REPORT TITLE:
Telemarketing Fraud


DESCRIPTION:
Establishes certain telemarketing acts or practices as unfair
deceptive acts or abusive telemarketing acts.  Requires telephone
solicitors to keep records of telemarketing activities in the
State. (SD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        1073
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 1
TWENTIETH LEGISLATURE, 1999                                S.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.  As used in this chapter, unless the
 
 7 context otherwise requires:
 
 8      "Consumer" or "purchaser" means a person who is, or may be,
 
 9 required to pay for goods or services offered by a telephone
 
10 solicitor through telemarketing and includes but is not limited
 
11 to consumers 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 specifically
 
15 authorizes the telephone solicitor to obtain payment from a
 
16 person's checking, savings, or bankcard account.
 
17      "Goods or services" means any real property or any tangible
 
18 or intangible personal property or services of any kind provided
 
19 or offered to a person.
 

 
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 1      "Investment opportunity" means anything tangible or
 
 2 intangible that is offered for sale, sold, or traded based wholly
 
 3 or in part on representations, either express or implied, about
 
 4 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 telemarketer to induce the purchase of goods or services.
 
 9      "Payment" means anything of value, including any interest,
 
10 benefit, privilege, claim, or right with respect to anything of
 
11 value, whether real or personal, tangible or intangible.
 
12      "Premium" means anything offered or given, independent of
 
13 chance, to consumers as an incentive to purchase goods or
 
14 services offered through telemarketing.
 
15      "Prize" means anything offered or purportedly offered and
 
16 given or purportedly given to a person by chance.
 
17      "Prize promotion" means a sweepstakes or other game of
 
18 change or an oral or written representation that a person has
 
19 won, has been selected to receive, or is eligible to receive a
 
20 prize or purported prize.
 
21      "Recovery service" means any business or other practice in
 
22 which a person represents or implies that, for a fee, any amount
 
23 a consumer has paid out to a telemarketing solicitor may be
 

 
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 1 recovered.
 
 2      "Seller" means any person who, in connection with a
 
 3 telemarketing transaction, solicits funds or contributions, or
 
 4 provides, offers to provide, or arranges for others to provide
 
 5 goods or services to the consumer in exchange for consideration.
 
 6      "Telemarketing" means a plan, program, or campaign,
 
 7 including a prize promotion or investment opportunity, that is
 
 8 conducted to induce the purchase of goods or services or to
 
 9 solicit funds or contributions by use of one or more telephones
 
10 and which involves more than one telephone call.
 
11      "Telephone solicitor" means any person who in connection
 
12 with telemarketing, initiates or receives telephone calls to or
 
13 from a consumer, where either or both parties to the telephone
 
14 call are located in this State.
 
15      �    -2  Unfair deceptive acts or practices prohibited.(a)
 
16 It is an unfair or deceptive act or practice and a violation of
 
17 this chapter for any seller or telephone solicitor to:
 
18      (1)  Fail to state, within the first minute of the call,
 
19           before payment is requested and prior to any
 
20           telemarketer solicitation:
 
21           (A)  The true purpose of the telephone call;
 
22           (B)  The telephone solicitor's name and the company or
 
23                entity on whose behalf the solicitation is being
 

 
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 1                made; and
 
 2           (C)  The goods or services being offered;
 
 3      (2)  Fail to disclose, in a clear, conspicuous, and
 
 4           intelligible manner, and before payment is received
 
 5           from the consumer, or misrepresent the following
 
 6           information:
 
 7           (A)  Total purchase costs to the consumer of the goods
 
 8                to be received;
 
 9           (B)  Any restrictions, limitations, or conditions to
 
10                purchase or to use the goods that are the subject
 
11                of any offer;
 
12           (C)  Any material term or condition of the seller's
 
13                refund, cancellation, or exchange policy,
 
14                including, if applicable, that none of these
 
15                policies exist;
 
16           (D)  All material costs or conditions related to
 
17                receiving a prize including the odds of winning
 
18                the prize, and if the odds are not calculable in
 
19                advance, the factors used in calculating the odds,
 
20                the nature and value of a prize, no purchase is
 
21                necessary to win the prize, and the "no purchase"
 
22                method of entering the contest;
 
23           (E)  Any material aspect of an investment opportunity
 

 
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 1                being offered, including but not limited to, risk,
 
 2                liquidity, earnings potential, market value, and
 
 3                profitability; and
 
 4           (F)  The quantity of any goods or services offered;
 
 5      (3)  Misrepresent any material aspect of the quality or
 
 6           basic characteristics of the goods or services
 
 7           purchased;
 
 8      (4)  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      (5)  Make a false or misleading statement with the purpose
 
13           of inducing a consumer to pay for any goods or
 
14           services;
 
15      (6)  Request or accept payment from a consumer or make or
 
16           submit any charge to the consumer's credit or bank
 
17           account until 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
 

 
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 1                services and return undamaged or unused goods or
 
 2                provide 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 telephone
 
 9                and in writing with advertising, promotional
 
10                material, or with delivery of the goods or
 
11                services;
 
12      (7)  Fail to include on the express verifiable authorization
 
13           in clear and conspicuous language:  "YOU ARE NOT
 
14           OBLIGATED TO MAKE ANY PAYMENT UNLESS YOU SIGN THIS
 
15           CONFIRMATION AND RETURN IT TO THE SELLER";
 
16      (8)  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      (9)  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     (10)  Fail to comply with the recordkeeping requirements of
 
23           this chapter.
 

 
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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
 
 3 telephone solicitor where that person knows or should have known
 
 4 that the telephone solicitor is engaged in any unlawful or
 
 5 deceptive practice defined within this chapter.
 
 6      (c)  Engaging in any other unfair or deceptive conduct that
 
 7 will create a likelihood of confusion or misunderstanding is a
 
 8 violation of this chapter.
 
 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 person's credit history or credit record
 
17           until:
 
18           (A)  The time frame in which the seller has represented
 
19                all of the goods or services will be provided to
 
20                that person has expired; and 
 
21           (B)  The seller has provided the consumer with
 
22                documentation in the form of a consumer report
 
23                from a consumer reporting agency demonstrating
 

 
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                                     H.B. NO.           H.D. 1
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 1                that the promised results have been achieved, the
 
 2                report having been issued, more than six months
 
 3                after the results were achieved.  
 
 4           Nothing in this chapter should be construed to affect
 
 5           the requirement of the Fair Credit Reporting Act,
 
 6           title 15 United States Code section 1681, that a
 
 7           consumer report may only be obtained for a specified
 
 8           permissible purpose;;
 
 9      (3)  Request or receive payment from a person to recover or
 
10           otherwise aid in a return of money or any other item
 
11           lost by the consumer in a telemarketing transaction,
 
12           until seven business days after the money or other item
 
13           is delivered to that person;
 
14      (4)  Request or actually receive payment of any fee in
 
15           advance of obtaining a loan or other extension of
 
16           credit when a high likelihood of success has been
 
17           represented by the telephone solicitor;
 
18      (5)  Cause the telephone to ring more than five times in an
 
19           intended telephone solicitation call;
 
20      (6)  Engage any person repeatedly or continuously with
 
21           behavior a reasonable person would deem to be annoying,
 
22           abusive, or harassing;
 
23      (7)  Initiate an outbound telephone solicitation call to a
 

 
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 1           person, when that person has stated previously that the
 
 2           person does not wish to receive solicitation calls from
 
 3           that seller or telephone solicitor; provided that the
 
 4           seller or telephone solicitor will not be liable of
 
 5           violating this subsection if:
 
 6           (A)  The seller or telephone solicitor has established
 
 7                and implemented written procedures to comply with
 
 8                this subsection, which procedures shall meet the
 
 9                minimum standards set forth in title 47 Code of
 
10                Federal Regulations section 64.1200(e)(2);
 
11           (B)  The seller or telephone solicitor has trained its
 
12                personnel in the procedures established pursuant
 
13                to subparagraph (A);
 
14           (C)  The seller, or the telephone solicitor acting on
 
15                behalf of the seller, has maintained and recorded
 
16                lists of persons who may not be contacted in
 
17                compliance with this subsection; and
 
18           (D)  The call is the result of error; or
 
19      (8)  Engage in telephone solicitation to a person's
 
20           residence at any time other than between 8:00 a.m. and
 
21           9:00 p.m. Hawaii time.
 
22      �   -4  Recordkeeping.  Every telephone solicitor shall keep
 
23 true and accurate records of all telemarketing activities in this
 

 
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 1 State or directed to consumers located in this State.  Upon
 
 2 demand, these records shall be made available to any governmental
 
 3 entity with authority to enforce this chapter.  These records
 
 4 shall be retained for a period of two years after the date of any
 
 5 telephone call from or into this State.  The records shall
 
 6 include but are not limited to the following information:
 
 7      (1)  The location of the telephone solicitor and the street
 
 8           addresses of any locations from which telephone
 
 9           solicitations originated;
 
10      (2)  Copies of any injunctions, temporary restraining
 
11           orders, judgments, consent judgments, or assurances of
 
12           voluntary compliance in any civil or administrative
 
13           action, including any pending actions, involving
 
14           violations or alleged violations of any state or
 
15           federal telemarketing law;
 
16      (3)  The true name, any fictitious name used, last known
 
17           home address, telephone number, job title, date of
 
18           birth, and social security number of all persons who
 
19           place or placed calls on behalf of a telephone
 
20           solicitor or who participate in or are responsible for
 
21           the management of the business of the telephone
 
22           solicitor; however, if the seller or telephone
 
23           solicitor permits fictitious names to be used by
 

 
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 1           employees or agents, each fictitious name shall be
 
 2           traceable to only one specific employee or agent.
 
 3           Where one or more telephone solicitors is employed by
 
 4           or otherwise acting on behalf of a telemarketing
 
 5           company, the reporting requirements of this chapter may
 
 6           be assumed by the telemarketing company on behalf of
 
 7           itself and its staff, but only to the extent records
 
 8           comply with the requirements of this chapter;
 
 9      (4)  Copies of all scripts, outlines, or presentation
 
10           materials the seller requires a telephone solicitor to
 
11           use when soliciting as well as all information to be
 
12           provided by a telephone solicitor to a consumer in
 
13           connection with any telemarketing;
 
14      (5)  All written consents to utilize a name or names in any
 
15           endorsements or to utilize the names of any charitable
 
16           organizations;
 
17      (6)  Materials that substantiate any claims about the
 
18           performance, efficacy, nature, or characteristics of
 
19           health, nutrition, or diet related goods or services
 
20           that are the subject of a telephone solicitation;
 
21      (7)  A copy of the refund, cancellation, exchange, or
 
22           repurchase policies or any good or product offered by a
 
23           telephone solicitor, unless the seller offers and
 

 
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 1           provides an unconditional satisfaction guaranteed
 
 2           policy and provides a full refund for returned goods or
 
 3           canceled services;
 
 4      (8)  Copies of all written confirmations of telemarketing
 
 5           transactions;
 
 6      (9)  Copies of all express verifiable authorizations and
 
 7           signed order confirmations;
 
 8     (10)  Copies of any training instructions, handbooks, or
 
 9           other guidelines distributed by telephone solicitors to
 
10           their staff;
 
11     (11)  Procedures for maintaining a list of persons who do not
 
12           wish to receive telephone solicitations made by or on
 
13           behalf of the seller, which procedures shall meet the
 
14           minimum standards set forth in title 47 Code of Federal
 
15           Regulations section 64.1200(e)(2), as well as the "do
 
16           not call" lists maintained pursuant to that procedure;
 
17           and
 
18     (l2)  Copies of written contracts and agreements between the
 
19           telephone solicitor and the seller.
 
20      �    -5  Exemptions.  This chapter shall not apply to the
 
21 following:
 
22      (1)  A person making telephone calls to a residential
 
23           customer for the sole purpose of polling or soliciting
 

 
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 1           the expression of ideas, opinions, or votes, or a
 
 2           person soliciting solely for a political or religious
 
 3           cause or purpose;
 
 4      (2)  A securities broker-dealer, salesperson, investment
 
 5           advisor, or investment advisor representative who is
 
 6           registered with this State to sell securities or who is
 
 7           authorized to sell securities in this State pursuant to
 
 8           federal securities laws, when soliciting over the
 
 9           telephone within the scope of the person's
 
10           registration;
 
11      (3)  A financial institution that is authorized to accept
 
12           deposits under its chartering or licensing authority
 
13           and the deposits are insured by the Federal Deposit
 
14           Insurance Corporation or the National Credit Union
 
15           Administration, such as a bank, savings bank, savings
 
16           and loan association, depository financial services
 
17           loan company, nondepository financial services loan
 
18           company, or credit union that is licensed or authorized
 
19           to conduct business in this State by the commissioner
 
20           of financial institutions, or an affiliate or a
 
21           subsidiary of a financial institution as defined in
 
22           chapter 412;
 
23      (4)  An insurance company or other organization that is
 

 
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 1           licensed or authorized to conduct business in this
 
 2           State by the commissioner of insurance;
 
 3      (5)  A college or university accredited by an accrediting
 
 4           organization recognized by the United States Department
 
 5           of Education;
 
 6      (6)  A person who publishes a catalog of at least fifteen
 
 7           pages, four times a year with circulation of at least
 
 8           100,000, where the catalog includes clear disclosure of
 
 9           sale prices, shipping, handling, and other charges;
 
10      (7)  A political subdivision or instrumentality of the
 
11           United States, or any state of the United States;
 
12      (8)  The sale of goods or services for which the terms and
 
13           conditions of the offering or sale are subject to
 
14           regulation by the public utilities commission or the
 
15           federal communications commission; provided that
 
16           nothing herein shall be construed to preclude or
 
17           preempt actions brought under other laws including
 
18           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
 
22     (10)  A travel agency that is registered with this State,
 
23           when engaging in the business of selling or advertising
 

 
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 1           to sell travel services.
 
 2      �    -6  Unfair or deceptive act or practice.  Any person
 
 3 who violates this chapter shall be deemed to have engaged in an
 
 4 unfair method of competition or unfair and deceptive act or
 
 5 practice in the conduct or any trade or commerce within the
 
 6 meaning of section 480-2.
 
 7      �  -7  Other relief available.  The relief provided in
 
 8 this chapter is in addition to remedies otherwise available
 
 9 against the same conduct under the common law or other state or
 
10 federal statutes or rules.
 
11      �    -8  Contracts voidable.  A contract or agreement made
 
12 as a result of telemarketing activity that violates this chapter
 
13 is voidable by the consumer for any reason at any time, shall not
 
14 be enforced against the consumer, and any debt arising therefrom
 
15 shall not be reported to a credit reporting agency."
 
16      SECTION 2.  This Act shall take effect upon its approval.