Honolulu, Hawaii
                                                     , 1999

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

Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 1999
State of Hawaii


     Your Committee on Judiciary, to which was referred S.B. No.
947, S.D. 1, entitled: 


begs leave to report as follows:

     The purpose of this bill is to create a new chapter in the
Hawaii Revised Statutes to regulate telemarketing activity in
Hawaii.  Specifically, this measure creates the Telemarketing
Fraud Prevention Act, which:

     (1)  Provides that a seller or telephone solicitor commits
          an unfair and deceptive act or practice by making false
          representations or by being abusive;

     (2)  Requires recordkeeping by persons who engage in
          telemarketing in Hawaii;

     (3)  Exempts certain persons and activities from being
          subject to the Act; and

     (4)  Makes contracts or agreements in violation of the Act
          voidable at the consumer's request.

     Your Committee finds that telemarketing fraud is a
widespread crime that is nonetheless hard to trace and prosecute.
Fraudulent telemarketers, working out of anonymous boiler-rooms,
prey on the elderly, the vulnerable, and the mentally deficient,
using misleading or high-pressure tactics to manipulate victims

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into giving the perpetrators of the fraud, money in exchange for
nonexistent or low-value goods or services.  This measure, in
conjunction with federal law, will aid in seeking out and
punishing telemarketing fraud, and deterring future fraudulent
telemarketing schemes.

     Your Committee further finds that many legitimate businesses
use telemarketing as part of their legitimate and non-fraudulent
marketing practices.  While your Committee believes that such
businesses should comply with the requirements set forth in this
measure, it is not your Committee's intent to harshly punish
legitimate businesses that use telemarketing, for careless or
inadvertent failures to strictly comply with the recordkeeping
requirements and other technical violations of the proposed Act.
Your Committee believes the penalties for violations of this Act
should reflect the difference between a simple violation which
may have resulted from mere carelessness in recordkeeping or in
training of employees, and a knowing violation by a fraudulent
telemarketer intending to bilk consumers of their savings through
deceptive practices and high-pressure sales techniques.

     Your Committee received testimony in support of this measure
from the Department of Commerce and Consumer Affairs, the
Department of the Prosecuting Attorney for the City and County of
Honolulu, the Honolulu Police Department, the American
Association of Retired Persons, and Legislative Information
Services of Hawaii, Inc.  Comments on this measure were submitted
by the Hawaii Financial Services Association and State Farm
Insurance Companies.  Testimony in opposition to the criminal
penalties provided by this measure was submitted by the Office of
the Public Defender.

     Upon further consideration, your Committee has amended this
measure by:

     (1)  Deleting the requirement that information about the
          identity of the caller and purpose of a telemarketing
          call be given within the first minute, as the measure
          already requires that the information be given prior to
          any solicitation or request for money, and the one
          minute time limit is likely to lead to inadvertent

     (2)  Deleting a provision providing that a telemarketer who
          let the phone ring more than five times would violate
          the Act;

     (3)  Adding a provision that use of an automatic dialer to
          initiate telemarketing calls violates the Act;

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     (4)  Adding language to provide that a telemarketer who
          complies with federal regulations and through error
          calls a consumer who had previously requested not to be
          called does not violate the Act as a result of that

     (5)  Changing the earliest time a telemarketer can legally
          call in the morning from 9:00 a.m. to 8:00 a.m., in
          conformance with federal regulations, and changing the
          applicable time zone from Hawaii Standard Time to the
          local time at the residence of the consumer called;

     (6)  Specifying that the Attorney General and the Department
          of Commerce and Consumer Affairs are authorized to
          review records kept by telemarketers;

     (7)  Requiring that "do not call" lists maintained in
          compliance with federal regulations be kept as part of
          the records required by the Act;

     (8)  Adding licensed non-depository financial services loan
          companies and affiliates of licensed financial
          institutions to the list of entities excepted from the

     (9)  Adding individuals licensed by the Insurance
          Commissioner to the list of entities excepted from the

    (10)  Adding to the list of entities excepted from the Act,
          entities with national or worldwide operations that are
          subject to the oversight of government agencies, but
          only for telephone calls to and from consumers with
          whom the entity has an existing business relationship;

    (11)  Amending the penalties provided by the bill to
          distinguish between a simple violation, which is
          punishable by a civil fine and possible forfeiture, and
          a knowing violation, which is punishable as a class C
          felony and by mandatory forfeiture;

    (12)  Curtailing the period in which previously undiscovered
          offenses may be prosecuted by setting an outside limit
          of ten years for all prosecutions;

    (13)  Amending terms used throughout the Act to conform to
          the definitions of terms in the first section of the

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    (14)  Changing the effective date; and

    (15)  Making technical, non-substantive changes for the
          purposes of clarity and style.

     As affirmed by the record of votes of the members of your
Committee on Judiciary that is attached to this report, your
Committee is in accord with the intent and purpose of S.B. No.
947, S.D. 1, as amended herein, and recommends that it pass Third
Reading in the form attached hereto as S.B. No. 947, S.D. 2.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Judiciary,

                                   AVERY B. CHUMBLEY, Co-Chair

                                   MATTHEW M. MATSUNAGA, Co-Chair