STAND. COM. REP. NO. 379

                                   Honolulu, Hawaii
                                                     , 1999

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




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

Sir:

     Your Committee on Commerce and Consumer Protection, to which
was referred S.B. No. 947 entitled: 

     "A BILL FOR AN ACT RELATING TO TELEMARKETING FRAUD,"

begs leave to report as follows:

     The purpose of this measure is to create a new chapter in
the Hawaii Revised Statutes to regulate telemarketing activity in
the State.  

     This measure creates the Telemarketing Fraud Prevention Act
(TFPA) which:

     (1)  Provides that a seller or telephone solicitor that
          makes false representations or is abusive commits an
          unfair deceptive act or practice;

     (2)  Requires licensing and registration of persons who
          engage in telemarketing in this State;

     (3)  Exempts certain persons, entities, and activities from
          being subject to the TFPA;

     (4)  Deems voidable contracts or agreements made as a result
          of telemarketing activity that violates the TFPA.

     Testimony in support of the intent of this measure was
presented by the Department of the Prosecuting Attorney of the
City and County of Honolulu.  Testimony supporting this measure

 
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with suggested amendments was received from the Office of
Consumer Protection, the Police Department of the City and County
of Honolulu, AT&T, AARP, GTE, and Hawaii Financial Services
Association.

     The Legislative Information Services of Hawaii presented
testimony in opposition.

     Your Committee finds that telemarketing fraud is an
insidious crime that often aggressively preys on the elderly.
Telemarketers commonly employ abusive, misleading, and/or high
pressure tactics in order to manipulate victims into giving the
telemarketers money in exchange for worthless or non-existent
goods or services.  This measure, in conjunction with federal
law, will aid in deterring further acts of telemarketing abuse
and fraud.

     Your Committee has amended this measure by:

     (1)  Deleting the definition of "communication" as it is not
          referenced in the measure;

     (2)  Defining "payment" to mean anything of value, including
          any interest, benefit, privilege, claim or right with
          respect to anything of value, whether real or personal,
          tangible or intangible;

     (3)  Clarifying that material information must be disclosed
          by the seller or telephone solicitor prior to receiving
          payment from the consumer;

     (4)  Allowing sellers and telephone solicitors to request or
          accept payment without first receiving the consumer's
          express verifiable authorization if they adopt the
          following policies:  (A) a seven-day consumer
          inspection period; (B) processing of full refund within
          thirty days; and (C) disclosure of refund policies
          orally and in writing;

     (5)  Prohibiting credit repair businesses from requesting
          fees until the time frame in which the business
          promised results has expired and the consumer is
          provided with documentation that the credit was
          repaired as promised;

     (6)  Increasing the number of telephone rings that
          constitute abusive conduct from five to ten rings;


 
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     (7)  Deleting the broad language describing abusive conduct
          as any other conduct that would be considered abusive
          to any reasonable consumer;

     (8)  Deleting the provisions requiring licensing and
          registration of persons engaged in telemarketing
          activity because the Office of Consumer Protection
          lacks the resources to process and maintain the
          licenses and registrations;

     (9)  Requiring telephone solicitors to keep true and
          accurate records of all telemarketing activities in
          this State or directed to consumers located in this
          State;

    (10)  Requiring that the records be made available to the
          authorized government agencies for inspection, be
          retained for a period of two years after the date of
          any telephone call, and include certain information on
          the telephone solicitor and its employees, including
          any fictitious names used, sales and marketing
          materials, product information on health, nutritional,
          or diet related goods, procedures, and certain consumer
          records;

    (11)  Exempting from the recordkeeping requirements of this
          measure, those telemarketing activities that are
          regulated by the public utilities commission or the
          federal communications commission; 

    (12)  Making the commission of an unfair deceptive or abusive
          telemarketing act or practice and noncompliance with
          the recordkeeping requirements a class B felony in
          order to provide for further deterrents against and
          penalties for such acts; and

    (13)  Making technical, nonsubstantive amendments for
          purposes of clarity and preferred drafting style.

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


 
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                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Commerce and
                                   Consumer Protection,



                                   ______________________________
                                   BRIAN KANNO, Co-Chair



                                   ______________________________
                                   BRIAN T. TANIGUCHI, Co-Chair

 
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