.1200(e)(2);
 
18           (B)  It has trained its personnel in the procedures
 
19                established pursuant to subparagraph (A);
 
20           (C)  The seller, or telephone solicitor acting on
 
21                behalf of the seller, has maintained and recorded
 
22                lists of persons who may not be contacted in
 
23                compliance with this paragraph; and
 

 
Page 10                                                    947
                                     S.B. NO.           S.D. 2
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 1           (D)  The call is the result of error. 
 
 2      (8)  Initiate an outbound telephone call to a consumer's
 
 3           residence at any time other than between 8:00 a.m. and
 
 4           9:00 p.m. local time at the location of the consumer
 
 5           called.
 
 6      �   -4  Recordkeeping.  Every telephone solicitor shall keep
 
 7 true and accurate records of all telemarketing activities
 
 8 initiated in this State or directed to consumers located in this
 
 9 State.  Upon demand, the records shall be made available to the
 
10 department of commerce and consumer affairs, the attorney
 
11 general, and any other governmental entity with authority to
 
12 enforce this chapter.  These records shall be retained for a
 
13 period of two years after the date of any outbound telephone call
 
14 initiated from, directed into, or within this State.  The records
 
15 shall include but are not limited to the following information:
 
16      (1)  The location of the telephone solicitor and seller and
 
17           the street addresses of any locations from which the
 
18           outbound telephone calls originated;
 
19      (2)  Copies of any injunction, temporary restraining order,
 
20           judgment, consent judgment, or assurance of voluntary
 
21           compliance in any civil or administrative action,
 
22           including any pending action, involving a violation or
 

 
 
 
Page 11                                                    947
                                     S.B. NO.           S.D. 2
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 1           alleged violation by telephone solicitor or the seller
 
 2           of any state or federal telemarketing law;
 
 3      (3)  The name, any fictitious name used, last known home
 
 4           address, telephone number, and job title of all
 
 5           telephone solicitors, who place or placed calls on
 
 6           behalf of a seller or who participate in or are
 
 7           responsible for the management of the business of the
 
 8           telephone solicitor; however, if the seller or
 
 9           telephone solicitor permits fictitious names to be used
 
10           by employees or agents, each fictitious name shall be
 
11           traceable to only one specific telephone solicitor,
 
12           employee or agent.  Where one or more telephone
 
13           solicitors is employed by or otherwise acting on behalf
 
14           of a seller, the reporting requirements of this chapter
 
15           may be met by the seller on behalf of itself and its
 
16           telephone solicitors, but only to the extent the
 
17           records comply with the requirements of this chapter;
 
18      (4)  Copies of all substantially different scripts,
 
19           outlines, or presentation materials the seller requires
 
20           a telephone solicitor to use when soliciting, as well
 
21           as of all information to be provided by a telephone
 

 
 
 
 
 
Page 12                                                    947
                                     S.B. NO.           S.D. 2
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 1           solicitor to a consumer in connection with any
 
 2           telemarketing;
 
 3      (5)  All written consents to utilize a name or names of any
 
 4           person, as defined in section 1-19, in any endorsement;
 
 5      (6)  Materials that substantiate any claims about the
 
 6           performance, efficacy, nature, or characteristics of
 
 7           health, nutrition, or diet related goods or services
 
 8           that are the subject of telemarketing;
 
 9      (7)  A copy of the refund, cancellation, exchange, or
 
10           repurchase policies for any goods or services offered
 
11           by a seller or telephone solicitor, unless the seller
 
12           or telephone solicitor offers and provides an
 
13           unconditional satisfaction guaranteed policy and
 
14           provides a full refund for returned goods or cancelled
 
15           services;
 
16      (8)  Copies of all written confirmations of telemarketing
 
17           transactions;
 
18      (9)  Copies of all express verifiable authorizations and
 
19           signed order confirmations;
 
20     (10)  Copies of any training instructions, handbooks, or
 
21           other guidelines distributed by telephone solicitors to
 

 
 
 
 
 
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 1           their staff or by sellers to their telephone
 
 2           solicitors, employees, or agents;
 
 3     (11)  Procedures for maintaining a list of persons who do not
 
 4           wish to receive outbound telephone calls made by or on
 
 5           behalf of the seller or telephone solicitor, which
 
 6           procedures shall meet the minimum standards set forth
 
 7           in 47 C.F.R. section 64.1200(e)(2), as well as the do
 
 8           not call lists maintained pursuant to those procedures;
 
 9           and
 
10     (l2)  Copies of written contracts and agreements between the
 
11           telephone solicitor and the seller.
 
12      �   -5  Exemptions.  This chapter shall not apply to:
 
13      (1)  A person who initiates telephone calls to a residence
 
14           for the sole purpose of polling or soliciting the
 
15           expression of ideas, opinions, or votes, or a person
 
16           soliciting solely for a political or religious cause or
 
17           purpose;
 
18      (2)  A securities broker-dealer, salesperson, investment
 
19           advisor, or investment advisor representative who is
 
20           registered with this State to sell securities or who is
 
21           authorized to sell securities in this State pursuant to
 
22           federal securities laws, when soliciting over the
 

 
 
 
Page 14                                                    947
                                     S.B. NO.           S.D. 2
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 1           telephone within the scope of the person's
 
 2           registration;
 
 3      (3)  A financial institution that is authorized to accept
 
 4           deposits under its chartering or licensing authority
 
 5           where such deposits are insured by the Federal Deposit
 
 6           Insurance Corporation or the National Credit Union
 
 7           Administration, such as a bank, savings bank, savings
 
 8           and loan association, depository financial services
 
 9           loan company, or credit union, or a nondepository
 
10           financial services loan company that is licensed or
 
11           authorized to conduct business in this State by the
 
12           commissioner of financial institutions, or an affiliate
 
13           or subsidiary of a financial institution as defined in
 
14           chapter 412;
 
15      (4)  A person or organization that is licensed or authorized
 
16           to conduct business in this State by the commissioner
 
17           of insurance including but not limited to an insurance
 
18           company and its employees, while engaged in the
 
19           business of selling or advertising the sale of
 
20           insurance products or services;
 
21      (5)  A college or university accredited by an accrediting
 
22           organization recognized by the United States Department
 
23           of Education;
 

 
Page 15                                                    947
                                     S.B. NO.           S.D. 2
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 1      (6)  A person who publishes a catalog of at least fifteen
 
 2           pages, four times a year, with a circulation of at
 
 3           least one hundred thousand, where the catalog includes
 
 4           clear disclosure of sale prices, shipping, handling,
 
 5           and other charges;
 
 6      (7)  A political subdivision or instrumentality of the
 
 7           United States, or any state of the United States;
 
 8      (8)  The sale of goods or services by telecommunications or
 
 9           landline (i.e. cable) or wireless video service
 
10           providers, for which the terms and conditions of the
 
11           offering, production, or sale are regulated by the
 
12           public utilities commission or the Federal
 
13           Communications Commission, or pursuant to chapter 440G,
 
14           including the sale of goods or services by affiliates
 
15           of these telecommunications or video service providers;
 
16           provided that nothing herein shall be construed to
 
17           preclude or preempt actions brought under any other
 
18           laws including chapter 480;
 
19      (9)  A real estate broker or salesperson who is licensed by
 
20           this State to sell real estate, when soliciting within
 
21           the scope of the license; or
 

 
 
 
 
 
Page 16                                                    947
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
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 1     (10)  A travel agency that is registered with this State,
 
 2           when engaging in the business of selling or advertising
 
 3           the sale of travel services.
 
 4      �   -6  Unfair or deceptive act or practice.  Any person who
 
 5 violates this chapter shall be deemed to have engaged in an
 
 6 unfair method of competition or unfair and deceptive act or
 
 7 practice in the conduct or any trade or commerce within the
 
 8 meaning of section 480-2.
 
 9      �   -7  Other relief available.  The relief provided in this
 
10 chapter is in addition to remedies otherwise available for the
 
11 same conduct under the common law or other state or federal
 
12 statutes or rules.
 
13      �   -8  Contracts voidable.  A contract or agreement made as
 
14 a result of telemarketing activity that violates this chapter is
 
15 voidable by the consumer for any reason at any time and shall not
 
16 be enforced against the consumer and any debt arising therefrom
 
17 shall not be reported to a credit reporting agency."
 
18      SECTION 2.  This Act shall take effect upon its approval.