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. (SD2)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        1073
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 1
TWENTIETH LEGISLATURE, 1999                                S.D. 2
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      "Autodialer" means a computer-based telephone system used to
 
 9 automatically dial more than one telephone number at a time.
 
10      "Consumer" or "purchaser" means a person who is, or may be,
 
11 required to pay for goods or services offered by a telephone
 
12 solicitor through telemarketing and includes but is not limited
 
13 to consumers as defined in section 480-1.
 
14      "Express verifiable authorization" means express written
 
15 authorization by the consumer, including but not limited to the
 
16 consumer's signature on a negotiable instrument that specifically
 
17 authorizes the telephone solicitor to obtain payment from the
 
18 consumer's checking, savings, or bankcard account.
 
19      "Goods or services" means any real property or any tangible
 
20 or intangible personal property or services of any kind provided
 

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

 
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 1 which a person represents or implies that, for a fee, any amount
 
 2 a consumer has paid out to a telephone solicitor may be
 
 3 recovered.
 
 4      "Seller" means any person who, in connection with
 
 5 telemarketing, solicits or arranges for a telephone solicitor to
 
 6 solicit funds or contributions, or provides, offers to provide,
 
 7 or arranges for others to provide goods or services to the
 
 8 consumer in exchange for consideration.
 
 9      "Telemarketing" means a plan, program, or campaign,
 
10 including a prize promotion or investment opportunity, that is
 
11 conducted to induce the purchase of goods or services or to
 
12 solicit funds or contributions by use of one or more telephones
 
13 and which involves more than one telephone call.
 
14      "Telephone solicitor" means any person who in connection
 
15 with telemarketing, initiates telephone calls to a consumer,
 
16 where either or both parties to the telephone call are located in
 
17 this State.
 
18          -2  Unfair and deceptive acts or practices prohibited.
 
19 (a)  It is an unfair and deceptive act or practice and a
 
20 violation of this chapter for any seller or telephone solicitor
 
21 to:
 
22      (1)  Fail to state, within the first minute of an outbound
 
23           telephone call, before payment is requested and prior
 

 
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 1           to any solicitation:
 
 2           (A)  The true purpose of the telephone call;
 
 3           (B)  The telephone solicitor's or the seller's name and
 
 4                the company or entity on whose behalf the
 
 5                solicitation is being made; and
 
 6           (C)  The goods or services being offered;
 
 7      (2)  Misrepresent or fail to disclose, in a clear,
 
 8           conspicuous, and intelligible manner, and before
 
 9           payment is received from the consumer, the following
 
10           information:
 
11           (A)  Total purchase costs to the consumer of the goods
 
12                to be received;
 
13           (B)  Any restrictions, limitations, or conditions to
 
14                purchase or to use the goods that are the subject
 
15                of any offer;
 
16           (C)  Any material term or condition of the seller's
 
17                refund, cancellation, or exchange policy,
 
18                including, if applicable, that none of these
 
19                policies exist;
 
20           (D)  All material costs or conditions related to
 
21                receiving a prize including the odds of winning
 
22                the prize, and if the odds are not calculable in
 
23                advance, the factors used in calculating the odds,
 

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

 
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 1           (A)  Affords a consumer at least seven days after the
 
 2                receipt of goods or services to review goods or
 
 3                services and return undamaged or unused goods or
 
 4                provide a cancellation of services notice;
 
 5           (B)  Requires the seller to process the full refund
 
 6                within thirty days after receipt of returned
 
 7                merchandise or the cancellation of services notice
 
 8                from the consumer; and 
 
 9           (C)  Requires the disclosure of the seller's return and
 
10                refund policy to the consumer, orally by telephone
 
11                and in writing with any advertising or promotional
 
12                material and with delivery of the goods or
 
13                services;
 
14      (7)  Fail to include on an express verifiable authorization
 
15           in clear and conspicuous language:  "YOU ARE NOT
 
16           OBLIGATED TO MAKE ANY PAYMENT UNLESS YOU SIGN THIS
 
17           CONFIRMATION AND RETURN IT TO THE SELLER";
 
18      (8)  Procure the services of any professional delivery,
 
19           courier, or other pick-up service to obtain immediate
 
20           receipt or possession of a consumer's payment;
 
21      (9)  Offer to consumers in the State any prize promotion in
 
22           which a purchase or payment is necessary to obtain the
 
23           prize; or
 

 
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 1     (10)  Fail to comply with the recordkeeping requirements of
 
 2           this chapter.
 
 3      (b)  It is a violation of this chapter for any person to
 
 4 assist, support, or provide substantial assistance to any seller
 
 5 or telephone solicitor where that person knows or should have
 
 6 known that the seller or telephone solicitor is engaged in any
 
 7 unlawful or deceptive practice defined within this chapter.
 
 8      (c)  Engaging in any other unfair or deceptive telemarketing
 
 9 conduct that will create a likelihood of confusion or
 
10 misunderstanding is a violation of this chapter.
 
11          -3  Abusive telemarketing acts or practices.  It is an
 
12 abusive telemarketing act or practice and a violation of this
 
13 chapter for any seller or telephone solicitor to engage in the
 
14 following conduct:
 
15      (1)  Threaten, intimidate, or use profane or obscene
 
16           language to a consumer;
 
17      (2)  Request a fee to remove derogatory information from or
 
18           improve a consumer's credit history or credit record
 
19           until:
 
20           (A)  The time frame in which the seller or telephone
 
21                solicitor has represented all of the goods or
 
22                services will be provided to that person has
 
23                expired; and 
 

 
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 1           (B)  The seller or telephone solicitor has provided the
 
 2                consumer with documentation in the form of a
 
 3                consumer report from a consumer reporting agency
 
 4                demonstrating that the promised results have been
 
 5                achieved, the report having been issued more than
 
 6                six months after the results were achieved;
 
 7           Nothing in this chapter shall be construed to affect
 
 8           the requirement of the Fair Credit Reporting Act,
 
 9           title 15 United States Code section 1681, that a
 
10           consumer report may only be obtained for a specified
 
11           permissible purpose;
 
12      (3)  Request or receive payment from a consumer to recover
 
13           or otherwise aid in a return of money or any other item
 
14           lost by the consumer in a telemarketing transaction,
 
15           until seven business days after the money or other item
 
16           is delivered to the consumer;
 
17      (4)  Request or receive payment of any fee in advance of
 
18           obtaining a loan or other extension of credit for a
 
19           consumer when a high likelihood of success has been
 
20           represented to the consumer by the telephone solicitor
 
21           or seller;
 
22      (5)  Cause the telephone to ring more than seven times in an
 
23           outbound telephone call;
 

 
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 1      (6)  Engage any consumer repeatedly or continuously with
 
 2           telemarketing behavior a reasonable person would deem
 
 3           to be annoying, abusive, or harassing;
 
 4      (7)  Initiate an outbound telephone call to a consumer, when
 
 5           that consumer has stated previously that the consumer
 
 6           does not wish to receive outbound telephone calls from
 
 7           that seller or telephone solicitor; provided that the
 
 8           seller or telephone solicitor will not be liable of
 
 9           violating this subsection if:
 
10           (A)  The seller or telephone solicitor has established
 
11                and implemented written procedures to comply with
 
12                this subsection, which procedures shall meet the
 
13                minimum standards set forth in title 47 Code of
 
14                Federal Regulations section 64.1200(e)(2);
 
15           (B)  The seller or telephone solicitor has trained its
 
16                personnel in the procedures established pursuant
 
17                to subparagraph (A);
 
18           (C)  The seller, or the telephone solicitor acting on
 
19                behalf of the seller, has maintained and recorded
 
20                lists of persons who may not be contacted in
 
21                compliance with this subsection; and
 
22           (D)  The call is the result of error;
 
23      (8)  Initiate an outbound telephone call to a consumer's
 

 
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 1           residence at any time other than between 8:00 a.m. and
 
 2           9:00 p.m. local time for the location of the person
 
 3           called; or
 
 4      (9)  Use an autodialer to initiate an outbound telephone
 
 5           call or calls resulting in a call abandonment rate of
 
 6           greater than five per cent.
 
 7         -4  Recordkeeping.  Every telephone solicitor and every
 
 8 seller shall keep true and accurate records of all telemarketing
 
 9 activities initiated in this State or directed to consumers
 
10 located in this State.  Upon demand, these records shall be made
 
11 available to the Department of Commerce and Consumer Affairs, the
 
12 Attorney General, or any other governmental entity with authority
 
13 to enforce this chapter.  These records shall be retained for a
 
14 period of two years after the date of any outbound telephone call
 
15 initiated from or directed into this State.  The records shall
 
16 include but are not limited to the following information:
 
17      (1)  The location of the telephone solicitor or seller and
 
18           the street addresses of any locations from which
 
19           outbound telephone calls originated;
 
20      (2)  Copies of any injunction, temporary restraining order,
 
21           judgment, consent judgment, or assurance of voluntary
 
22           compliance in any civil or administrative action,
 
23           including any pending action involving a violation or
 
24           alleged violation by the telephone solicitor or seller
 

 
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 1           of any state or federal telemarketing law;
 
 2      (3)  The true name, any fictitious name used, last known
 
 3           home address, telephone number, and job title of all
 
 4           telephone solicitors who place or placed outbound
 
 5           telephone calls on behalf of a seller and all other
 
 6           employees and agents who participate in or are
 
 7           responsible for the management of the business of the
 
 8           seller; however, if the seller permits fictitious names
 
 9           to be used by its employees or agents, each fictitious
 
10           name shall be traceable to only one specific telephone
 
11           solicitor, employee, or agent.  Where one or more
 
12           telephone solicitors is employed by or otherwise acting
 
13           on behalf of a seller, the reporting requirements of
 
14           this chapter may be assumed by the seller on behalf of
 
15           itself and its staff, but only to the extent the
 
16           records comply with the requirements of this chapter;
 
17      (4)  Copies of all substantially different scripts,
 
18           outlines, or presentation materials the seller requires
 
19           a telephone solicitor to use when soliciting as well as
 
20           all information to be provided by a telephone solicitor
 
21           to a consumer in connection with any telemarketing;
 
22      (5)  All written consents to utilize the name or names of
 
23           any person, as defined in section 1-19, in any
 

 
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 1           endorsement;
 
 2      (6)  Materials to substantiate any claim about the
 
 3           performance, efficacy, nature, or characteristics of
 
 4           health, nutrition, or diet related goods or services
 
 5           that are the subject of telemarketing;
 
 6      (7)  A copy of the refund, cancellation, exchange, or
 
 7           repurchase policies or any good or product offered by a
 
 8           seller or telephone solicitor, unless the seller or
 
 9           telephone solicitor offers and provides an
 
10           unconditional satisfaction guaranteed policy and
 
11           provides a full refund for returned goods or canceled
 
12           services;
 
13      (8)  Copies of all written confirmations of telemarketing
 
14           transactions;
 
15      (9)  Copies of all express verifiable authorizations and
 
16           signed order confirmations;
 
17     (10)  Copies of all training instructions, handbooks, or
 
18           other guidelines distributed by sellers to their
 
19           telephone solicitors, employees, or agents;
 
20     (11)  Procedures for maintaining a list of persons who do not
 
21           wish to receive outbound telephone calls made by or on
 
22           behalf of the seller or telephone solicitor, which
 
23           procedures shall meet the minimum standards set forth
 

 
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 1           in title 47 Code of Federal Regulations section
 
 2           64.1200(e)(2), as well as the "do not call" lists
 
 3           maintained pursuant to that procedure; and
 
 4     (l2)  Copies of written contracts and agreements between the
 
 5           telephone solicitor or seller and any other telephone
 
 6           solicitor or seller.
 
 7          -5  Exemptions.  This chapter shall not apply to the
 
 8 following:
 
 9      (1)  A person who initiates telephone calls to a residential
 
10           customer for the sole purpose of polling or soliciting
 
11           the expression of ideas, opinions, or votes, or a
 
12           person soliciting solely for a political or religious
 
13           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           and the deposits are insured by the Federal Deposit
 

 
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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, nondepository financial services loan
 
 5           company, or credit union that is licensed or authorized
 
 6           to conduct business in this State by the commissioner
 
 7           of financial institutions, or an affiliate or a
 
 8           subsidiary of a financial institution as defined in
 
 9           chapter 412;
 
10      (4)  A person or organization that is licensed or authorized
 
11           to conduct business in this State by the commissioner
 
12           of insurance, including but not limited to an insurance
 
13           company and its employees, while engaged in the
 
14           business of selling or advertising to sell insurance
 
15           products or services;
 
16      (5)  A college or university accredited by an accrediting
 
17           organization recognized by the United States Department
 
18           of Education;
 
19      (6)  A person who publishes a catalog of at least fifteen
 
20           pages, four times a year with circulation of at least
 
21           100,000, where the catalog includes clear disclosure of
 
22           sale prices, shipping, handling, and other charges;
 
23      (7)  A political subdivision or instrumentality of the
 

 
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 1           United States, or any state of the United States;
 
 2      (8)  The sale of goods or services by telecommunications or
 
 3           cable providers, for which the terms and conditions of
 
 4           the offering or sale are subject to regulation by the
 
 5           public utilities commission or the Federal
 
 6           Communications Commission, or pursuant to chapter 440G;
 
 7           provided that nothing herein shall be construed to
 
 8           preclude or preempt actions brought under other laws
 
 9           including chapter 480;
 
10      (9)  A real estate broker or salesperson who is licensed by
 
11           this State to sell real estate, when soliciting within
 
12           the scope of the license; or
 
13     (10)  A travel agency that is registered with this State,
 
14           when engaging in the business of selling or advertising
 
15           to sell travel services.
 
16          -6  Unfair or deceptive act or practice.  Any person
 
17 who violates this chapter shall be deemed to have engaged in an
 
18 unfair method of competition or unfair and deceptive act or
 
19 practice in the conduct or any trade or commerce within the
 
20 meaning of section 480-2.
 
21   -7  Other relief available.  The relief provided in this
 
22 chapter is in addition to remedies otherwise available against
 
23 the same conduct under the common law or other state or federal
 

 
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 1 statutes or rules.
 
 2          -8  Contracts voidable.  A contract or agreement made
 
 3 as a result of telemarketing activity that violates this chapter
 
 4 is voidable by the consumer for any reason at any time, shall not
 
 5 be enforced against the consumer, and any debt arising therefrom
 
 6 shall not be reported to a credit reporting agency."
 
 7      SECTION 2.  This Act shall take effect on March 10, 1876.