Telemarketing Fraud

Creates a new chapter to regulate telemarketing fraud.

THE SENATE                              S.B. NO.           947
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT



 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
 6          -1  Definitions.  As used in this chapter:
 7      "Communication" means a written or oral notification or
 8 advertisement that meets any one of the following conditions:
 9      (1)  The notification or advertisement is transmitted by or
10           on behalf of the seller and by any printed, audio,
11           video, cinematic, telephonic, or electronic means; or
12      (2)  In the case of a notification or advertisement other
13           than by telephone, either of the following conditions
14           is met:
15           (A)  The notification or advertisement is followed by a
16                telephone call from a telephone solicitor or
17                salesperson; or
18           (B)  The notification or advertisement invites a
19                response by telephone, and through that response,

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 1                a telephone solicitor attempts to make a sale of
 2                goods or services.
 3      "Consumer" or "purchaser" means a person who is, or may be,
 4 required to pay for goods or services offered by a telephone
 5 solicitor through telemarketing and includes but is not limited
 6 to consumers as defined in section 480-1.
 7      "Department" means the department of commerce and consumer
 8 affairs.
 9      "Director" means the director of commerce and consumer
10 affairs.
11      "Express verifiable authorization" means express written
12 authorization by the consumer, including but not limited to, the
13 consumer's signature on a negotiable instrument that specifically
14 authorizes the telephone solicitor to obtain payment from a
15 person's checking, savings, or bankcard account.
16      "Goods or services" means any real property or any tangible
17 or intangible personal property or services of any kind provided
18 or offered to a person.
19      "Investment opportunity" means anything tangible or
20 intangible that is offered for sale, sold, or traded based wholly
21 or in part on representations, either express or implied, about
22 past, present, or future income, profit, or appreciation.
23      "Material" means any factor likely to affect a person's
24 choice of, or conduct regarding, goods or services.

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 1      "Outbound telephone call" means a telephone call initiated
 2 by a telemarketer to induce the purchase of goods or services.
 3      "Premium" means anything offered or given, independent of
 4 chance, to consumers as an incentive to purchase goods or
 5 services offered through telemarketing.
 6      "Prize" means anything offered or purportedly offered and
 7 given or purportedly given to a person by chance.
 8      "Prize promotion" means a sweepstakes or other game of
 9 change or an oral or written representation that a person has
10 won, had been selected to receive, or is eligible to receive a
11 prize or purported prize.
12      "Recovery service" means any business or other practice in
13 which a person represents or implies that, for a fee, any amount
14 a consumer has paid out to a telemarketing solicitor may be
15 recovered.
16      "Seller" means any person who, in connection with a
17 telemarketing transaction, solicits funds or contributions, or
18 provides, offers to provide, or arranges for others to provide
19 goods or services to the consumer in exchange for consideration.
20      "Telemarketing" means a plan, program, or campaign,
21 including a prize promotion or investment opportunity, that is
22 conducted to induce the purchase of goods or services or to
23 solicit funds or contributions by use of one or more telephones
24 and which involves more than one telephone call.

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                                     S.B. NO.           947

 1      "Telephone solicitor" means any person who in connection
 2 with telemarketing, initiates or receives telephone calls to or
 3 from a consumer, where either or both parties to the telephone
 4 call are located in this State.
 5          -2  Unfair deceptive acts or practices prohibited.(a)
 6 It is an unfair or deceptive act or practice and a violation of
 7 this chapter for any seller or telephone solicitor to:
 8      (1)  Fail to state, within the first minute of the call,
 9           before payment is requested and prior to any
10           telemarketer pitch:
11           (A)  The true purpose of the telephone call;
12           (B)  The telephone solicitor's true name and the
13                company or entity on whose behalf the solicitation
14                is being made; and
15           (C)  The goods or services being offered;
16      (2)  Misrepresent or fail to disclose, in a clear,
17           conspicuous, and intelligible manner, the following
18           information:
19           (A)  Total purchase costs to the consumer of the goods
20                to be received;
21           (B)  Any restrictions, limitations, or conditions to
22                purchase or to use the goods that are the subject
23                of any offer;

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                                     S.B. NO.           947

 1           (C)  Any material term or condition of the seller's
 2                refund, cancellation, or exchange policy,
 3                including, if applicable, that none of these
 4                policies exist;
 5           (D)  All material costs or conditions related to
 6                receiving a prize including the odds of winning
 7                the prize, the nature and value of a prize, no
 8                purchase is necessary to win the prize, and the
 9                "no purchase" method of entering the contest;
10           (E)  Any material aspect of an investment opportunity
11                being offered, including but not limited to, risk,
12                liquidity, earnings potential, market value, and
13                profitability; and
14           (F)  The quantity of any goods or services offered;
15      (3)  Misrepresent any material aspect of the quality or
16           basic characteristics of the goods or services
17           purchased;
18      (4)  Advertise that any person is registered as a telephone
19           solicitor in the State or represent that any person has
20           in any way received an endorsement or approval by any
21           governmental agency of the State;
22      (5)  Make a false or misleading statement with the purpose
23           of inducing a consumer to pay for any goods or
24           services;

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                                     S.B. NO.           947

 1      (6)  Request or accept payment from a consumer or make or
 2           submit any charge to the consumer's credit or bank
 3           account until the telephone solicitor or seller
 4           receives from the consumer an express verifiable
 5           authorization;
 6      (7)  Fail to include on the express verifiable authorization
 7           in clear and conspicuous language:  "YOU ARE NOT
10      (8)  Obtain or submit for payment a check, draft, or other
11           form of negotiable paper drawn on a person's checking,
12           savings, or bankcard account without that person's
13           express verifiable authorization;
14      (9)  Procure the services of any professional delivery,
15           courier, or other pick-up service to obtain immediate
16           receipt or possession of a consumer's payment;
17     (10)  Offer to consumers in the State any prize promotion,
18           lottery, or sweepstakes in which a purchase or payment
19           is necessary to obtain the prize offered; or
20     (11)  Fail to comply with the recordkeeping requirements of
21           this chapter.
22      (b)  It is a violation of this chapter for any person to
23 assist, support, or provide substantial assistance to any

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                                     S.B. NO.           947

 1 telephone solicitor that person knows or should have known that
 2 the telephone solicitor is engaged in any unlawful or deceptive
 3 practice defined within this chapter.
 4      (c)  Engaging in any other unfair or deceptive conduct which
 5 will create a likelihood of confusion or misunderstanding is a
 6 violation of this chapter.
 7          -3  Abusive telemarketing acts or practices.  It is an
 8 abusive telemarketing act or practice and a violation of this
 9 chapter for any seller or telephone solicitor to engage in the
10 following conduct:
11      (1)  Threaten, intimidate, or use profane or obscene
12           language;
13      (2)  Request any fee to remove derogatory information from
14           or improve a person's credit history or credit record;
15      (3)  Request or receive payment from a person to recover or
16           otherwise aid in a return of money or any other item
17           lost by the consumer in a telemarketing transaction;
18      (4)  Request or actually receive payment of any fee in
19           advance of obtaining a loan or other extension of
20           credit when a high likelihood of success has been
21           represented by the telephone solicitor;
22      (5)  Cause the telephone to ring more than five times in an
23           intended telephone solicitation call;

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                                     S.B. NO.           947

 1      (6)  Engage any person repeatedly or continuously with
 2           behavior a reasonable person would deem to be annoying,
 3           abusive, or harassing;
 4      (7)  Initiate a telephone solicitation call to a person,
 5           when that person has stated previously that the person
 6           does not wish to receive solicitation calls from that
 7           seller or telephone solicitor;
 8      (8)  Engage in telephone solicitation to a person's
 9           residence at any time other than between 9:00 a.m. and
10           9:00 p.m. Hawaii time; or
11      (9)  Engage in any other conduct that would be considered
12           abusive to any reasonable consumer.
13          -4  Licensing and registration.(a)  No person shall
14 engage in telemarketing in this State without a license issued
15 pursuant to this section.
16       (b)  A seller, as defined in section   -1, shall register
17 with the department.  The registration shall be submitted on
18 forms specified by the department and shall include the following
19 information:
20      (1)  Name, address, and phone number of the seller, whether
21           a person or entity;
22      (2)  If the seller is an entity, the names and addresses of
23           the officers, directors, or partners, as appropriate,
24           and a copy of the articles of incorporation or

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                                     S.B. NO.           947

 1           partnership agreement, as appropriate;
 2      (3)  The specific type of goods or services, investment
 3           opportunity, or prize promotion, as appropriate; 
 4      (4)  Past incidences of telemarketing fraud that were
 5           prosecuted, administratively or criminally, in this
 6           State, any other state, or any country, giving specific
 7           information as may be required by the director; and
 8      (5)  Any other information the director may require.
 9      (c)  Registration under subsection (a) shall be a
10 prerequisite to obtaining a license to engage in telemarketing in
11 this State.
12      (d)  After reviewing the sufficiency of the registration
13 information, the director shall issue a license to engage in
14 telemarketing.  The license shall expire in one year from its
15 issuance; provided that the license may be renewed upon a new
16 registration submission.
17      (e)  No license shall be issued to a seller that has one or
18 more incidences of telemarketing fraud.
19      (f)  The department may require a registration fee and a
20 license fee in accordance with rules adopted pursuant to chapter
21 91.
22      (g)  Violation of this section shall be a class C felony, to
23 be prosecuted by the attorney general.

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                                     S.B. NO.           947

 1          -5  Exemptions.  This chapter shall not apply to the
 2 following:
 3      (1)  A person making telephone calls to a residential
 4           customer for the sole purpose of polling or soliciting
 5           the expression of ideas, opinions, or votes, or a
 6           person soliciting solely for a political or religious
 7           cause or purpose;
 8      (2)  A securities broker-dealer, salesperson, investment
 9           advisor, or investment advisor representative who is
10           registered with this State to sell securities or who is
11           authorized to sell securities in this State pursuant to
12           federal securities laws, when soliciting over the
13           telephone within the scope of the person's
14           registration;
15      (3)  A financial institution that is authorized to accept
16           deposits under its chartering or licensing authority
17           and the deposits are insured by the Federal Deposit
18           Insurance Corporation or the National Credit Union
19           Administration, such as a bank, savings bank, savings
20           and loan association, depository financial services
21           loan company, or credit union;
22      (4)  An insurance company or other organization that is
23           licensed or authorized to conduct business in this
24           State by the commissioner of insurance;

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                                     S.B. NO.           947

 1      (5)  A college or university accredited by an accrediting
 2           organization recognized by the United States Department
 3           of Education;
 4      (6)  A person who publishes a catalog of at least fifteen
 5           pages, four times a year with circulation of at least
 6           100,000, where the catalog includes clear disclosure of
 7           sale prices, shipping, handling, and other charges;
 8      (7)  A political subdivision or instrumentality of the
 9           United States, or any state of the United States;
10      (8)  A public utility that is subject to regulation by the
11           public utilities commission of this State;
12      (9)  A real estate broker or salesperson who is licensed by
13           this State to sell real estate, when soliciting within
14           the scope of the license; or
15     (10)  A travel agency that is registered with this State,
16           when engaging in the business of selling or advertising
17           to sell travel services.
18          -6  Unfair or deceptive act or practice.  Any person
19 who violates this chapter shall be deemed to have engaged in an
20 unfair method of competition or unfair and deceptive act or
21 practice in the conduct or any trade or commerce within the
22 meaning of section 480-2.
23          -7  Other relief available.  The relief provided in
24 this chapter is in addition to remedies otherwise available

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 1 against the same conduct under the common law or other state or
 2 federal statutes or rules.
 3          -8  Contracts voidable.  A contract or agreement made
 4 as a result of telemarketing activity that violates this chapter
 5 is voidable by the consumer for any reason at any time, shall not
 6 be enforced against the consumer, and any debt arising therefrom
 7 shall not be reported to a credit reporting agency."
 8      SECTION 2.  This Act shall take effect upon its approval.
10                           INTRODUCED BY:  _______________________