Honolulu, Hawaii
                                                   , 1999

                                 RE: S.B. No. 947
                                     S.D. 2
                                     H.D. 1

Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 1999
State of Hawaii


     Your Committees on Consumer Protection and Commerce and
Judiciary and Hawaiian Affairs, to which was referred S.B. No.
947, S.D. 2, entitled: 


beg leave to report as follows:

     The purpose of this bill is to prevent telemarketing fraud
in this State by adding a new chapter to the Hawaii Revised
Statutes entitled the "Telemarketing Fraud Prevention Act", that:

     (1)  Describes unfair or deceptive acts or practices;

     (2)  Describes abusive telemarketing acts or practices;

     (3)  Requires that telephone solicitors keep specified types
          of records for a period of two years from the date of
          the telephone call, and that these records be made
          available upon demand of the Department of Commerce and
          Consumer Affairs, the Attorney General, or any other
          governmental entity authorized to enforce the chapter;

     (4)  Exempts specified persons, types of businesses,
          organizations, and entities; and

     (5)  Provides for enforcement of the chapter as follows:

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          (A)  Violations of the chapter are unfair methods of
               competition or unfair and deceptive acts or
               practices within the meaning of and subject to the
               penalties applicable to section 480-2, Hawaii
               Revised Statutes;

          (B)  Provides additional civil penalties for violations
               of the chapter; and

          (C)  Makes a knowing violation, a class C felony, and
               subjects any interest in property used, acquired,
               or maintained in knowing violation of the chapter,
               to forfeiture.

     The Office of Consumer Protection (OCP) of the Department of
Commerce and Consumer Affairs testified in strong support of this
bill, but expressed preference for the House version (H.B. No.
1073, H.D. 1) that does not contain amendments subsequently made
in the Senate.  Among other things, OCP favored:

     (1)  Restoring the requirement of disclosing the nature of
          the phone call within the first minute of the

     (2)  Restoring the limitation on the number of times the
          telephone can ring to ten rings;

     (3)  Omitting civil penalties inconsistent with those
          provided for under unfair or deceptive act or practices
          statutes; and

     (4)  Omitting the exemption for entities whose telemarketing
          calls are to and from consumers with whom the entity
          has an existing business relationship.

     The Department of the Prosecuting Attorney of the City and
County of Honolulu testified in support of the intent of this
bill.  The Honolulu Police Department and the Policy Advisory
Board for Elder Affairs testified in support of the bill.

     The Office of the Public Defender (OPD) recommended that
criminal sanctions be eliminated from the bill, explaining that
the proscribed conduct should be dealt with by the DCCA and the
Attorney General through civil enforcement of  existing laws
prohibiting unfair or deceptive business practices.  Further, OPD
stated that existing criminal laws against theft are sufficient
to prosecute a case for theft by deception.  OPD also highlighted
the unfairness of the Class C felony penalty that would apply to
acts like calling too early or too late, failing to give one's

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name or company name before, instead of after, the solicitation
is made and payment is requested, and failing to keep up with all
record keeping requirements.

     Hawaii Financial Services Association supported the bill's
exemption for depository financial services loan companies,
nondepository financial services loan companies, and affiliates
or subsidiaries of financial institutions.  State Farm Insurance
Companies (State Farm) supported the intent of this measure, but
requested clarification so that the exemption for insurance
companies, individuals, and other organizations licensed or
authorized by the Insurance Commissioner, would include all
unlicensed staff of licensees.  AARP supported the bill and made
suggestions for additional prohibitions and requirements for

     Direct Marketing Association (DMA) opposed this measure in
its current form and suggested some amendments to conform with
the Federal Telemarketing Sales Rule.  GTE expressed concerns
about the bill, requesting that the bill be held in committee,
but if passed, that amendments be made to more closely conform
with provisions of the Federal Telemarketing Sales Rule, expand
the exemption for telecommunications and cable providers to
include their affiliates, and omit the criminal penalties
associated with Class C felonies.

     Your Committees agree with many of the concerns and
recommendations of various testifiers.  Accordingly, your
Committees have amended the bill by substituting its contents
with that of the House companion, H.B. No. 1073, H.D. 1, that
passed out of your Committees earlier this session, and also have
made technical, nonsubstantive amendments for purposes of clarity
and consistency.  Your Committees believe that H.B. No. 1073,
H.D. 1 addresses numerous issues raised by OCP, OPD, and DMA in
that the House bill:

     (1)  Requires that a disclosure of the nature and purpose of
          the call be made in the first minute of the call;

     (2)  Provides no criminal penalties, and provides only civil
          penalties consistent with those under the State's
          unfair or deceptive practices statutes;

     (3)  Provides that a telephone solicitor who lets the
          consumer's telephone ring more than ten times would
          violate the chapter;

     (4)  Contains no prohibition on use of automatic dialers;

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     (5)  Contains no exemption for an "entity that operates on a
          worldwide or national basis and is subject to oversight
          of governmental agencies, for telephone calls to and
          from consumers with whom the business has an existing
          business relationship".

     To address other issues raised by OCP, DMA, GTE, and State
Farm, your Committees have further amended the bill, as follows:

     (1)  Modified the record-keeping provisions to require
          retention of copies of "all substantially different"
          scripts, outlines, or presentation materials that the
          seller requires a telephone solicitor to use;

     (2)  Modified the record-keeping provisions to omit the
          "date of birth" and "social security number" from the
          list of personal information that must be kept
          regarding all telephone solicitors;

     (3)  Clarified that the exemption for the sale of goods or
          services regulated by the Public Utilities Commission
          or the Federal Communications Commission, or pursuant
          to Chapter 440G, Hawaii Revised Statutes, applies to
          telecommunications or cable providers, and to their
          affiliates; and

     (4)  Clarified that the exemption for an insurance company,
          individual, or other organization licensed or
          authorized by the Insurance Commissioner to conduct
          business in the State, applies to all unlicensed
          employees of insurance companies and other licensees,
          while selling or advertising to sell insurance products
          or services.

     Your Committees emphasize that the exemption for insurance
entities and persons licensed or authorized by the Insurance
Commissioner is intended to be broadly applicable to all of the
unlicensed staff of licensees.

     In addition to the amendments specified above, this measure
includes a number of other differences from S.B. No. 947, S.D. 2.

     As affirmed by the records of votes of the members of your
Committees on Consumer Protection and Commerce and Judiciary and
Hawaiian Affairs that are attached to this report, your
Committees are in accord with the intent and purpose of S.B. No.
947, S.D. 2, as amended herein, and recommend that it pass Second
Reading in the form attached hereto as S.B. No. 947, S.D. 2, H.D.
1, and be placed on the calendar for Third Reading.

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                                 Page 5


                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committees on Consumer
                                   Protection and Commerce and
                                   Judiciary and Hawaiian

______________________________     ______________________________
PAUL T. OSHIRO, Chair              RON MENOR, Chair