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.  (SB947 HD1)

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


                   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, which
 
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 consumer'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      "Premium" means anything offered or given, independent of
 
14 chance, to consumers as an incentive to purchase goods or
 
15 services offered through telemarketing.
 
16      "Prize" means anything offered or purportedly offered and
 
17 given or purportedly given to a consumer by chance.
 
18      "Prize promotion" means a sweepstakes or other game of
 
19 chance or an oral or written representation that a consumer has
 
20 won, has been selected to receive, or is eligible to receive a
 
21 prize or purported prize.
 

 
 
 
 
 
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                                     S.B. NO.           S.D. 2
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 1      "Recovery service" means any business or other practice in
 
 2 which a person represents or implies that, for a fee, any amount
 
 3 a consumer has paid out to a seller or telephone solicitor may be
 
 4 recovered.
 
 5      "Seller" means any person, who, in connection with a
 
 6 telemarketing transaction, solicits funds or contributions, or
 
 7 provides, offers to provide, or arranges for others to provide
 
 8 goods or services to the consumer in exchange for consideration.
 
 9      "Telemarketing" means a plan, program, or campaign that is
 
10 conducted to induce the purchase of goods or services or to
 
11 solicit funds or contributions by use of one or more telephones
 
12 and that involves more than one telephone call.
 
13      "Telephone solicitor" means any person who in connection
 
14 with telemarketing, initiates or receives telephone calls to or
 
15 from a consumer, where either or both parties to the telephone
 
16 call are located in this State.
 
17      §   -2  Unfair or deceptive acts or practices prohibited.
 
18 (a)  It is an unfair or deceptive act or practice and a violation
 
19 of this chapter for any seller or telephone solicitor to:
 
20      (1)  Fail to state, within the first minute of the call,
 
21           before payment is requested and prior to any
 
22           telemarketing pitch:
 
23           (A)  The true purpose of the telephone call;
 

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

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

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

 
Page 7                                                     947
                                     S.B. NO.           S.D. 2
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 1      (b)  It is a violation of this chapter for any person to
 
 2 assist, support, or provide substantial assistance to any seller
 
 3 or telephone solicitor if the person knows or should have known
 
 4 that the seller or telephone solicitor is engaged in any unlawful
 
 5 or deceptive practice defined within this chapter.
 
 6      (c)  It is a violation of this chapter to engage in any
 
 7 other unfair or deceptive conduct that will create a likelihood
 
 8 of consumer confusion or misunderstanding.
 
 9      §   -3  Abusive telemarketing acts or practices.  It is an
 
10 abusive telemarketing act or practice and a violation of this
 
11 chapter for any seller or telephone solicitor to engage in the
 
12 following conduct:
 
13      (1)  Threaten, intimidate, or use profane or obscene
 
14           language;
 
15      (2)  Request any fee to remove derogatory information from
 
16           or improve a consumer's credit history or credit record
 
17           until:
 
18           (A)  The time frame in which the seller or telephone
 
19                solicitor has represented that all of the goods or
 
20                services will be provided to that consumer has
 
21                expired; and
 
22           (B)  The seller or telephone solicitor has provided the
 
23                consumer with documentation in the form of a
 

 
Page 8                                                     947
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

 
 1                consumer report from a consumer reporting agency
 
 2                demonstrating that the promised results have been
 
 3                achieved, such report having been issued more than
 
 4                six months after the results were achieved.
 
 5                Nothing in this chapter should be construed to
 
 6                affect the requirement of the Fair Credit
 
 7                Reporting Act, 15 U.S.C. 1681, that a consumer
 
 8                report may only be obtained for a specified
 
 9                permissible purpose;
 
10      (3)  Request or receive payment from a consumer to recover
 
11           or otherwise aid in the return of money or any other
 
12           item lost by the consumer in a telemarketing
 
13           transaction, until seven business days after the money
 
14           or other item is delivered to that consumer;
 
15      (4)  Request or actually receive payment of any fee in
 
16           advance of obtaining a loan or other extension of
 
17           credit when a high likelihood of success has been
 
18           represented by the seller or telephone solicitor;
 
19      (5)  Cause the telephone to ring more than ten times in an
 
20           intended telephone solicitation call;
 
21      (6)  Engage any consumer repeatedly or continuously with
 
22           behavior a reasonable person would deem to be annoying,
 
23           abusive, or harassing;
 

 
Page 9                                                     947
                                     S.B. NO.           S.D. 2
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 1      (7)  Initiate an outbound telephone solicitation call to a
 
 2           consumer, when the consumer has stated previously that
 
 3           the consumer does not wish to receive telephone calls
 
 4           from that seller or telephone solicitor; or
 
 5      (8)  Engage in telephone solicitation to a consumer's
 
 6           residence at any time other than between 9:00 a.m. and
 
 7           9:00 p.m. local time at the residence called.
 
 8      §   -4  Recordkeeping.  Every telephone solicitor shall keep
 
 9 true and accurate records of all telemarketing activities in this
 
10 State or directed to consumers located in this State.  Upon
 
11 demand, the records shall be made available to any governmental
 
12 entity with authority to enforce this chapter.  Records of any
 
13 telephone call from or into this State shall be retained for a
 
14 period of two years after the date of the telephone call.  The
 
15 records shall include but are not limited to the following
 
16 information:
 
17      (1)  The location of the telephone solicitor and the street
 
18           addresses of any locations from which telephone
 
19           solicitations originated;
 
20      (2)  Copies of any injunctions, temporary restraining
 
21           orders, judgments, consent judgments, or assurances of
 
22           voluntary compliance in any civil or administrative
 
23           action, including any pending actions, involving
 

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

 
 
 
Page 11                                                    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 in any
 
 4           endorsements or to utilize the names of any charitable
 
 5           organizations;
 
 6      (6)  Materials that substantiate any claims about the
 
 7           performance, efficacy, nature, or characteristics of
 
 8           health, nutrition, or diet related goods or services
 
 9           that are the subject of a telephone solicitation;
 
10      (7)  A copy of the refund, cancellation, exchange, or
 
11           repurchase policies for any goods or services offered
 
12           by a telephone solicitor, unless the seller offers and
 
13           provides an unconditional satisfaction guaranteed
 
14           policy and provides a full refund for returned goods or
 
15           cancelled 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 all training instructions, handbooks, or
 
21           other guidelines distributed by telephone solicitors to
 
22           their staff;
 

 
 
 
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                                     S.B. NO.           S.D. 2
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 1     (11)  Procedures for maintaining a list of persons who do not
 
 2           wish to receive telephone solicitations made by or on
 
 3           behalf of the seller, which procedures shall meet the
 
 4           minimum standards set forth in 47 C.F.R. section
 
 5           64.1200(e)(2); and
 
 6     (l2)  Copies of written contracts and agreements between the
 
 7           telephone solicitor and the seller.
 
 8      §   -5  Exemptions.  The recordkeeping requirements of this
 
 9 chapter shall not apply to:
 
10      (1)  A person making telephone calls to a residence for the
 
11           sole purpose of polling or soliciting the expression of
 
12           ideas, opinions, or votes, or a person soliciting
 
13           solely for a political or religious cause or purpose;
 
14      (2)  A securities broker-dealer, salesperson, investment
 
15           advisor, or investment advisor representative who is
 
16           registered with this State to sell securities or who is
 
17           authorized to sell securities in this State pursuant to
 
18           federal securities laws, when soliciting over the
 
19           telephone within the scope of the person's
 
20           registration;
 
21      (3)  A financial institution that is authorized to accept
 
22           deposits under its chartering or licensing authority
 
23           where such deposits are insured by the Federal Deposit
 

 
Page 13                                                    947
                                     S.B. NO.           S.D. 2
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 1           Insurance Corporation or the National Credit Union
 
 2           Administration, such as a bank, savings bank, savings
 
 3           and loan association, depository financial services
 
 4           loan company, or credit union;
 
 5      (4)  A person or organization that is licensed or authorized
 
 6           to conduct business in this State by the commissioner
 
 7           of insurance including but not limited to an insurance
 
 8           company and its employees, while engaged in the
 
 9           business of selling or advertising the sale of
 
10           insurance products or services;
 
11      (5)  A college or university accredited by an accrediting
 
12           organization recognized by the United States Department
 
13           of Education;
 
14      (6)  A person who publishes a catalog of at least fifteen
 
15           pages, four times a year, with a circulation of at
 
16           least one hundred thousand, where the catalog includes
 
17           clear disclosure of sale prices, shipping, handling,
 
18           and other charges;
 
19      (7)  A political subdivision or instrumentality of the
 
20           United States, or any state of the United States;
 
21      (8)  The sale of goods or services by telecommunications or
 
22           cable providers, for which the terms and conditions of
 
23           the offering, production, or sale are regulated by the
 

 
Page 14                                                    947
                                     S.B. NO.           S.D. 2
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 1           public utilities commission or the Federal
 
 2           Communications Commission, or pursuant to chapter 440G,
 
 3           including the sale of goods or services by affiliates
 
 4           of these telecommunications or cable providers;
 
 5           provided that nothing herein shall be construed to
 
 6           preclude or preempt actions brought under any other
 
 7           laws including chapter 480;
 
 8      (9)  A real estate broker or salesperson who is licensed by
 
 9           this State to sell real estate, when soliciting within
 
10           the scope of the license; or
 
11     (10)  A travel agency that is registered with this State,
 
12           when engaging in the business of selling or advertising
 
13           the sale of travel services.
 
14      §   -6  Unfair or deceptive act or practice.  Any person who
 
15 violates this chapter shall be deemed to have engaged in an
 
16 unfair method of competition or unfair and deceptive act or
 
17 practice in the conduct or any trade or commerce within the
 
18 meaning of section 480-2.
 
19      §   -7  Other relief available.  The relief provided in this
 
20 chapter is in addition to remedies otherwise available for the
 
21 same conduct under the common law or other state or federal
 
22 statutes or rules.
 

 
 
 
Page 15                                                    947
                                     S.B. NO.           S.D. 2
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 1      §   -8  Contracts voidable.  A contract or agreement made as
 
 2 a result of telemarketing activity that violates this chapter is
 
 3 voidable by the consumer for any reason at any time and shall not
 
 4 be enforced against the consumer and any debt arising therefrom
 
 5 shall not be reported to a credit reporting agency."
 
 6      SECTION 2.  This Act shall take effect upon its approval.